Impact on Aged Care Fees, as a result of January 2017 changes to Centrelink/DVA Assets test
As mentioned in previous newsletters, Centrelink & DVA will be changing the “Assets Test Taper” which for many pensioners will reduce their pension entitlement & for some, will lose their pension entitlement completely.
However, there has been no discussion to date on the impact this change will have on the Means Tested Fees (for those who entered aged care on or after 1st July 2014) & the Income Tested Daily Care Fee (for those who entered care prior to 1st July 2014).
For those people who have their Age Pension (Centrelink) or Service Pension (DVA) or Income Support Supplement (DVA – War Widows) reduced as a consequence of the Assets test taper changes, will see the Means Tested Fee reduced (therefore saving fees) but as a consequence of less pension, the cash flow situation is also likely to deteriorate, ie a cash flow surplus could either reduce or become a cashflow shortfall, an existing cash flow shortfall could turn into a larger shortfall. This may affect your ability to afford aged care, & would certainly impact on the ultimate amount of funds available for the family on the death of the aged care resident.
Due to the fact that the pension is counted as income when determining the amount of Means Tested Fee charged or the Amount of Income Tested Fee charged, the changes (if you are affected) will have an impact on the fees charged, & hence you should expect to see correspondence from the department about the changes to fees, sometime in the new year. However for Means Tested Fees, the reduction or loss of pension, due to the change in the assets test only has an impact on the Income Tested Amount for Means Tested Fee purposes (because it affects the pension & hence the income which is included in the Income Tested Amount.) But overall the saving in Means Tested Fee, is unlikely to be more than the loss or reduction in pension, & hence the cash flow situation is likely to be worse after the changes.
For those who are being charged an Income Tested Fee (Pre July 2014 residents) for many the Income Tested Fee will cease completely, but the loss or reduction of pension is likely to be greater than the reduction in Income Tested Fees, so once again the cash flow situation will deteriorate.
So, what can you do about it? There may be nothing you can do, but simply wear it. The Govt. are all about saving money, & hence that means they will reduce the amount they subsidise residents in aged care (however this will affect the aged care facilities), AND will also be reducing the amount of pensions many people receive (which will affect the residents). BUT for some, there may be smarter ways of investing to replace the lost income, or smarter ways of structuring your finances to get a better outcome. Or if the situation is dire, there are hardship provisions that are available from the Federal Government. You can always call us to discuss your situation, & see if there is anything we can do. Keep in mind that when this happens in January 2017, & the pension drops soon after, it may take weeks or up to 3 months before you see the changes in fees, don’t wait until then, as it will get very busy.