Providers can expect to receive more questions from clients about RADs, DAPs and fees following a number of reports in the mainstream media over the last week.
An article published in the Australian Financial Review last Friday centred around the financial impact on people in their 50s and 60s having to supplement their elderly parents’ ongoing aged care costs to the detriment of their own financial position.
The article reported higher incidence of adult children having to pay “tens of thousands of dollars a year to supplement ongoing aged care costs on behalf of their parents, or hundreds of thousands of dollars to help meet up-front accommodation costs”, which it attributed to rising property prices.
Advisory firms, Aged Care Steps and Aged Care Gurus were both quoted about the importance of having good aged care loan agreements in place and the potential for problems for inheritance recipients when loans were later recouped through wills.
The article followed advice last week from Stewart Brown that many providers are under-charging on RADs, especially in locations where property prices have increased drastically in recent years.
In a separate piece also published by Fairfax, director of Third Age Matters, Bina Brown, provided an overview of the different aged care payment options and the unintended financial consequences that can impact adult children, particularly following changes to the age pension.
“Payment of a RAD doesn’t count towards a resident’s assets for age pension purposes but it does get counted as an asset when it comes to calculating their means-tested care fee,” Ms Brown advised in the article.
“Unfortunately, there is no loan offset available for funds borrowed to pay the RAD, which means 100 per cent of the paid RAD is assessable.”
Ms Brown said the person paying a RAD may need to provide ongoing financial support given the means-tested care fee would be higher, and warned consumers to “watch out for facilities that charge additional daily fees of around $20 for residents who pay the RAD upfront, rather than in instalments”.
David Cox, Head of Operational Strategy at Ansell Strategic, said that the use of additional charges for those who pay the RAD upfront typically called a refurbishment fee are rare.
“These fees have been flagged by the Department as not being ‘supported by legislation’,” he said.
“The issue highlights the confusion for providers who have not been provided clarification over the rules relating to accommodation payments and who have no capacity to determine or even know if a resident pays an upfront payment or ongoing fee until the resident has entered the home.”
“This uncertainty has resulted in an environment where the initial intended purpose of accommodation payments, the funding of new and expanded capital development, is no longer certain,” Mr Cox said.
It is understood that only Estia, Japara and Regis charge a capital refurbishment fee on top of RADs. Estia charges $10 per day ongoing, Japara charges $18 per day ongoing and Regis charges $13.70 per day on a sliding scale based on the accomodation deposit paid as a lump sum, capped at two and a half years.
According to the 2016 ACFA report, between July 2014 and December 2015, RADs remained the most used method of making accommodation payments, with over 40 per cent of residents who pay the full or partial cost of their accommodation opting for this method of payment.
During the same period approximately 24 per cent of residents opted for a combination of RAD and DAP. However, the threshold above which prices must be approved by the Pricing Commissioner remained unchanged during 2015-16 at $550,000 or equivalent daily payment of $94.63, and at 31 May 2016, 86 per cent of published prices were less than this amount, 8 per cent were exactly this amount and only 6 per cent were higher than this threshold.