The new Aged Care Act 2024 is expected to commence from 1 July 2025. This article attempts to explain the changes that are likely to happen in relation to residential care focusing on consumer contributions and means testing.
The intention of this major revision of the existing Aged Care Act is to:
- improve the lives of older people accessing aged care services in their homes, community settings and residential aged care homes;
- encourage aged care providers to deliver high-quality care.
The proposed rights-based law:
- addresses approximately 60 Royal Commission into Aged Care Quality and Safety recommendations;
- incorporates feedback from several public consultations about proposed aged care reforms;
- responds to the Aged Care Taskforce about sustainably funding aged care into the future.
However, for most people, the most important, and not finalised, changes will relate to the expected cost of receiving care – whether that is at home or when resident in an aged care facility. The proposed changes appear to focus on the resident’s financial disclosure responsibilities and an onerous assessment process that are likely to result in a very large increase in the cost of receiving aged care services. At this stage (February 2025) the details have not yet been finalised and it is likely that more changes will be made.
Means testing reforms
The reforms consist of:
- means testing the hotelling supplement which is currently paid in full by government;
- abolishing the current means tested care fee and associated annual and lifetime caps;
- introducing a new means tested contribution to non-clinical care, including a new daily cap on payments and a new lifetime cap;
- mandatory reporting to keep residents’ means assessments current.
The no worse-off principle
- A no worse-off principle will apply to everyone in residential aged care on 30 June 2025.
- Existing residents retain their existing contribution arrangements for the entirety of their stay in residential care.
What will stay the same
The government will continue to fund the majority of aged care. All residents will continue to pay a Basic Daily Fee. The way different types of income and assets are assessed in the residential aged care means assessment will not change. Current financial hardship assistance arrangements will continue.
What will change
Means testing – Current means tested care fee will be abolished • Introduction of Hotelling Contribution • introduction of Non-Clinical Care Contribution • Mandatory reporting • accommodation costs • Grandparenting of fee arrangements.
Changes to means testing – A resident’s means tested amount is based on their assessable income and assets. It will continue to be the sum of their income tested amount and asset tested amount. Income and asset taper rates are changing.
Hotelling Supplement contribution – Starting 1 July 2025, the Hotelling Supplement will be means tested for new residents. Residents who can afford to pay their full accommodation costs will contribute to daily living costs such as food, cleaning, laundry and utilities.
The means test will require a contribution from residents with:
- assets over $238,000, or
- income over $95,400, or a combination of both.
The contribution will be up to the maximum Hotelling Supplement of $12.55 per day (20 September 2024 rates). The government will pay providers the difference.
Non-Clinical Care Contribution – The Government will fully fund all clinical care costs in residential aged care. For new residents from 1 July 2025, the new means-tested Non-Clinical Care Contribution (NCCC) will replace the Means Tested Care Fee. This contribution will be for non-clinical care costs such as bathing, mobility assistance and lifestyle activities. It will only apply to residents who can afford to pay the full Hotelling Supplement contribution.
The non-clinical care means test will require a contribution of 7.8% of assets over $502,981 or 50% of income over $131,279 or a combination of the two up to a daily limit of $101.16. It is paid until the resident has contributed $130,000 or been in residential aged care for 4 years, whichever occurs first. The government will pay the difference.
Mandatory reporting – Providers will regularly report individual refundable deposit balances. Residents will be required to report changes to their personal and financial circumstances. Residents can elect to be classified ‘means not disclosed’ and consequently won’t be asked to report financial circumstances, will not be eligible for government support with accommodation costs or Non-Clinical Care Contribution. They can later elect to complete a means assessment but this cannot be back-dated to their entry to care.
Grandparenting for current residents -The current fee arrangements will continue for residents already in care before 1 July 2025. This includes the: pre 1 July 2014 cohort and the post 1 July 2014 cohort. Individuals will be able to ‘opt out’ of their grandparented fee arrangements at any time.