Whenever I mention what I do for a living 9 times out of 10 I will receive a comment about the cost of aged care, in particular the lump sum deposits called Refundable Accommodation Deposits or RAD’s. There is a lot of misinformation and fear surrounding RAD’s, I guess it’s because it is asking the more vulnerable of our society for such a large sum of money. I’m not going to comment on whether I think the amount Aged Care Homes charge is appropriate or justified as I don’t run a one and therefore don’t have any idea of how much it costs to do so, but, I can see the benefit of charging a RAD and I can reassure my clients by dispelling some of the misinformation they have heard.
What does the Aged Care Home do with the RAD?
Firstly we need to take a step back and look at what costs an Aged Care Home incurs through its day to day running. Put very simply they need to house, feed and water all of its residents. But they need to do this in a safe and strictly controlled and monitored environment if they wish to remain accredited (i.e. government subsidised). As with any household they need to pay for electricity, gas, water, food, they have costs associated with laundry and cleaning and they need to provide some form of entertainment or activities to keep the residents occupied. But unlike normal households they also have the additional cost of providing 24 hour care. All of these costs are covered by the daily care fees which are a combination of basic daily care fee (and possibly an extra service fee or additional service fee) which the resident pays as well as the subsidies the federal government pays directly to the Aged Care Home.
The other costs any household incurs are maintenance costs and an Aged Care Home is no different. Gardens need to be maintained and kept safe; the interior needs to be maintained to a certain standard ensuring the safety of all residents and staff. As residents leave it may be necessary for repairs to be done to their room, such as repairing walls, repainting or re-carpeting. To the general facility there may be renovations and there is always ongoing maintenance of furniture, fixtures and fittings. None of these costs are covered in the daily care fees. So this is where the accommodation payments come in. The interest earned on a RAD as well as the Daily Accommodation Payment (DAP) for those who opt to pay the RAD as a daily interest rate, is used by the Aged Care Home to maintain the building and grounds, to do renovations or to pay down the mortgage it may already have.
The Aged Care Home must invest the RAD money of each and every resident in a fund specified by the Aged Care Act 1997 and can only be used to pay for capital improvement or to refund other RAD’s as residents leave. This is strictly controlled by the federal government and Aged Care Homes are asked to show financial statements to demonstrate how much money has been collected and where is it invested during regular accreditation visits.
RAD’s are also government guaranteed so can be viewed as one of the safest investments you can make with the money. And, within 2 weeks of you leaving the Aged Care Homes or giving notice of leaving the Aged Care Homes (or probate) the Aged Care Homes must refund the RAD in full, unless you have previously agreed to have certain charges deducted, directly into the residents nominated account (or into their estate).
If you have a question about RAD’s that you would like covered please let me know. Otherwise stay tuned for more articles.
If you are considering aged care, it is important that you know and understand your rights as a potential resident. If you are concerned about any aspect of entering aged care please call us and we will answer all of your questions and concerns.
