Are you planning for your elderly age? Here’s what changes to aged care mean for you

Last week, Parliament passed sweeping reforms to Australia’s aged care system. These “once in a generation”, which is due to start on July 1 next year, aims to improve the way care is delivered to older Australians at home, in their communities and in care homes.

The novel Act on Care for the Elderly focuses on: improving quality and safety, protecting rights older people and ensuring financial stability caregivers of the elderly.

The key change is the introduction of a novel payment system, requiring wealthier people to pay more for non-clinical services.

If you – or a loved one – are planning to care for older people, here’s what these changes could mean for you.

What to expect from a home care review

Over the last decade, there has been a noticeable shift towards “aging at home.” The number of Australians using home care has more than four timesexceeding the number living in nursing homes.

To meet the growing demand, the government is adding home care places over the next two years, with the goal of reducing waiting times to just three months.

From July 1, 2025 Support at home will replace Home care packages program. The table below shows some of the key differences between the two programs.

Home Care Packages are currently delivered as part of four annual levels of government subsidiescovering the costs of care and management of healthcare providers. As part of home support, the number of home care budget tiers will double to eightwith the high rising to A$78,000.

This is to provide more tailored support and to accommodate those requiring a higher level of care.

Under the novel system, recipients will receive quarterly budgets tailored to their funding level and will work with their chosen provider to allocate funds between three broad categories of services: :

• clinical care such as nursing or physiotherapy

• independence support, including personal care, transport and social support

• assistance with everyday life, e.g. cleaning, gardening and delivering meals.

Clinical care services will be fully funded by the government as they are crucial to supporting health and preventing hospitalization.

However, beneficiaries will cover the cost of independence and daily living services under a novel payment model, reflecting the Government’s position that these are services that people have traditionally self-funded throughout their lives.

This will replace the basic daily fee and means-tested care fee that some people currently pay. Contributions will vary depending on income and assets (based on retirement means a test) and by service type.

Home support also includes additional funding for specific needs:

• older Australians with less than three months to live will get priority access to $25,000 in funding for 12 weeks

• Up to $15,000 will be available for assistive technology and home modifications eliminating the need reserve home care budgets for them.

What if I or my loved one already receives a Home Care Package?

If you were picking up a parcel, on waiting listor deemed eligible for one on September 12, 2024, Govt.no worse” guarantees that you will not pay more in the novel system.

Current home support recipients’ budget will be adjusted to their existing package and any unspent funds will be carried over.

How will fees for care in nursing homes change?

Australia’s care home sector is struggling financially 67% of suppliers operating at a loss. To ensure sustainable development and support the modernization of facilities, the government is introducing major changes to financing.

What remains the same?

The basic daily rate paid by all people in care homes, set at 85% of the basic pension (currently $63.57 per day or $23,200 per year) will not change.

What’s changing?

Currently, the government pays a hotel allowance of $12.55 per day per resident to cover the cost of daily services such as cleaning, meals and laundry ($4,581 per year).

From July 1, 2025, this allowance will depend on income. Residents with annual incomes greater than $95,400 or assets greater than $238,000 (or a combination thereof) will be make a partial or full contribution to this cost.

Currently, residents with sufficient means also pay an means-tested fee for care $0 to $403.24 per day. It will be replaced by “contribution to non-clinical care”, capped at $101.16 per day and payable for the first four years of care. Only people with assets over $502,981 or income over $131,279 (or a combination thereof) will pay this premium.

Importantly, no one will pay more than $130,000 in combined premiums over their lifetime for home support and non-clinical care in nursing homes.

Changes to accommodation fees

From July 1, 2025, the method of paying for accommodation in a nursing home will also change:

• residents who pay the room rate in a refundable lump sum will have 2% of their payments are withheld every year by the supplier, up to a maximum of 10% over five years. For example, a one-time payment of $400,000 would result in a refund of $360,000 if the person stayed at the facility for five years or longer, with the provider retaining $40,000

• daily accommodation fees (a rent-like interest fee) will no longer remain constant throughout the person’s stay in the care home. Instead, these payments will be indexed twice a year to the Consumer Price Index

• service providers will be able to price rooms up to $750,000 without government approval, an enhance from the current limit of $550,000.

These changes will not affect people on lower incomes (those who are fully subsidized by the government to cover their housing costs).

What if I own my home?

Family home treatment under the Nursing Home Cost Study will be remain unchanged.

Its value is only assessed if no “protected person” (e.g. spouse) lives there, and even then its value is capped at $206,039 (as of September 20, 2024).

What will happen to the current nursing home residents?

The novel rules on contributions and accommodation will only apply to people entering care homes from July 1, 2025.

The current residents will keep the current arrangements and will be there no worse.

Feeling overwhelmed?

These reforms aim to improve care delivery, integrity and sustainability, with the Government highlighting that many older Australians – particularly those with lower income and assets – I won’t pay more.

The government has provided case studies illustrating how to do this home care AND nursing home costs will vary under the novel system for people with different levels of income and wealth.

Still, planning for elder care can be tough. For more tailored advice and supportconsider contacting financial advisors, servicesor online tools to facilitate you navigate changes and make informed decisions.