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Change of resident financial position post admission – what impact does this have on resident contributions?

By Julie McStay25 Aug 2014

As was the case pre 1 July 2014, when a person enters care and is assessed as being a fully supported resident, the resident will pay the basic daily care fee and the Government will pay for all other costs associated with their accommodation and care, but what happens if the resident’s financial position changes whilst they are in care? The most common scenario where this may occur is when the home of a resident which was excluded from asset testing on admission because it was occupied by a dependent spouse becomes an assessable asset when their spouse also enters care.

The Department has issued some statements to clarify the policy position they will adopt in these circumstances.

If a resident is assessed as fully supported resident on admission they will not subsequently be asked to pay a refundable accommodation deposit (RAD) or a daily accommodation payment (DAP) after admission – even if their financial position significantly changes after admission.

However, that resident may become eligible to contribute towards the costs of their accommodation by way of an accommodation contribution. The amount of the contribution will be determined by Centrelink, but depending on the resident’s circumstances and the status of the facility (i.e., is it a new facility or has it been significantly refurbished), the resident may be asked to pay an accommodation contribution of up to $52.49 per day and they may also be required to pay a means tested care fee.

The obvious problem that this creates is that until the resident’s house is sold the only income that the resident will receive (if the resident was assessed as fully supported on entry) is the pension. As a result of this scenario the resident will not have the required income to pay those additional fees on a daily basis until the house is sold. This creates additional risk for the provider.

There are a number of steps that a provider can take to minimise the risk this scenario is likely to create. As a preliminary step it is important that the provider ensures that they have a comprehensive admissions process in place and that their resident agreement clearly outlines that the resident’s contribution to costs of care and accommodation may change whilst they are in the service. The resident agreement subscriptions available at Simply Legal do so.

Providers should also have steps in place to minimise their exposure to risk which could include obtaining:

  • a guarantee or indemnity from a third party to meet the costs of care and accommodation, this would give the provider an alternative avenue to pursue if a resident was unable to pay their fees; and
  • taking security over the family home as soon as the provider becomes aware that the resident’s liability to the provider has increased and that the resident will be unable to meet the fees until the home is sold.

There are a number of ways in which a provider can take security over the home. If you would like further advice on security arrangements with residents please contact us. We have a number of simple fixed fee solutions for providers.