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Aged Care Reforms

Residential Aged Care Reforms - March 2008

Brochure detailing important changes to Australia's residential aged care system to take effect from 20 March 2008.

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Changes to aged care fees and charges – 20 March 2008

Background

Important changes to Australia's residential aged care system take effect from 20 March 2008. These reforms change the system of accommodation fees and Government accommodation subsidies for new people entering residential aged care, and address inequities in relation to income tested fees.

The legislation to provide for these changes was passed by the Australian Parliament in February, with bi-partisan support.

The reforms are necessary to place Australia's residential aged care system on a sound financial footing, ensuring it is strong and flexible enough to meet Australia's rapidly growing aged care needs, in particular high level care.

What this means for new aged care residents

From 20 March, older people who can afford to contribute more towards the cost of their accommodation and care may be asked to contribute more.

Those people who cannot afford to pay more will be protected, with the amount the Australian Government contributes in subsidies towards accommodation and care costs to also be increased. There will be no change to accommodation fees or accommodation subsidy arrangements for all existing aged care residents.

The current income test for aged care residents will become fairer, with self-funded retirees for the first time to be treated the same as pensioners with respect to their income. From 20 March, the maximum level of a resident's income tested fee will be based on their total assessable income rather than the level of their non-pension income. The maximum level of a resident's income tested fee will therefore no longer depend on whether the resident is a pensioner or a self-funded retiree.

No existing residents will pay more under the new income test than they would have under the previous arrangements. It is expected that about 45 per cent of self-funded retirees will pay less under the new arrangements.

The changes do not alter accommodation bond arrangements paid by residents entering low care and extra service care.

For all high care residents (other than extra service) who enter care from 20 March there will be one assets test used to work out the maximum accommodation charge a resident can be asked to pay and how much accommodation supplement the Government will pay on their behalf.
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How these changes help residential aged care

Overall, the changes will provide additional revenue of more than $1 billion over four years - $860 million from the Government and $270 million from residents.

This will give greater certainty, allowing homes to plan better for the future, and to invest more in the development of buildings, better amenities and greater safety for residents.

Why the reforms are necessary

Australia's ageing population, coupled with the fact that more people are living in their own homes for longer and entering residential care later, means we are already seeing a shift in demand towards high level aged care.

There are currently 1.9 million Australians aged 70 years and over, who make up 9.3 per cent of the total population. This number will double in the next 20 years as the baby boomers reach old age. There are also currently more than 200,000 Australians living with dementia. This number is also expected to double within the next 20 years.

The need for more high level residential aged care is therefore going to continue to grow at an increasing rate well into the future.

The changes to take effect from 20 March will ensure more money is directed towards providing more and better quality of care for frail older Australians.

Further information

People considering their future aged care needs should be aware of these important reforms.

For further information about the changes, contact the Department of Health and Ageing Aged Care Information Line – 1800 500 853 – or go to the web site www.health.gov.au and follow the appropriate links.

People should also seek detailed advice from their accountant and/or financial planner.
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