Deep dive into exploring Home Care Packages

Home Care Packages (HCP) provide subsidised home care services for older clients who want to remain in their home. Most clients who require care prefer to stay in their home, however this can be very difficult when their care needs are high and Government funding is insufficient to provide the home care services needed.

With progression of time, the number of HCPs have continued to increase to the extent that as at 30 September 2023, there were approximately 264,000 people in receipt of a HCP, an increase of 17% over the preceding 12 month period. The number of HCPs are expected to continue to increase each year and with a strong preference for clients to remain at home for as long as possible, may prompt advice conversations with clients.

In this article, we explain how HCPs are provided, how they are funded and we look at strategies that can maximise cash flow and allow a client with care needs to remain in their own home as long as possible.

How are Home Care Packages provided?

HCPs are offered on a consumer directed care basis. This gives clients more choice for home care services and control over how they are delivered. Providers work in partnership with clients to develop a home care plan that will meet their care needs.

Clients have the ability to choose their provider and direct the Government subsidies and supplements to that provider. In addition, all HCPs are portable giving clients the flexibility to change providers and transfer unspent funds accordingly.

To access a HCP, clients are first assessed by the Aged Care Assessment Team (ACAT)¹, which determines eligibility. Once assessed as eligible for home care, a client is placed in the National Priority System and is assigned a HCP when one becomes available (see below).

Interaction with the Commonwealth Home Support Programme

Clients whose needs are not complex can access subsidised home support services via the entry level Commonwealth Home Support Program (CHSP). Unlike HCPs and permanent residential aged care, there is no Centrelink/DVA means test. Instead, there are established guidelines within the Client Contribution Framework to assist service providers with determining suitable amounts to charge, as well as how these amounts are collected, based on their business and the services provided. Clients will therefore need to discuss and agree to any fees with the service provider before they start receiving these services.

HCPs will be replaced by the Support at Home program from 1 July 2025 and then the CHSP will be transitioned into the new program no earlier than 1 July 2027.

National Priority System (NPS) and waiting times

The NPS is essentially a queue which takes into account two factors:

The client’s priority for home care services as determined by the ACAT during the assessment.
The date the client was approved for home care at a specific package level.

Due to the dynamic nature of the NPS, the client’s position in the queue is not available. Once the client has been allocated a HCP, they usually have 56 calendar days²to enter into an agreement with a service provider.

The estimated wait times for clients with medium priority as at 31 January 2024 to be allocated a HCP for particular levels are:

There is seemingly more demand for Level 3 HCPs than available packages with clients waiting the longest for a Level 3 HCP.

Interim package assignment

Clients have the option to indicate if they are willing to accept a package at a lower level than their approved level, as an interim arrangement, while waiting for their approved package level. If a client is willing to receive an interim level package it does not mean they will wait longer to receive a package at their approved level and has no impact on their wait time for their approved package level.

An interim level package simply allows the client to access care and services while they remain in the queue for their approved package level. Once a package becomes available at a higher package level, it will be assigned to the client and accepted automatically. The vast majority of clients waiting in the queue without an interim HCP are approved for CHSP.

As at 30 September 2023, there were 41,950 people in the NPS who were waiting on a HCP at their approved level. While they were waiting, approximately 9,500 had been allocated an interim HCP with the remaining people, waiting to be

offered aninterim HCP³.

How are home care packages funded?

The funds available to provide home care services include Government subsidies and supplements and when relevant, the client’s contribution. Once a client enters into a home care agreement, the service provider receives and administers the funds available under the HCP and issues clients with monthly income and expenditure statements.

Government subsidies and supplements

The Government is the primary source of funding for HCPs, with subsidies determined by the approved package level. There are four levels of HCPs, with each providing different subsidies towards the total amount of funds available to meet care needs:

How many hours of care can be received?

The amount of hours which could be funded through HCPs is variable on a number of factors such as the hourly charge for services, whether a basic daily fee is paid as well as care and package management costs. According to COTA⁴, on average, HCPs can allow for care to be provided from anywhere from 2 to 13 hours per week depending on the HCP level.

The My Aged Care website can provide visibility of the pricing schedule by a service provider which may be beneficial in comparing different service providers when providing identical services.

Given that average age of receiving an HCP is approximately 81, based on many discussions with advisers, it is apparent that for many clients, HCP funding is insufficient to fund the amount of care they need. Any additional hours of care which are outside the HCP budget are either required to be topped up by informal care through family and friends or through the purchase of additional services. The stark reality is that for some clients with intensive care needs, especially if they do not have enough available funds nor the support of unpaid informal care, entry into an aged care facility may be required.

To assist with ensuring that HCP funding is retained to provide for the provision of care, from 1 January 2023, there is a capping on administrative charges that service providers pass onto clients. Care and package management costs are capped at 20% and 15% respectively of the HCP basic subsidies. Further, exit fees cannot be charged if the client wishes to change service providers.

Client’s contribution

Clients may be asked to contribute a basic daily fee and for those who have assessable income over certain thresholds, an income-tested care fee, towards their HCP. The Basic Daily Fee (BDF) can range from $11.22 to $12.53 per day, depending on the HCP Level. With agreement of the service provider, this fee can be waived. If a BDF is paid, the amount is in addition to the HCP funding from the Government and therefore, can allow for higher care hours.

The income-tested care fee is determined by a client’s assessable income. Once the assessable income exceeds certain thresholds, a client pays an income-tested care fee subject to a daily, annual and lifetime cap ($78,525 as at 20 September 2023).

Assessable income includes income as assessed under social security rules and any Age Pension entitlement (excluding the minimum Pension Supplement and Energy Supplement). The income-tested care fee is calculated by Services Australia and is reviewed monthly. The amount of income-tested care fee payable reduces the amount of subsidy and primary supplements provided by the Government.

Case study

Verna, 81, is widowed and lives in her home. While Verna can manage certain tasks on her own, her mobility is limited. She currently receives a Level 3 HCP and pays the basic daily fee. This means that she has $43,764 available to pay for services in her home.

Verna’s spending needs are $32,000 per annum plus $6,000 per annum for an extra 2 hours per week of privately funded care that ensures she has someone visit her each day of the week. Also, her daughter and son in-law visit her twice a week to help with things around the home as well as help with cooking.

Verna’s other assets include $400,000 in cash and term deposits and $10,000 of personal assets and currently has a cash flow short fall of $6,777 in the first year per annum that she funds from drawing down capital from her cash account.

Investment strategies can help Verna address her cash flow shortfall. For example, if Verna invests $300,000 from her cash and term deposits into Challenger CarePlus (CarePlus), she is able to increase her cash flow by $6,779 in the first year. CarePlus works effectively with the Centrelink and aged care means tests to reduce assessable assets and receives a deductible amount for tax purposes which reduces assessable income.

In Verna’s situation, the benefits of investing in CarePlus were:

Increase in Age Pension by $3,471
Reduction in tax of $395
Improved net cash flow of $6,779

CarePlus also provides estate planning certainty for Verna and her beneficiaries. In the event of Verna’s death, her estate and/or nominated beneficiary will receive 100% of the amount invested⁵.

For further information on Challenger CarePlus, please contact your Business Development Manager.

In considering investing in CarePlus, Verna’s financial adviser considered the need for future lump sums and it was felt that leaving $100,000 in the bank was sufficient for any future needs.

Furthermore, there may have been a concern that if Verna was to enter residential aged care, the investment in CarePlus may provide less liquidity to pay any Refundable Accommodation Deposit (RAD). While CarePlus can be withdrawn, there are break costs associated with withdrawing prior to death. Taking that into account, the adviser considered that if Verna was to move into an aged care facility, the family home would likely be sold, freeing up capital to pay any RAD.

Challenger’s Aged Care calculator

Through Adviser Online, you can access the Aged Care calculator, which can also model home care related scenarios.

1 Aged Care Assessment Service (ACAS) in Victoria
2 A further 28 day extension can be requested allowing for a total of 84 calendar days to enter into a Home Care Agreement.
3 Home care packages program data report 1 July - 30 September 2023 - AIHW Gen (gen-agedcaredata.gov.au)
4 https://cota.org.au/information/aged-care-for-consumers/home-care-today-consumers/frequentlyasked-questions/faqs-home-care-package-services/
5 For South Australian residents, 1.5% stamp duty initially paid by Challenger (currently 1.5% of the insurance premium) will be deducted from the sum insured before it is paid to beneficiaries.