insight into the aged care reforms linda murray

Insight into the Aged Care Reforms Linda Murray

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

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

Your Price is Your Price


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


New Financial Opportunity with residents that have reduced assets


RAD Required $400,000Cost to Consumer Pre July 2014

ResidentsTotal Assets

Bond Paid Retention01.07.13

$200,000 $155,000 $3,972

Indicative Two Year Estate Value $192,056Assumptions:Residents left with $45,000 in assetsRetention is $331 per month

Cost to Consumer From 1st July 2014 Residents

Total AssetsRAD Paid DAP on $245k

($155k - $400k)

$200,000 $155,000 $9,753

Indicative Two Year Estate Value $165,363AssumptionsMIR is 6.63%Retention is not taken from July 2014Residents left with $45,000 in assetsProjection is using compound interest on DAP

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


Important Information when talking with families


What is your preferred level of “not fully refundable”, Refundable Accommodation Deposit?

Published PriceRAD 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 $518.21MIR used is 6.63% Compound Interest AppliedDoes not take into account other deductions such as the Means Tested Care Fee

What about a higher “not fully refundable”, Refundable Accommodation Deposit?


Published PriceRAD 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 MIRDoes not take into account other deductions such as the Means Tested Care Fee

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%)


How will you manage your bad debt risk?

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.


What about couples?

In the event of overpayment you may be asked to repay the balance along with MIR penalty interest.

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 $205,000 +DAP of $35.42

Outstanding RAD $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.

Consider moving them in on the same day


Let’s Move In Together!Post July 2014RAD $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 meritYour organisations <> 40% needs to be considered

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

AssumptionsNon Homeowner. Income includes: Age Pension and deemed incomeMTCF is subject to ACFIMTCF = Means Tested Care Fee$45k remaining in assets

Minimum Means Tested Care FeeHome 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

AssumptionsHomeownerIncome includes: Age Pension and deemed income onlyPayment subject to ACFIMTCF = Means Tested Care Fee$45k remaining in assets

.


What happens if it’s time to move!

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 26 th May 2014


It’s time to move by choice

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



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.



It’s time for an involuntary Move

Supported and Partially Supported Residents


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


Let’s Talk about RAC’s and DAC’s

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


Supported Residents


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

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000Fees Payable by Different Classes of Resident (Singles)

Assessable Income

As

se

ss

ab

le a

ss

ets

$45,000 (Asset Free Area)

$24,731 (Income Free Area)

$62,944 (Income level at which accommodation supplement re-duced to zero, if assets <$45,000)

$154,179 (asset level at which accommodation supplement reduced to zero, if income < $24,731)

Fully supported res-idents

Non-supported resid-entsPartially supported resid-

ents

Pays basic daily fee onlyNo accommodation Payment

(full Accommodation Supplement)No Care Contribution

Pays basic daily fee +Small Accommodation Payment (some Accommodation Supple-

ment)No Means Tested Care Fee)

Basic daily fee +Accommodation Payment (no supplement)

+Care Contribution

17.5

% b

etw

een

45,0

00 a

nd $

154,

179

and

1%

bet

wee

n 15

4,17

9 a

nd $

372,

537

2% f

or a

mou

nts

over

372

,537

50% of income over Income Free AreaGraph Courtesy of DSS

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.

Part One – The DAC CalculationFred has assets in the bank of $140,000 and an age pension.

What will he be asked to pay?

DAC Calculation Calculation $ Amount

Assets $140,000($95,000 x 17.5% / 364)

$45.67

Pension & Deeming $26,041.03(50% of income over $24,731 / 364)

($1,310.03 / 50% )

$1.79

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

Case Study One - Fred

RAC CalculationRAC Formula Equivalent RAC

DAC of $47.46 x 365 / 0.0663(Refer previous slide for DAC calculation)

$261,280

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 DACOther factors< > 40% position Refurbished Position Government will top up the funding as requiredMIR used for the RAC conversion

Part One – The DAC CalculationJane 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 Calculation $ Amount

Assets $100,000($55,000 x 17.5% / 364)

$26.44

Pension & Deeming and Overseas income

$28,041.06(50% of income over $24,731 / 364)

($3,310.06 / 50% = $4.54)

$4.54

Jane DAC Payment $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

Case Study Two – Jane

RAC CalculationRAC Formula Equivalent RAC

DAC of $30.98 x 365 / 0.0663(Refer previous slide for DAC calculation)

$170,553.54

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 DACOther factors< > 40% position Refurbished Position Government will top up the funding as requiredMIR used for the RAC conversion

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


.


Selling Ideas

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.


There are three fees that consumers may be asked to pay

“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.


Government Contribution to Care

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?


Qualifying Strategies

Offer information sheets on the following topics:

1. Property Rules2. Means Tested Care Fee rules3. RAD & DAP explanation4. Payment Option Examples5. RAC & DAC

Ask a family to initial your checklist confirming you have provided them with the appropriate information sheets


Information sheets

.


Policies and Procedures

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?


Your policies

.


Mandatory Prudential Content


Mandatory Prudential ContentFrom 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.


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.

Remember we are all in this together


“Things work out for those who make the best of how

things work out.”John Wooden


insight into the aged care reforms linda murray

Documents

aged care reformswhat

aged care reforms rad

families insight

care feebe clear

care feemtcflump sum

dap value

nominated rad price

dap drawdownrad