Understanding aged care costs

Key points:

• The Federal Government will contribute towards the cost of your care
• In most cases, if you cannot afford to contribute to the cost of aged care, you won’t have to
• Most fees and costs have annual or lifetime caps to ensure you aren’t paying too much for your care

However, the answer to this is not always straightforward. In some cases, the final cost is broken up into different fees and charges and these depend on your individual circumstances.

Approved aged care services and facilities are subsidised by the Federal Government. Even though the Government will pay part of your fees for aged care services, you are still expected to pay something towards the cost of your care.

So what fees and charges do you need to pay?

Basic home care

Entry level home care delivered under the Commonwealth Home Support Programme (CHSP) is largely funded by the Australian Government, however, you will be asked to contribute to the cost of the care and services you receive.

Services among basic home care providers differ between providers, and how much you contribute will be dependent on your income and the services you require.

Smaller, less intensive jobs like cooking meals will be a minimal cost compared to nursing care.

You will need to discuss how much it will cost with your provider and agree to the fees they are setting before you receive services.

If you cannot afford to contribute to CHSP services you need, you will still be able to access services but may receive financial hardship assistance.

Home Care Packages

The cost for Home Care Packages can be broken down into two types of fees – the basic daily fee and the income-tested care fee.

The basic daily fee is a set percentage of the single basic Age Pension and will vary depending on the level of your HCP. While a provider may ask you to pay a basic daily fee, not all providers do.

If you are paying a basic daily fee, this amount will be added on top of the Government subsidy, increasing the total funds available in your package budget. So if the provider you choose doesn’t charge you this fee, you may not have as much package funding available for care.

With the income tested care fee, it is an extra contribution that you may need to pay. However, this is entirely dependent on your income assessment and can differ from person to person. You will not need to pay an income tested care fee if you have income under a certain amount.

If you want extra care or services from your provider that aren’t covered in your package, you can agree to additional service fees, however, this is not subsidised by the Government as it is a direct agreement with your provider.

These home care fees will likely be paid by you on a fortnightly or monthly basis.

You are able to negotiate with providers on home care fees and agree to the rate you will be charged for services. This should be outlined in your care plan.

The funding for your package can only be claimed from the Government on your behalf by an approved Home Care Package provider and they need to provide you with regular statements outlining how the money is being used.

Private providers can also deliver home care services however these are not subsidised by the Government and you will have to pay for all services out of your own pocket.

To get started in applying for a Home Care Package, you’ll first need to be assessed by the government for your eligibility. Then, you’ll be placed on the National Priority System until you receive the assignment of your Home Care Package. Wait times vary and are dependent on the approval date and the level of priority. After you receive your letter, you’ll need to choose a provider and complete the income assessment to determine how much you’ll need to contribute to your care.

Short term care

If you require care and assistance every now and then, you may prefer to access short term care options. These services do cost and are generally subsidised by the Government.

For Short Term Restorative Care (STRC), you will need to contribute to the cost of the services you receive, however, you will not be subject to a means assessment. How much you pay will differ depending on factors such as if you receive STRC at home or in the community, which is cheaper, or in a residential aged care facility, which is more expensive.

If you are accessing Transition Care Program services, you will need to contribute to the cost of the services you receive. Similar to STRC, you do not have to undertake a means assessment, but your provider can request financial information about your contribution ability.

You will negotiate with your provider on how much you will pay, but if you cannot afford to contribute to transition care services, you will not be rejected from receiving these services. The cost of what you will pay will differ depending on where you receive the care, like at home, in the community, or in a residential setting.

Respite care fees will differ depending on where the service is delivered. It’s also not subject to a means assessment.

If you receive respite in an aged care home, you will be required to pay a residential aged care basic daily fee, which pays for the day to day of living in a nursing home. Some providers may require a booking fee to secure your bed in the facility, however, whatever you pay in booking fees will be deducted from your basic daily fees. Some providers may also charge additional service fees or extra services fees.

If you receive respite at home or in the community through the CHSP, you will have to make a contribution to the cost of your care if you can afford to do so.

Residential aged care

There are three main costs you will likely pay while living in aged care – the basic daily fee, a means tested care fee, and an accommodation fee.

The basic daily fee is something everyone will pay while in residential care, as the fee covers your daily living services that you need every day, like food, cleaning, laundry, and facility management.

The means tested care fee is paid as an extra contribution to the personal and clinical care services you receive if you can afford to. Since this fee is based on a means test, it will differ from person to person and can fluctuate during the time you are in aged care.

Depending on your financial circumstance, you may not have to pay this contribution and the Government will cover the cost of your care.

When you enter aged care, you are required to pay an accommodation fee, which covers the price of the room you will be living in. This cost can differ from provider to provider and is also dependent on the size of the room, amenities and location.

You will be subject to a means test, which will determine how much the Government will assist with the accommodation cost. If you can afford to, you will be expected to pay towards your room in the aged care home, however, if your assets and income are under a certain level, the Government will pay for your room.

The accommodation cost can be paid in three different ways – as a refundable accommodation lump sum, a daily accommodation payment, or a combination of both these options. You can learn more about RADs and DAPs on the Aged Care Guide.

There are other fees you may pay if you agree to additional services or extra services while in aged care. Both these options are hotel-like services and can give you access to additional lifestyle options while in a nursing home, like paid TV services, special menus and more room furnishings. Additional services and extra services do not provide you better quality care.

Additional services can be provided in a bundled package or you can choose what services you wish to receive. Some providers may have additional services that need to be agreed to as a condition of you moving into the facility. This fee is not subsidised by the Government.

Some providers may have an extra service status, which means they are allowed to provide higher standards of hotel-type services. Extra services are usually set to specific rooms or to a whole facility, so if you move into an extra service room, you will be required to pay this fee. These services are not covered by any Government subsidies.

For actual costs or figures for home care or residential aged care, you can find this information on the Aged Care Guide, or use our fee estimator for home care and nursing homes.

Have you talked to a financial professional to figure out what fees you may need to pay for aged care services? Tell us in the comments below.

Related content:

How much can home care cost?
What costs are involved in nursing homes?
Benefits and entitlements for retirees and seniors