Exit from aged care
By William Truong, Technical Services Manager
We have witnessed from time to time, residents of residential aged care wanting to leave for periods and sometime exiting altogether. This trend has become more pronounced during COVID-19, where many families have faced restricted visitation rights and understandingly have concerns about their love one’s health while staying in residential care, and even concerns as to whether the facility has the capability to address each resident’s health needs in case of outbreaks.
In this article we deal with the following issues:
- Taking a break from care.
- Transferring to another residential care facility.
- Exiting residential care to return home to be cared for by family.
Taking a break from care
Once a resident is in care, they may take leave for any reason. This does not affect their right to residential care services and their place remains secured. However, a resident’s leave can affect:
- the subsidy amount the government can pay to the facility on their behalf
- the fees that facilities can charge the resident.
It also depends on the type of leave they take and how long their leave is for.
Residents can take unlimited leave if they need to go into hospital. During times such as COVID-19, the availability in hospitals may be limited, so can depend on the state the resident lives in and whether there is a clinical need.
From a residential care perspective, clients will need to continue to pay for their care fees and accommodation costs during their time in hospital, although cannot be asked to pay more while they are in hospital.
However, if the clients are paying the means-tested care fee (MTCF), these fees may be reduced if their hospital stay is for 30 days or more. This is because while the Government will continue to contribute to the facility on the resident’s behalf (via subsidy payments). However, these subsidies may be reduced by 50% after an extended hospital leave1.
If the Government subsidies are reduced, this may trigger a reduction to the resident’s means-tested care fee. The means-tested care fee is calculated based on a means tested amount (MTA) which is calculated based on a combination of assets and income, as follows:
If the MTA is:
- Zero or less than zero, the MTCF is nil
- Greater than zero, the resident can be charged a MTCF. This is the lower of:
- the care cost2
- their MTA less the maximum accommodation supplement of $58.19 per day (current as at 19 November 2020).
Case study – Prakash
Prakash is a resident in the local ABC residential care facility.
While in care, the Government has been contributing towards Prakash’s basic care subsidies and eligible supplements which totals the care cost of $100 per day. His means-tested amount as calculated from his assessable assets and income, less the maximum accommodation supplement is $90 per day. Hence, Prakash’s means-tested care fee prior to his hospitalisation is $90 per day, as calculated by the lower of:
However, when Prakash is required to go into hospital for extended treatment of over 30 days, the Government’s contribution towards his care cost due to their reduction to his basic subsidy by 50% reduces the total care cost contribution to the facility. His total care cost is now $65 per day.
This will reduce Prakash’s means-tested care fee to $65 per day, as calculated by the lower of:
Further the facility cannot charge Prakash a separate fee to reserve his place in the facility to cover the subsidy reduction and so his position in the facility remains secured so long as he continues paying other contractual accommodation and basic care fees.
Spending nights away from the facility for personal reasons is called social leave. For residents who take social leave, they will still have to pay their agreed fees and accommodation costs. Residents can take up to 52 nights of social leave per financial year for any reason.
If they take more than 52 nights away, the facility can ask them to pay more on top of their usual fees and accommodation costs.
A resident’s leave balance resets on 1 July each year and leave balances transfer with them if they change providers.
Emergency leave is available from 1 April 2020 to 30 June 2021 to avoid residents having to utilise their social leave to exit a facility for a period due to neither hospitalisation or social reason. For example, if a resident of aged care wanted to leave the facility to stay with family or friends during COVID-19. Residents who are admitted to hospital during the emergency leave period, must take hospital leave while in hospital.
By taking emergency leave, residents will not be required to pay a fee to maintain their place in their residential care facility. They will however have to continue to pay their usual accommodation and care fees during the period of their leave.
It also ensures that approved facilities remain eligible for an aged care subsidy and are therefore not financially disadvantaged if a resident is on leave from a service.
Transferring to another residential care facility
If a resident voluntarily transfers out of their existing facility and into a new care facility, they will generally be required to undertake a new entry assessment and negotiate new accommodation fees and other contractual terms on entry (different rules may apply for residents whom has entered care prior to 1 July 2014). This could lead to the reclassification of their residency (for example, some residents may no longer be a low means resident), which can impact their level of Government subsidy and result in higher payment of accommodation payments and care fees. In such cases, lump sum deposit paid to the previous accommodation providers will be refunded to them after they leave the existing facility.
However, even if the move is involuntary and within the same group of residential care companies, residents must be cautioned that they may also be reassessed on entry to the new facility if it has a different Residential Aged Care Service (RACS) ID to the previous facility. Residents can check the new facilities RACS ID at www.agedcarequality.gov.au/reports
Impact of interest rates on transferring to a new residential care facility
Moving rooms within the same facility may trigger a new accommodation agreement if a new room price is negotiated or if residents moves to a new residential care facility. In these cases, it could reset the interest rate to the Maximum Permissible Interest Rate (MPIR) applicable at that time, if there are any outstanding accommodation payments under the new contract of residence. As the MPIR has been declining this may have a favourable result.
If the resident pays the full lump-sum refundable accommodation deposit (RAD), any changes to the MPIR has no impact as there is no interest to pay.
The interest rate is only relevant if some of the lump sum remains unpaid. In this case, the fall in rates is beneficial, although residents will only get the benefit if they transfer into another facility (assuming interest rates have reduced). The interest rate is then fixed upon entry to the new facility, so existing residents will not benefit from a lower rate.
Since 1 July 2020, the interest rate has reduced. Normally you would expect a lower interest rate to be a good thing, but this is where residential care gets complicated. Whether the lower rate is beneficial for someone in residential care, depends on the resident’s situation and their choices.
Case study – non supported resident
Betty moved into residential care in July 2019 when the annual interest rate was 5.54%3. Her room cost was $400,000 and she paid a partial lump-sum RAD of $100,000. The $300,000 balance is paid as a daily accommodation payment (DAP) of $1,385 per month (ie $300,000 x 5.54% / 12 months).
Betty and her family are concerned about the current facilities’ ability to manage COVID-19 and would like her to move to a new residential facility in November 2020. The new provider has a room available, but the price is $450,000 ($50,000 more than the total cost of the current room). On leaving the previous facility, they refund her $100,000 which she had previously paid as a partial lump sum RAD. She can now use these funds to partially fund the RAD in the new facility.
Betty agrees and signs a new accommodation agreement with the new facility. She now pays interest on an unpaid amount of $350,000. Even though she is living in a more expensive room, the lower interest rate of 4.10 per cent4 reduces her DAP to $1,196 per month (ie $350,000 x 4.10% / 12 months).
Case study – Low means resident
Jim is married and his wife is staying in their home when he moves to residential care. This means that the home is an exempt asset for age care assessment. Jim’s share of their assessable assets and income is low, which means he can be classified as a low means resident. Based on his assets and income, his means-tested amount (MTA) is calculated as a daily rate of $47 per day (assumed), which is how much he will be asked to contribute towards his cost of accommodation. This daily fee is based on assets and income with no connection to the MPIR.
For Jim, this price is the same regardless of when he moves into care. But if he wants to convert his daily fee into a lump sum RAC, the lower the interest rate when he enters care, the worse off he becomes.
If Jim moves into care in June 2020 when the interest rate was 4.89 per cent, eliminating the $47 daily fee requires a lump sum of $350,818 (ie. $47 per day x 365 days / 4.89%).
However, if he moves into care in July 2020 when the rate has fallen to 4.10 per cent, his daily fee would still be $47 per day (assuming assets and income remains the same). But if he chooses to pay via a lump sum RAC, he would need a higher lump sum of $418,414 ($47 per day x 365 days / 4.10%).
Returning home for care
In the current environment, the ability to move freely between a care facility and the family home is more complicated because of strict isolation requirements in many jurisdictions.
So, the decision to transfer a resident back into a private home for care can be a serious and complicated decision that requires the support of all family members and the residents care facility for approval.
Importantly, if the resident is still able to make decisions, any choice to move back home, must take into account their wishes and not just the concerned family members alone.
There are many other considerations for the family, including:
- capacity for family members to provide 24-hour care
- resources (including dietary, medication) that is required
- safety and suitability of the environment (eg stairs, rails, bathroom safety)
- right equipment (personal protection equipment (PPE), mobility aids such as wheelchairs, and
- contingency plans if the carer or person leaving care gets sick.
Families may contact the Older Persons Advocacy Network (OPAN) who are specifically equipped to assist helping residents with a temporary shift home, including providing a specialist team to support them with the transition.
Financial support while being cared for at home
For residents living in a facility affected by an outbreak of COVID-19, financial support is available if they take leave either voluntarily or out of necessity. Tier 1 is the top level financial support available, which includes the equivalent to a level four home care package or approximately $52,000 a year, with no further assessments or fees needed.
Tier 2 financial support includes entry-level services for residents who voluntarily decide to temporarily relocate from residential care facility to home to stay with a family member and who are not eligible for the complex clinical support available under tier 1.
Tier 2 support is through the existing Commonwealth Home Support Package (CHSP) and could include meals, transport to medical appointments, social support, personal care. Generally, these financial supports are for a limited period of up to 8 weeks.
Residents who access Tier 2 services may need to pay a client contribution fee for services where they can afford to do so. Residents who receive tier 1 support may also apply for the extra tier 2 support.
Residents can assess their eligibility and apply for these financial assistances by contacting ‘My Aged Care’ www.myagedcare.gov.au.
If individuals and their family decide to stay in the community on a long term or ongoing basis, they will need to give up their place in their residential care home. In such cases, they will receive a refund of any lump sum amounts paid to the facility.
They can then arrange for a home care services assessment through ‘My Aged Care’ to assess if they are eligible for a Home Care Package (HCP). Families should be aware there are potentially long waiting times for HCPs, even despite recent Government promises to increase home care packages available.
Although individuals can access entry-level Commonwealth Home Support Program (CHSP) services while waiting for HCP to commence, once they have relinquished their place in the aged care home, they will not be eligible to continue accessing Tier 1 services. Individuals and their family must carefully consider whether entry level services will be sufficient to support them while on the wait list for HCP.
COVID-19 has placed enormous pressure on residents of residential facilities and their families. The decision to vacate a facility requires careful consideration of not only due to financial aspects but numerous qualitative factors as well, which residents and their family must consider together. Referral to organisations such as OPAN is highly recommended, as they can provide overall specialised and practical advice.
Click here to read more information on entering aged care and what you need to know about RAD and RAC.
If you have any questions, or would like more information, please contact the IOOF TechConnect team on 1300 650 414.Disclaimer
The information in this section of the website is intended for financial advisers only and is not to be distributed to clients. It has been prepared on behalf of Australian Executor Trustees Limited ABN 84 007 869 794 AFSL 240023, IOOF Investment Management Limited ABN 53 006 695 021 AFSL 230524, IOOF Investment Services Ltd ABN 80 007 350 405, AFSL 230703 and IOOF Ltd ABN 21 087 649 625 AFSL 230522 based on information that is believed to be accurate and reliable at the time of publication.