As well as costs for their care services, older people in residential aged care may also need to pay for, or help pay for, the cost of accommodation in the home.
The Act creates a new framework for accommodation payments and contributions to support the long-term sustainability of high-quality residential aged care services. These payments or contributions apply to ongoing residents in aged care homes and may also apply to certain specialist aged care programs, to cover the cost for the room.
Accommodation payments and contributions are treated in the same way under the Act. The main difference is that people who can afford to pay the full accommodation supplement will make an accommodation payment. People who can’t afford to pay the full supplement may still need to make an accommodation contribution, depending on their means tested amount.
Accommodation payments and contributions may be made:
- daily – called a daily payment
- as a lump sum – called a refundable deposit
- as a combination of both.
Means testing will determine if an older person has to pay an accommodation payment or contribution and how much they need to pay.
Accommodation agreements
[Chapter 4 – Part 4 – Division 3]
Before an older person starts using their services, providers must have an accommodation agreement in place that includes details about payments and contributions.
The provider has to give the older person information explaining the agreement and the payment amounts before they make the agreement. This helps make sure the older person understands what they are agreeing to.
What must be in the agreement
The Act sets out the terms that must be in an accommodation agreement, such as:
- the older person’s start date, or proposed start date
- information about the charge for the room and how the older person will pay – either through daily payments or a refundable deposit
- information about any fee reductions for their accommodation costs
- information about refunds on the balance of a refundable deposit
- the room and services the older person is eligible for
- information about the amount the older person has to pay and how it’s worked out, including for means-tested contributions
- information about voluntary and non-voluntary moves in the aged care home
- information about amounts that can be deducted from a refundable deposit balance, including mandatory retention amounts.
Admission processes
While the Act sets out requirements for agreements between older people and the provider, it does not set the admission processes for aged care homes. Each registered provider can set their own process for assessing whether to admit an older person into their care home. They may consider factors like:
- the older person’s means status
- their current vacancies
- whether they can meet the older person’s care needs.
Accommodation payment and contribution amounts
[Chapter 4 – Part 4 – Division 2, Division 4, Division 5, Division 6]
Providers must meet certain requirements when they enter into an accommodation agreement with an older person. These include how they charge accommodation payments or contributions and how they can use a refundable deposit.
General limits
There are general limits on the maximum amount that providers can charge without special approval. This is called the maximum accommodation payment amount, which is set in the Rules. This amount is subject to indexing, which means it may change over time in line with inflation. A provider can also get approval from the Independent Health and Aged Care Pricing Authority to charge a higher amount.
Registered providers must tell the department the accommodation payment amounts they charge so the department can make this information available to the public.
Individual limits
For an individual older person, a provider can’t charge them an accommodation payment amount unless their daily means tested amount is the same as or higher than the maximum accommodation supplement amount. The accommodation payment also can’t be higher than the amount agreed between the older person and the provider.
Where an older person’s daily means tested amount is less than the maximum accommodation supplement amount, they may be required to pay an accommodation contribution. This amount must not be more than the maximum accommodation supplement amount or their means tested amount.
Providers can charge interest on outstanding daily payments if this is included in the agreement.
Refundable deposits
[Chapter 4 – Part 4 – Division 7]
An older person can choose to pay a refundable deposit at any time after starting services with their provider.
Limits on refundable deposits
A provider can’t accept a refundable deposit amount that would leave the older person with less than the minimum permissible asset value. This amount is set at approximately 2.25 times the basic Age Pension amount. This helps to make sure older people have money to spend on other things while they are in residential aged care, such as on clothing and entertainment.
Using the refundable deposit
There are restrictions on what the provider can deduct from a refundable deposit and how they can use the funds.
General use
In general, only amounts agreed in writing between the older person and the provider can be deducted from the refundable deposit. This would mainly be the daily accommodation payment or daily accommodation contribution to cover the cost of the room for each day.
The Rules can include any other general deductions that the provider can make.
Retention amounts
Retention amounts are amounts of money that the provider must deduct from the refundable deposit balance. These deductions help make sure they can continue to provide high-quality residential aged care, as well as support improvements and further investment.
The amount that providers deduct and how to work it out are set out in the Rules. After someone has been in care for 5 years, providers can no longer deduct these amounts.
Other permitted uses
Other than charging for services and retention amounts, providers can only use the refundable deposit for allowed reasons, known as permitted uses. This reduces the risk of providers not being able to repay the amount to the older person if needed. Refundable deposits can only be used as funding for:
- investment in infrastructure
- careful financial investment
- refunding deposit balances or repaying certain debts.
Complying with the use of these deposits is a specific provider obligation under Chapter 3.
Refunding deposits
When a provider stops delivering services to an older person, the older person’s refundable deposit must either be:
- refunded
- transferred to another provider.
If the funds are transferred to another provider, this must be done in a way that supports the older person’s financial stability and continuity of care.