Home' Australian Ageing Agenda : AAA Nov-Dec 2014 Contents Arcare has introduced innovative
new ideas that bring staff and
resident relationships to the fore.
This relationship-focus is not only
changing the culture of Australian
aged care, it's also been featured
in an international documentar y.
To discover the approach that's
shaping aged care, search 'It takes
a community' on YouTube.
AGED CARE FOREVER
Cathy Greenblat PhD
Sociologist, Photographer & Author
Soo Borson MD
Geriatric Psychiatrist & Dementia Specialist
super-premium room you are not locked
into a certain room being a certain price,"
Price says that as providers get more
detail about RADs and DAPs in their area
and factors influencing families, more will
apply to exceed to $550,000 threshold.
"I fully expect more providers will go
above the $550,000 level. Some were on the
front foot for the changes and were very
precise on how they priced, some were on
the back foot," he says.
"People will get more sophisticated as
they learn the relationship between the
median house prices in their areas and the
willingness of people to pay."
Analysts say the consumer market is still
immature and clients remain unsure how
the new system affects them.
Under the rules, the choice of paying a
RAD or DAP should lie entirely with the
client, who has 28 days to decide (paying
the daily amount in the interim.) If the
client chooses a RAD, there is a further
three-month period to pay.
"I think the financial planning
industry is one of the winners out of
this," Mr Sinclair says.
"There are going to be a lot of people
requiring advice and lots of aged care
providers will be saying to people go get
a financial planner."
Anecdotally, that advice may be
encouraging some residents to pay a RAD
rather than a DAP, given the low rate of
return on offer from cash funds.
Although the daily payment is
calculated as a fixed proportion of the
lump sum, additional interest is charged to
the resident if they choose the DAP.
The DAP is calculated by multiplying
the RAD by a maximum interest rate
(formerly 6.69 per cent now 6.63 per cent)
then dividing that total by 365.
This means a resident offered a
$500,000 RAD would pay about $91 a day
if the amount was converted to a DAP or
$33,150 a year. The same money left in a
savings account at 3 per cent would earn
only about $15,000.
"We are hearing that in some
instances, because they are getting
financial advice, and because the RAD-
DAP equivalent carries an implicit 6.5 per
cent or thereabouts, it is better for them
to pay the lump sum and pay it quickly,"
"That's a good thing as the industry
was concerned there could have been a
delay in not knowing what the consumer
wanted to pay."
Ansell says those of his providers who
had mainly taken bonds in the past have
tended to get clients choosing RADs;
those formerly receiving daily payments
received more DAPs.
"I don't know that the consumer
choice angle of this has really manifested
yet," he says. "People who were bonded
providers suddenly converting to getting
mainly DAPs was a worry for me but early
feedback is that people are still happy at
this point to pay a bond.
"What I don't know is the science of
that --- whether it is that rich people are
happy to pay a RAD or whether it is the
way the home is approaching the families
when they are negotiating."
But Ansell says providers should
also think about the interest rate bonus
built into the RAD-DAP conversion, and
explore combined or pure cash payments.
"The conversion of your RADs into
DAPs takes place at a much better price
than when it is sitting in the bank.
"If the RAD is sitting in the bank I
DAP which is a conversion of my RAD
plus 6.63 per cent, I'd rather have that.
Groups that are not dependent on bonds
are really quite happy to have the cash,"
Sinclair predicts there might be moves
by some providers to smaller RADs that
provide a buffer against bad debts that
are drawn down on by the provider as
"The perfect situation --- if you are a
provider with lots of cash who doesn't
need RADs to refinance cash reserves
or spend cash reserves any time soon on
capital expenditure --- is getting a DAP or
combination," he says.
"They are going to get a better return on
the DAP proportion of that than they will on
the RAD proportion sitting in the bank." n
www.australianageingagenda.com.au | 25
Links Archive AAA Jan-Feb 2015 AAA Spt-Oct 2014 Navigation Previous Page Next Page