Insight into the Aged Care Reforms

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Insight into the Aged
Care Reforms
Linda Murray
Insight into the Aged Care Reforms
Agenda
 New Terminology
 Implications for couples
 Trigger Figures
 Over payment and underpayments
 Supported / Assisted Financial Rules
 Sales Ideas
 Policies and Procedures
 Prudential Requirements
Insight into the Aged Care Reforms
What is the new Terminology?
Current
New
Acronym
Accommodation Bond
Refundable Accommodation Deposit
RAD
Periodic Payment
Daily Accommodation Deposit
DAP
Income Tested Fee
Means Tested Care Fee
MTCF
Lump Sum amount Paid by
Supported Residents
Refundable Accommodation Contribution
RAC
Daily Contribution made by
Supported Residents
Daily Accommodation Contribution
DAC
Insight into the Aged Care Reforms
What are the Payment Options?
Payment Options (Non Supported)
Full RAD
RAD & DAP (Combination)
Full DAP
RAD with a DAP drawdown
RAD and other fees drawdown
Payment Options (Supported)
Full DAC
Part RAC & DAC
DAC drawdown from the RAC
Insight into the Aged Care Reforms
Your Price is Your Price
Insight into the Aged Care Reforms
New Financial Opportunity with
residents that have reduced assets
You are allowed to charge a RAD greater than their assets
“Your Price is Your Price”
Other than “Supported residents” you can ask everyone
to pay your nominated RAD price
Insight into the Aged Care Reforms
RAD Required $400,000
Cost to Consumer Pre July 2014
Residents
Total Assets
Bond Paid
Retention
01.07.13
$200,000
$155,000
$3,972
Indicative Two Year Estate Value $192,056
Assumptions:
Residents left with $45,000 in assets
Retention is $331 per month
Cost to Consumer From 1st July 2014
Residents
Total Assets
RAD Paid
$200,000
$155,000
DAP on $245k
($155k - $400k)
$9,753
Indicative Two Year Estate Value $165,363
Assumptions
MIR is 6.63%
Retention is not taken from July 2014
Residents left with $45,000 in assets
Projection is using compound interest on DAP
Insight into the Aged Care Reforms
Important Information when
talking with families
If the family decides to deduct their DAP from their RAD
you are allowed to charge compound interest;
subsequently their DAP will increase monthly.
Let families know this or they may object once they see
the RAD balance declining and the DAP value increasing!
I recommend you provide an information sheet
Insight into the Aged Care Reforms
What is your preferred level of “not fully refundable”,
Refundable Accommodation Deposit?
Published Price
RAD Paid
DAP Deduction
$400,000
$50,000
$63.57
6 Months
$38,236.05
12 Months
$26.076.71
18 Months
$13,508.67
2 years
$518.21
MIR used is 6.63%
Compound Interest Applied
Does not take into account other deductions such as the Means Tested Care Fee
Insight into the Aged Care Reforms
What about a higher “not fully refundable”,
Refundable Accommodation Deposit?
Published Price
RAD Paid
DAP Deduction
$400,000
$100,000
$54.49
6 Months
$89,916.62
12 Months
$79,494.32
18 Months
$68,721.72
2 years
$57,587.03
3 Years
$34,182.33
4 Years
$9,177.87
MIR used is 6.63%
Compound Interest Applied at MIR
Does not take into account other deductions such as the Means Tested Care Fee
Insight into the Aged Care Reforms
How will you manage your bad debt risk?
Be clear on your policy regarding low RAD’s and high DAP’s that are
to be deducted from the RAD.
There are risks if the RAD paid is low and the resident outlives the
deposit.
Remember 95% of families will do the right thing!
MPIR from the 1st of July 2014 is 6.69% (Currently 6.63%)
Insight into the Aged Care Reforms
What about couples?
The rule still applies whereby only ½ the asset less $45,000 (each) can be used towards a
RAD deposit. They can pay any additional RAD via a DAP so it does not limit their ability to
pay your price.
Published RAD Value $400,000
Joint position
Peter and Ann Murray
Peter’s RAD Position
$500,000 Bank (1/2 each)
$250,000
$45,000 Minimum assets threshold
-$45,000
Maximum RAD deposit Peter can pay
Outstanding RAD
$205,000 +
DAP of $35.42
$195,000
They still have $295,000 in a joint bank account and you are NOT allowed to
ask them to pay Peter’s RAD in full.
In the event of overpayment you may be asked to repay the balance along with
MIR penalty interest.
Insight into the Aged Care Reforms
Let’s Move In Together!
Post July 2014
RAD $400,000
Joint Assets
Value
Family Home
$500,000
Bank account
$50,000
Total Assets
$550,000
Staggered Entry
Same Day
Peter enters care
Fully Supported
$230,000 + DAP of $11,271
Anne enters care
RAD $230,000 + DAP $11,271
$230,000 + DAP of $11,271
Assumptions:
MIR used is 6.63%
Residents left with $45,000 each ($90K in total)
You need to judge each case on its own merit
Your organisations <> 40% needs to be considered
Consider moving them in on the same day
Insight into the Aged Care Reforms
Means Tested Care Fee
Trigger Figures
Minimum Means Tested Care Fee
Non Homeowner
Total cash
Assets
RAD Paid
Daily MTCF
Annual MTCF
$995,000
$950,000
$40.20
$14,673.00
$895,000
$850,000
$34.20
$12,483.00
$795,000
$750,000
$29.21
$10,661.65
$595,000
$550,000
$18.22
$6,650.30
$545,000
$500,000
$15.47
$5,646.55
$495,000
$450,000
$12.72
$4,642.80
$445,000
$400,000
$9.98
$3,642.70
$395,000
$350,000
$7.23
$2,638.95
$345,000
$300,000
$5.24
$1,912.60
$295,000
$250,000
$3.86
$1,408.90
Above is a guide of the potential Means Tested Care Fee generated from
the RAD + Age Pension + $45,000 remaining in the bank
Assumptions
Non Homeowner. Income includes: Age Pension and deemed income
MTCF is subject to ACFI
MTCF = Means Tested Care Fee
$45k remaining in assets
Minimum Means Tested Care Fee
Home Owner
Total cash
Assets
RAD Paid
Daily MTCF
Annual MTCF
$995,000
$950,000
$48.67
$17,764.55
$895,000
$850,000
$43.17
$15,757.05
$795,000
$750,000
$37.68
$13,753.20
$595,000
$550,000
$26.69
$9,741.85
$545,000
$500,000
$23.94
$8,738.10
$495,000
$450,000
$21.19
$7,734.35
$445,000
$400,000
$18.45
$6,734.25
$395,000
$350,000
$15.70
$5,730.50
$345,000
$300,000
$12.95
$4,726.75
$295,000
$250,000
$10.20
$3,723.00
Above is a guide of the potential Means Tested Care Fee generated from the $154,179
Family Home + RAD + Age Pension + $45,000 remaining bank assets
Assumptions
Homeowner
Income includes: Age Pension and deemed income only
Payment subject to ACFI
MTCF = Means Tested Care Fee
$45k remaining in assets
Insight into the Aged Care Reforms
What happens
. if it’s time to
move!
Insight into the Aged Care Reforms
It’s time to move by choice
If a resident wants to move from their room priced at
$300,000 to a room with a published price of $400,000 you
are allowed to charge them a higher RAD or DAP from the
“Price Agreement date”
Ref: Exposure draft fees and payment principles 26th May 2014
Insight into the Aged Care Reforms
It’s time for an involuntary Move
 The move is necessary on genuine medical grounds OR
 The room becomes an Extra Service place and the resident
does not wish to pay the Extra Service Fee OR
 The room is being repaired or redeveloped
Ref: Exposure draft fees and payment principles 26th May 2014
Insight into the Aged Care Reforms
It’s time for an involuntary Move
 If the moves is for less than 28 days there is no change to their
fees and charges
 If the move is for longer than 28 days then there is no additional
charge even if the new room has a higher published RAD price
 If the resident moves to a lower price you must only charge
them the lower RAD and you must refund the difference. Failure
to do so will incur MIR on the overpayment.
Ref: Exposure draft fees and payment principles 26th May 2014
Insight into the Aged Care Reforms
Supported and Partially Supported
Residents
Insight into the Aged Care Reforms
Let’s Talk about RAC’s and DAC’s
The Terminology used to explain the financial contribution
required if you are a supported resident is
Refundable Accommodation Contribution – (RAC)
A lump sum payment for accommodation, just like a RAD
Daily accommodation Contribution - (DAC)
A contribution made on a regular basis, similar to a DAP
Insight into the Aged Care Reforms
Supported Residents
Residents with assets between $45,000 and $154,179
and income above $24,731 may be certified as
“Supported Residents”
Asset Current cut off prior to July is $116,136
You will continue to receive government funding for
these residents
Insight into the Aged Care Reforms
There are four types of
RAC & DAC thresholds
Refurbished > 40% = $52.49
Refurbished < 40% = $39.75
Not Refurbished > 40%= $34.20
Not Refurbished < 40% = $25.65
17.5% between 45,000 and $154,179 and 1% between 154,179 and $372,537
2% for amounts over 372,537
$160,000
Fees Payable by Different Classes of Resident (Singles)
$154,179 (asset level at which accommodation supplement reduced to zero, if income < $24,731)
$140,000
Partially supported
residents
$120,000
Assessable assets
$100,000
$80,000
Non-supported
residents
Basic daily fee +
Accommodation Payment (no supplement) +
Care Contribution
Pays basic daily fee +
Small Accommodation Payment
(some Accommodation
Supplement)
$60,000
$45,000 (Asset Free Area)
$62,944 (Income
level at which
accommodation
supplement
reduced to zero,
if assets
<$45,000)
$40,000
Fully supported
$20,000
$0
Pays basic daily fee only
No accommodation Payment
(full Accommodation Supplement)
No Care Contribution
$0
$10,000
$20,000
$24,731 (Income Free Area)
$30,000
$40,000
Assessable Income
50% of income over Income Free Area
Graph Courtesy of DSS
$50,000
$60,000
$70,000
Insight into the Aged Care Reforms
Are You a Supported Resident?
Accommodation Contribution Formula
50% of Income over the free threshold of $24,731 PLUS
17.5% of the value of assets between $45,000 & $154,179 PLUS
An accommodation contribution equalling $52.49 or less
determines if you are a Supported resident.
Case Study One - Fred
Part One – The DAC Calculation
Fred has assets in the bank of $140,000 and an age pension.
What will he be asked to pay?
DAC Calculation
Assets
Calculation
$ Amount
$140,000
$45.67
($95,000 x 17.5% / 364)
Pension & Deeming
$26,041.03
$1.79
(50% of income over $24,731 / 364)
($1,310.03 / 50% )
Fred’s DAC Payment
$47.46
The accommodation contribution is less than $52.49 therefore Fred is a
partially supported client and will be asked to contribute towards his cost
of care via a contribution
Case Study One - Fred
Part Two – The RAC Calculation
Fred now wants to know if he can pay part of his DAC as a lump
sum (RAC). You now need to covert the DAC to a RAC
RAC Calculation
RAC Formula
Equivalent RAC
DAC of $47.46 x 365 / 0.0663
$261,280
(Refer previous slide for DAC calculation)
What will Fred Pay?
Fred decides to pay you a
RAC of $95,000
His new DAC is
$261,280 – $95,000 = $166,280
$166,280 x 6.63% = $30.20 (new DAC)
Fred will pay $95,000 as a RAC and $30.20 as a DAC
Other factors
< > 40% position
Refurbished Position
Government will top up the funding as required
MIR used for the RAC conversion
Case Study Two - Jane
Part One – The DAC Calculation
Jane has bank assets of $100,000 and an age pension and an
overseas pension of $100 per week. What will she be asked to
pay?
DAC Calculation
Assets
Calculation
$ Amount
$100,000
$26.44
($55,000 x 17.5% / 364)
Pension & Deeming and
Overseas income
Jane DAC Payment
$28,041.06
$4.54
(50% of income over $24,731 / 364)
($3,310.06 / 50% = $4.54)
$30.98
The accommodation Contribution is less than $52.49 therefore Jane is a
supported client and will be asked to contribute towards her cost of care
via a contribution
Case Study Two – Jane
Part Two – The RAC Calculation
Jane now wants to know if she can pay part of her DAC as a lump
sum (RAC). You now need to covert the DAC to a RAC
RAC Calculation
RAC Formula
Equivalent RAC
DAC of $30.98 x 365 / 0.0663
$170,553.54
(Refer previous slide for DAC calculation)
What will Jane Pay?
Jane decides to pay you a
RAC of $55,000
Her new DAC is
$170,553.54 – $55,000 = $115,553.54
$115,553.54 x 6.63% = $20.98 (new DAC)
Jane will pay $55,000 as a RAC and $20.98 as a DAC
Other factors
< > 40% position
Refurbished Position
Government will top up the funding as required
MIR used for the RAC conversion
Insight into the Aged Care Reforms
What’s your RAC and DAC policy?
Consider sending residents (or E.P.A) to the Centrelink Office and
request a copy of their income and assets across the counter to
show to you
Plus a “Stat Dec” confirming financial position
Assist them to complete the Centrelink “Income and Asset”
form as a matter of urgency
Problem!
If you overcharge the resident you will be asked to refund the
overpayment plus MIR
Insight into the Aged Care Reforms
Selling
. Ideas
Insight into the Aged Care Reforms
There are three fees that consumers
may be asked to pay
1.
A contribution towards their accommodation (Physical
building including their bedroom) via a RAD or a DAP.
2.
A contribution towards the cost of their laundry, electricity
and meals. This is funded via the Daily Care Fee.
3.
A contribution to cover the “cost of their care” via the
Means Tested Care Fee.
Insight into the Aged Care Reforms
Government Contribution to Care
“Are you aware that the government can fund up to $67,000 a
year for someone with failing health within aged care?”
“The government will assess your mum’s position and she may be
asked to contribute something towards her care. The most she
can ever be asked to pay in one year is $25,000 and as you can see
the government, dependant upon mum’s health, pays significantly
more than this.
Insight into the Aged Care Reforms
Qualifying Strategies
1. Does Mum live in the local area?
2. Does she live alone in her own home?
3. Does she receive any age pension?
What is this information telling us?
Insight into the Aged Care Reforms
Information sheets
Offer information sheets on the following topics:
1. Property Rules
2. Means Tested Care Fee rules
3. RAD & DAP explanation
4. Payment Option Examples
5. RAC & DAC
Ask a family to initial your checklist confirming you have provided
them with the appropriate information sheets
Insight into the Aged Care Reforms
Policies and. Procedures
Insight into the Aged Care Reforms
Your policies
Have developed clear policies for your staff:





RAD & DAP Policy
Self Funded Retirees RAD Policy
Admitting Supported Clients
Means Tested Care Fee explanation
Who do staff refer to if questioning it outside of their
scope or becomes difficult.
 Are you accounts department trained to take calls?
Insight into the Aged Care Reforms
Mandatory Prudential
Content
.
Insight into the Aged Care Reforms
Mandatory Prudential Content
From new Fees and Payment Principles 2014 (No.2) (Cth)
A statement informing the person that if they request, you will provide the
following information relating to the previous financial year to them within 7
days:
 a summary of how you use RADs and Accommodation Bonds;
 information about whether you have complied with the Prudential
Standards and any other rules about the use of RADs and
Accommodation Bonds;
 information about the number (if any) of RADs, Accommodation Bonds or
Entry Contributions that were not refunded as per the Act’s time frames;
 if you have invested in financial products, information about objectives and
asset classes you may invest in.
Insight into the Aged Care Reforms
Mandatory Prudential Content (Cont)
.
AND
 an audit opinion copy; and
 a copy of either - the Service’s most recent statement of audited
accounts; OR your most recent statement of audited accounts if you
operate more than one Service.
 If the person is paying by a RAD you must also provide them with a
copy of their entry in the RAD register.
Insight into the Aged Care Reforms
Remember we are
all in this together
Insight into the Aged Care Reforms
“Things work out for those
who make the best of how
things work out.”
John Wooden
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