Why is aged care ‘so expensive’? The costs explained Aged care industry expert Louise Biti does the maths on costs to help you understand the reality.
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he Royal Commission into Aged Care Quality and Safety queried the funding of residential aged care and recommended the Refundable Accommodation Deposit (RAD) be phased out. YourLifeChoices member Richard Burrell wrote “that day couldn’t come quickly enough” and queried the basis for the charge. He wrote: “It was recommended this process start from 1 July 2025, but will probably take some time. In the meantime, these sometimes eye-watering amounts continue to be charged by aged care facilities. “I’m told the RAD is used to provide security for the borrowings that fund the enterprise. Why? Other projects are funded and built without this puzzling anomaly! “Why are they so expensive, and how are they calculated?
“The RADs cost many thousands of dollars – $500,000 is common. There is a facility in Seaforth (Sydney) that costs $900,000! Based on what? “Leaving aside the billions of dollars the RAD provides interest-free to the facilities, this outdated fee has two big consequences: • It forces people to sell the family home. This is cruel and wrong. • So instead, people opt for in-home care. Of course, there is a backlog. “Oh dear, July 2025 will be too late for many.” We asked an expert in the sector, Aged Care Steps director Louise Biti, to comment. She gave YourLifeChoices this detailed explanation. One of the myths about aged care is the perception that it is a healthcare service. It is true that in recent years, the health needs of people entering care are increasing and greater specialist healthcare is needed, but the purpose of aged care is to provide a new home – one that is more suitable for managing increasing frailty and keeping a person safe and well. As such, they do provide some health support. Very few residential services are run by government, with most run by charities, churches, not-for-profit organisations and forprofit businesses. But the government does pay substantial subsidies to help make care affordable. An average of $65,000 per year is paid by taxpayers for every resident in aged care.
What are the fees? When unravelling the costs, the first thing to understand is that there are four categories of fees, and each pays for a different component of living expenses. This is not dissimilar to the costs you incur while living in the community. The table on page 15 provides a summary. 14
YourLifeChoices Retirement Affordability Index™ November 2021
