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Does the 28-day rule prevent residents deciding to pay a RAD before entry?


While the department is seeking to interpret the law in a manner consistent with the policy intention that prospective residents are not denied a place because they choose to pay by a DAP, it is doubtful that the legislative provisions are as restrictive as they suggest, write Anita Courtney and Victor Harcourt.

Anita Courtney

Anita Courtney

This article examines the basis and interpretation of the so-called ’28-day rule’ which gives residents up to 28 days from the date of entry to decide whether to pay their accommodation costs as a lump sum, daily payments or a combination. We challenge the position that the 28-day rule prevents a resident from making a choice as to their preferred method of payment prior to entry.

One of the aims of the Living Longer Living Better reforms was to give residents more flexibility in terms of how to pay for the costs of their accommodation in residential aged care. Consistent with this, the legislation states that residents now have up to 28 days after the date of entry to decide how to pay their accommodation costs. The 28-day rule is found primarily in section 52F-4 of the Aged Care Act 1997 titled ‘Refundable deposit not to be required for entry’ which states that: “The approved provider must not require the person to choose how to pay an accommodation payment or accommodation contribution before the person enters the service”.

Victor Harcourt

Victor Harcourt

In addition, section 52F-3 requires that the resident’s accommodation agreement state that: “within 28 days after the date of entry, the person must choose to pay the accommodation or accommodation contribution (if payable) by: (i) daily payments; or (ii) a refundable deposit; or (iii) a combination of refundable deposit and daily payments.”

Residents must pay a daily payment (or DAP) until they make their decision. If after 28 days, they have not decided the default position is for the resident to pay DAPs. However a resident always has the option of paying a refundable deposit (RAD).

A choice of payment methods was theoretically available to bond-paying residents under the old provisions. However, the ability for providers to select residents on the basis of their agreed payment method prior to entry meant that, in real terms, the option was not always available to residents. Where they refused to pay a lump sum, they could be refused admission.

The 28-day rule seeks to address this. As stated in the Questions and Answers Regarding Legislative Changes: “Aged care providers will not be able to distinguish between care recipients on the basis of how they elect to pay for their accommodation because care recipients will have a 28 day period after entering the aged care service to decide how to pay their accommodation costs.”

The Department of Social Services takes the strong view that there is no scope for a provider and a prospective resident to agree on a method of payment prior to entry. The frequently asked questions section on the department’s website contains the following:

Q: Is a new resident allowed to agree to a payment option on admission or before admission, or MUST they wait 28 days?

A: Residents cannot elect their payment method before admission. Residents have up to 28 days to decide on a payment option and can make a decision at any time during this period – they do not have to wait the entire 28 days. (emphasis added)

However, this is not what the Act says. Section 52F-4 simply prevents an approved provider from requiring the person to choose how to pay an accommodation payment before entering the service.

The ordinary meaning of the word “require” involves compelling someone to do something. It is defined as “to call on authoritatively; order or enjoin to do something” or “to ask for authoritatively or imperatively; demand.”

The Act does not say that a person cannot choose how they will pay the accommodation payment. That is an exercise of choice by the person prior to entering the service. The Act does not mean that a provider cannot invite the person to make a choice prior to entering the service. The invitation to specify a payment method and the person’s election to do this voluntarily is clearly different to an approved provider demanding that the election be made prior to entering the service.

The department’s position is that a provider cannot allow a resident to make an election prior to entering the service. The Act does not state that a resident cannot select the method of payment prior to entry. Residents are encouraged to seek financial advice and many residents decide on their preferred method of payments well prior to entry. It would be an odd result if residents could not decide on the best of payment for their situation until after they have entered care.

The closest the Act comes to regulating when residents make their choice as to how to pay is through the requirement that an accommodation agreement states that the resident “must choose” to pay their accommodation payment or contribution “within 28 days after the date of entry”. However, this provision is intended to regulate the content of accommodation agreements. If the choice has been made, the requirements of the Act have been met.

While the department is seeking to interpret the provisions in a manner consistent with the stated policy intention that prospective residents are not denied a place because they choose to pay by a DAP, it is doubtful that the legislative provisions are as restrictive as they suggest. The department is seeking to promote a policy intention of preventing approved providers from only choosing residents who will pay by way of a RAD. However, until they are put before a court for scrutiny, it is arguable that the provisions in the Act do not achieve this aim.

Anita Courtney is an associate and Victor Harcourt is a principal at Russell Kennedy Lawyers. This article appears in the current May-June issue of AAA magazine.



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2 Responses to Does the 28-day rule prevent residents deciding to pay a RAD before entry?

  1. James Underwood June 18, 2015 at 3:28 pm #

    A good article Anita and Victor.

    We are actually seeing some providers go a bit further and offer discounts to the accommodation payment if paid as a RAD at or before entry, but no equivalent discount to the DAP if agreed to at or before entry. I.e. a clear incentive to payment of a lump sum and to making the decision on or before Day One.

    This discount and the conditions for receiving it may be significantly at variance with the Department’s policy intention of preventing providers from only (or mainly) selecting new residents on the basis of their paying a lump sum.

    Certainly this appears at variance with the Department’s FAQ’s stating that residents cannot elect the payment method before entry.

    It is certainly to be hoped that this issue gets more clarity: Are incentives to pay by lump sum acceptable? Can persons pay before entry. It would be good to see a DSS response to your article.

  2. Anita Courtney July 7, 2015 at 12:36 pm #

    Thanks James, much appreciated. Yes we would certainly be interested in a response from the DSS. If you (or anyone else) hears anything further please let us know.

    I agree, there is certainly a need for more clarity on this and several other issues!

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