From 1 July 2014, aged care recipients were asked to contribute more to the cost of their care through income and means tested care fees, based on their financial situation.

These fees are paid to the aged care provider and are supplemented by the subsidy paid by the Government to the provider.

To ensure the system remained affordable for care recipients, annual and lifetime caps were placed on these fees. Once these caps are reached, letters are sent to the provider, care recipient and/or their nominee advising the fee payable by recipients reduces to zero as the Government will pay the full amount of the subsidy to the provider.

The annual and lifetime caps apply to the means tested care fees (both residential and home care) only and are not applicable to any other fees or charges.

Aged care service provider funding is paid in advance and reconciled through a claim lodged by the service provider after the month has elapsed. The model of upfront funding, retrospective claiming and reconciliation of payments means that all recipients who have reached the cap may continue to pay fees until their relevant provider submits its monthly claim and this is processed by the department.

Any payments made by a care recipient for the part of the month after the cap takes effect will be reconciled at the next quarterly review (QR). Any potential refund calculated in the QR will be advised in writing. The refund calculated is based on the assumption that the care recipient has paid the fees in full as per the fee letters issued by the Department. The provider is responsible for reconciling the fees they have received against what should have been paid and making any necessary refund payable.

With regard to refund letters that are sent as part of the quarterly review process, the letters identify the type of refund that may be payable as a result of the fee reconciliation. The provider payment statement reflects the rates and days for each relevant month the refunds are payable to enable the providers to reconcile.

Further information is available on the My Aged Care website.