Amazing nursing home means test

Street sign "double dip ahead"

ON the first of July, things changed in aged care. Unfortunately, these changes are not about improvement in the quality of care for residents, they’re about improvements to the financial circumstances of aged care providers.

It’s very important to realise that only people entering residential care from 1 July 2014 are going to be affected by these changes.

Those already in a nursing home continue according to current arrangements (unless they move to a different aged care facility and choose to be charged under the new system).

The most significant change from 1 July 2014 is the abolition of the distinction between high care and low care. Doing away with this distinction means that accommodation bonds and equivalent accommodation payments will now apply to anyone going into a nursing home.

Yes, there is a means test, and, yes, the family home is excluded from that means test, but the 1 July 2014 changes will make it very difficult for many people to get into a nursing home of their choice without selling the family home.

Here’s why.

For some years now, the proportion of nursing home entrants needing high care has been double that of entrants needing low care.

Only low care entrants could be required to pay an accommodation bond or accommodation charges, and only if a means test found that they had the ability to pay.

From 1 July, the minimum bond demanded will be well above the current average of $275,000. It could be $300,000 or thereabouts, but in most cases it’s likely to be much higher.

From 1 July 2014, everyone is means tested, because there is no longer a distinction between low care and high care.

So the pool of nursing home entrants being means tested has suddenly trebled in size.

Nursing homes are obliged to take in a certain number of concessional residents.    

These are residents who cannot afford to pay anything beyond the basic care fee, set at 85 per cent of the basic full rate of the pension (the pension minus the supplements).                   

The minimum proportion of concessional residents in any nursing home is 40 per cent, but up until now it has tended to be much higher because high care residents were not required to pay for their accommodation.

Now that nursing homes have three times the number of people who will potentially pay a bond, they are likely to want as many bond-paying residents as they can get. This means that they will want to stick to the minimum 40 per cent of concessional residents and charge the other 60 per cent as much as they can.

Nursing homes must now publish their prices. In theory, this means that there are set accommodation bonds for each home and set daily accommodation charges.

In practice, those published accommodation bond levels and accommodation fees are likely to have been set artificially high for the purposes of negotiation.    
Nursing homes are likely to have published prices which they know full well that most people can’t afford.

Well, ‘how much can you afford?’, nursing homes will ask.

This means prospective residents who, under these new rules and circumstances, would enter a nursing home as a concessional resident, will be competing with residents who can pay at least something for a nursing home place.

Single nursing home entrants will feel pressured to sell their home immediately to free up money to pay a bond, just so they can guarantee their place.

Even couples, where only one of the partners needs to go into a nursing home, will feel the pressure to free up as much money as they can, even if it means selling the family home needed by the partner who is not going into the nursing home.

This is the reality: if you (or you and your partner) have a house and you need to go into a nursing home, the nursing home proprietor is eyeing off your family home.

Some will tell you that as a result of these new rules starting 1 July 2014, you will receive better care. 

This is a patent untruth.

Accommodation bonds and accommodation fees are to pay for accommodation, not care. They pay for the building, the gardens, the furniture and any other physical facilities, but not for care. The law does not permit it.

Accommodation bonds and accommodation fees are how nursing home proprietors make the bulk of their profits.

So you may decide to sell your home to pay a higher difference for a nursing home which demands a higher bond.

Nursing home director: any residential property deed helps

Let’s assume your house sells for $250,000. If you go in as a single, the full $250,000 will be means tested. As a result, you will pay the full daily accommodation payment (you don’t have enough to pay the $300,000 bond) of $54.99 plus a means tested care fee of $2.63 a day.

That’s $57.62 a day or $21,000 a year, and that’s on top of the 85 per cent of the basic rate of pension that everyone pays, making your payments a total of $38,000 a year.

Once you are assessed as having too much money to receive a Government accommodation subsidy, you will be paying the full whack in accommodation charges set by the nursing home.

In fact, if you have assets of between $150,000 and $1.14 million and the bond is set at $300,000 (daily charge $54.99), you will pay more than $900 a year in excess of the amount the Government’s own means test says you are able to afford.

At CPSA, we call it the Amazing Double Dip.

This excess, which the Government’s means test says is beyond your ability to pay, goes up as the bond goes up.

The maximum bond amount for most nursing homes is $550,000 (daily charge $100.81).

The corresponding ‘unaffordable’ excess is $17,600 a year.

On the other hand, if you manage to get a Home Care package (the old Community Aged Care Package), you will be charged 17.5 per cent of the basic rate of the single Age Pension.

That’s $8 a day or $3,000 a year. This is a non-means tested flat charge everyone pays.

In addition, the old Home Care service under the HACC program will change its pricing from 1 July 2015.

A recently published Government discussion paper foreshadowed the total contributions by care recipients rising to three times what they are now, but there will be a means test. We will keep you posted.

If you want to enquire about how nursing home or home care fee changes will affect you or family members, please call CPSA on 02 9281 3588 (1800 451 488 country callers).