Aged Care – Not all accommodation costs are the same!

Aged care costs are extremely complicated and issues have been raised in relation to a person entering residential aged care and having to pay a Refundable Accommodation Deposit (RAD).

What is the RAD?

A lump sum payment made by residents for accommodation in an aged care home.

Do I have to pay the RAD?

Some people will have their accommodation costs paid in full or in part by the government, while others will need to pay the accommodation price agreed with the age care home. As to whether an individual is eligible for support from the government in meeting their accommodation costs, will depend on their assets and income.

What happens if I am not able to pay the RAD in full?

If you are required to pay the RAD and are not able to pay the full amount, you will need to pay a Daily Accommodation Payment (DAP). This amount is based on the interest payable on the balance of the RAD you have not paid. The current interest rate is 5.76%. To assist with a person’s cash flow to meet the required payment of the aged care fees, a request can be made to deduct the DAP from the RAD which has been paid.

What happens to the RAD when I pass away or move homes?

Indicated by its name ‘Refundable Accommodation Deposit’, the amount that has been paid will be returned to your estate or you if you move or leave the facility. This amount could be reduced if you have requested as per the previous question that a DAP can be deducted from the RAD. It should also be noted that the RAD is underwritten by the government, in other words it is guaranteed.

The RAD is the accommodation cost, which depending on your circumstances, you do have to pay. There are, however, a couple of additional charges that have recently appeared in accommodation contracts. The charges should be closely scrutinised before any agreement is made to pay them or have them deducted from the RAD which has been paid.

These fees can appear as a ‘capital refurbishment fee’ or an ‘asset replacement contribution’ with the explanation that they are levied to cover the cost of repairing, painting and refurbishment of a resident’s room when they leave or pass away.

The Department of Health is very clear that these fees would not be supported by the legislation.

The following is a direct quote from the Department of Health website dated the 2nd of September 2016 and refers to both these types of fees:

“Where the fee does not provide a direct benefit to the individual or the resident cannot take up or make use of the services or where the activities or services subject to the fee are of the normal operation of an aged care home and fall within the scope of specified care and services”.

Painting, repairing and refurbishment of a resident’s room would fall within the category of normal operation. These services should be factored into the facilities scheduled maintenance program. The resident is certainly not going to benefit from the refurbishment after they have passed away. I do not believe the charges for these services falls within the category of fees outlined in the Aged Care Act 1997, Quality of Care Principles 2014 and the User Rights Principles 2014 which are required to be paid by the resident.

So, if you believe you are paying a capital refurbishment fee or an asset replacement contribution or one of these fees is being deducted from the RAD that you have paid, I would certainly ask the question of the aged care facility as to whether the fee can be charged under the guidelines issued by the Department of Health.


Source:  Mark Teale | Centrepoint Alliance