14 Feb Aged care planning: Prepare now for high costs when you’re older – or regret it
Planning for the future can be challenging at the best of times. That’s why for many of us compulsory superannuation will be the saviour for a half-decent retirement.
While none of us like to think of anything other than a happy and healthy journey to the end, we know that the reality can be very different.
There are several forces at play highlighting the need to think beyond the holidays and spare time in retirement to how we are going to manage our health and care requirements.
The Productivity Commission puts the chance of women needing care at age 65 at about 68 per cent and for men 48 per cent. The difference comes from men having lower life expectancies, whereby they predecease their spouses, leaving the remaining partner in a vulnerable position living alone.
As medical improvements increase longevity, the percentage of people needing care is expected to grow.
Most of us rely on friends and family to provide help we may need in the home but the landscape for informal carers is also changing.
Smaller families, children living and working away, more women continuously in the workforce and changing attitudes mean a growing reliance on formal care arrangements.
The government’s latest data shows more than 1.3 million people access or use some form of subsidised aged care either at home or in a facility. It is predicted that 3.5 million Australians will be accessing aged care services every year by 2050.
Most people may never have to move from their own home into residential care but this is where future planning can go a long way.
A study commissioned by independent in-home care provider Absolute Care & Health by social demographer McCrindle found that despite the overwhelming desire to live out their days in their own home, only a quarter of all respondents had given any thought to how they would make this happen.
Ask yourself whether you would rely on family, on government-subsidised services or pay privately using existing resources. What if your preferred option was limited or couldn’t deliver the care level you need?
Superannuation and cash savings emerged in the study as two obvious sources of capital. But with most people focusing on using the same resources for a comfortable retirement, you may need to start thinking about whether there is enough for both.
Expectations around how much it costs and who should pay may also need to change.
The McCrindle data found that two-thirds of older Australians expect their future care costs to be $400 a week or less and nearly half intend to subsidise their expenses with government payments. Almost 20 per cent expect the government to fully fund their future care.
The government does foot all or some of the bill of a large portion of home and residential care recipients – full pensioners are covered and part pensioners make a small contribution – but those with the means to pay are asked to do so up to a capped amount.
Just as a guide, the current rate for privately-funded home care services through an accredited provider is about $50 an hour (more on weekends). It is possible to employ care providers including cleaners directly from about $25 an hour.
If you are not paying privately and are relying on government-subsidised home care services, then the costs (based on an income test) will be capped at about $5500 year for part-pensioners and $11,000 for self-funded retirees. But then the number of hours of subsidised care will also be limited by the budget allocated within any government funded package.
With residential care the two components that need to be understood are the accommodation – payable via a refundable accommodation deposit or the equivalent daily interest rate or a combination of both – and care.
The basic daily care fee is currently $18,308 a year and the means-tested care fee is capped at $26,964 a year.
Currently the consumer contribution towards residential care is significantly higher than it is for home care – which is clearly unsustainable.
In-home care outgrew residential care by five to one in the 10 years between 2006 and 2016, according to the Australian Institute of Health and Welfare.
According to McCrindle 30 per cent of older Australians have already been involved in organising care for a parent, but the care decisions are being made quickly and with limited information.
The process of organising care is often triggered by a sudden event causing ill health or injury, with two in five spending less than one month actively exploring care options.
In the current environment where government-subsidised home-based care services are stretched to the maximum (and even non existent in many places), residential care may be the only alternative.
With the wait for a government-subsidised home care package at least six months and possibly 18 months, it may be worth canvassing other care options.
Anyone who has been through the process will tell you that a month to find the best care facility and then work through the complex system to establish how much it is going to cost and how to pay for it is stressful for everyone involved.
Conversations around different care options and how they should be paid for are never easy. The worst time to have them is under pressure, such as beside a hospital bed.
The Royal Commission into Aged Care Quality and Safety has already got more people talking about the type of care we expect to see as a society.
The expectation is there will be a lot more focus on the actual delivery of service and how people will pay for it, but the preferred outcomes will always be better with some planning.