The wait is over…aged care fee reforms announced

The Aged Care Bill, tabled in Parliament on 12 September 2024, brings significant reforms aimed at addressing the financial challenges of Australia’s aged care sector. This follows the Royal Commission and the Aged Care Taskforce’s report, responding to the growing demand for aged care services and the need for increased investment.

The new reforms focus on creating a more sustainable system that balances government funding and consumer contributions, especially in the context of an ageing population where the number of people aged over 85 is projected to triple over the next 40 years.

At this point, the proposals are not yet law, but the Bill has been tabled with bipartisan support, so significant changes are unlikely. However, as the saying goes, "the devil is in the detail," and much remains to be clarified, with additional Principles still to be released.

The information below provides a quick overview of the changes, but the Aged Care Steps team is continuing to analyse the changes and will continue to provide more details as we know more. Keep an eye on our Latest News , and follow us on social for more detailed information as it becomes available.  And watch our free update webinar.

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Who is affected?

Most of the changes to fees are proposed to come into effect from 1 July 2025 and will only apply to clients entering residential care from that date. 

For Support at Home, people accessing a home care package (or on the National Priority System) as at 12 September 2024 will pay no more than applies under the existing fee rules. 

The next nine months could be busy if people needing care need advice and consider accessing care before the new rules start. 

Make sure you have an advice solution for your business - ask us how!

Residential care - accommodation

More than 50% of providers are reportedly losing money on accommodation which is limiting investment into new builds. Five changes proposed:

1. Increase the approval cap to $750,000 (from 1 Jan 2025).

2. Apply a retention (non-refundable) amount to RADs/RACs up to 10% over the first five years.

3. Index the DAP in line with CPI.

4. Consider eliminating new RADs from 2035.

5. Increase room subsidies for low-means residents (to be investigated).

Residential care - daily fees

Care fees will be divided into three categories. The current means-testing system will be abolished and replaced with a new set of rules.

1. Everyday living expenses - residents with assets over $238,000 or income over $95,400 (or combination) could pay up to $12.55 per day more. 

2. Clinical care - this will be fully funded by government. 

3. Non-clinical care - a new means-testing system will apply for assets over $502,981 or income over $131,279 (or combination) which may calculate a client contribution up to $101.16 per day.

4. Lifetime cap - the non-clinical care contribution will only apply for the first four years or to a dollar limit of $130,000 (indexed)

Home care fees

The new Support at Home program will start from 1 July 2025. The services will be divided into clinical care, independence support and everyday living costs. 

1. Care will be approved under 10 package levels. The highest level will have a higher budget than the current Level 4 package. 

2. Clinical care will be fully paid by government. 

3. Full pensioners will pay 5% of independence support costs and 17.5% of everyday living costs. 

4. Self-funded retirees will pay 50% of independence support costs and 80% of everyday living costs. 

5. Part-pensioners or recipients of the Commonwealth Seniors Health Card (CSHS) will pay between these levels with means-testing (assets & income) that aligns with age pension means-testing rules. 

6. The lifetime cap (for client contributions) will increase to $130,000 and count towards residential care cap.

7. Clients who start a Home Care Package after 30 June 2025 will only be able to accumulate unspent funds of up to $1,000 or 10% of package budget (higher of) across quarters.

Free webinar

Watch a recording of our free webinar for more details (based on our understanding and information available as at 18 September 2024). No CPD hours allocated. Watch here.