Fee arrears in residential aged care have been growing as a financial management challenge for Australian providers. The combination of complex Commonwealth funding structures, means-tested contributions, refundable accommodation deposits (RADs), and the involvement of family members or attorneys in managing residents' finances creates an environment where arrears can accumulate through confusion, dispute, or neglect as much as through genuine inability to pay.
The funding complexity
A residential aged care provider's revenue for a given resident may come from multiple sources: the Commonwealth basic daily fee (set by regulation), means-tested care fees (calculated based on the resident's income and assets), accommodation payments (either a RAD or a daily accommodation payment, or a combination), and additional services fees where applicable. The resident or their representative is responsible for the means-tested fee and accommodation payment components. Calculating the correct amounts, and ensuring they are paid on time, requires active management.
Where a resident lacks decision-making capacity, their finances are typically managed by a family member as attorney under an enduring power of attorney, by a professional trustee (Public Trustee, or a private trustee company), or in some cases by the State Trustee. The quality of financial management by these parties varies significantly — some are diligent, others allow fees to accumulate unpaid for months without the provider knowing the situation.
Sources of arrears
- RAD not paid: a refundable accommodation deposit that has not been settled by the resident or their representative. This is the largest single source of unresolved arrears in some facilities.
- Means-tested fee shortfalls: Commonwealth assessment of means-tested fees can take time, and interim payments may not match the final assessment.
- Family disputes: where multiple family members are involved in a resident's financial affairs, disputes between family members (about the sale of property, the exercise of power of attorney) can delay payment while family disagreements are resolved.
- Estate complications: following a resident's death, the estate may not have liquid assets to pay outstanding fees immediately, particularly if the estate's primary asset is property that must be sold.
Recovery approaches
Aged care providers are generally reluctant to apply aggressive collection pressure to residents or their families, for obvious ethical and reputational reasons. The preferred approach is proactive communication — identifying potential fee collection issues at admission and during the stay, rather than after they have become arrears. For significant arrears, formal demand to the attorney or estate executor, followed by legal proceedings if necessary, is appropriate. The RAD and any estate assets provide some security for facilities that have exposure at the time of a resident's death.
Contact Merion about aged care fee recovery — we understand the specific sensitivities and the legal framework governing these accounts.