Why commit to a RAD now if you can offer one later anyway?

I have asked this question of the nursing home I am helping my mum apply to, and also of our financial adviser - but it seems hard to pin them down to a clear answer…
I know nursing homes want to know for their budgeting and planning if you are planning to pay a RAD,
but what is the disadvantage to the resident of just agreeing to a full DAP - and then in 6 months or 18 months or anytime later offering to pay a RAD?
Realistically they are not going to a refuse a RAD later, or are they? (unless the resident has a short life-expectancy).

The manager at the place my mum is in Respite at said that in their agreements, you have to commit to a maximum of 12 months to pay the RAD or you may lose the opportunity to ever pay a RAD (I think she said this anyway).

But realistically are they going to turn it down if we start off only agreeing to a full DAP, and then offering a RAD later if or when we are ready to sell? And are there any other downsides to not commiting to a RAD?

Thank you, Tim.

Just correcting my first line: I meant to say, “…about the option to change from a DAP to a RAD…”

Thank you. That sounds like a good idea to ask about adding a clause to the Agreement about the option to change from a RAD to a DAP (if you don’t want to commit to a RAD at first). Perhaps they would refuse, or make it conditional - to try to get you commit to a RAD quickly - even though, as we both suspect, they would be inclined to take the offer of a RAD later anyway.I suppose nursing homes prefer RADs because it gives them more security that you will reliably pay your fees - even though, as you say, legally they aren’t allowed to favour one over the other.In our case, we are now negotiating to commit to paying a small part of the RAD straight away - in exchange for an extension on the time to sell the house to pay the rest (as it is convenient for us to keep the house for a while). I think this could be worth it for us, to guarantee we will get the chance to pay a RAD later when we sell the house…Legally we may be entitled to offer the RAD later without a commitment now (I will post here if I find out more), but I think it’s probably fair for them to reserve the right to refuse a RAD later in order to get us to commit now (with a negotiated extension in time to sell the house).

Hi Tim,
Thanks for your question. It is a bit of a tricky one but lets looks at it in parts.
So, from a resident’s point of view, a DAP is the interest the nursing home would have received on your RAD had you paid it, converted to a daily fee so when you pay a DAP you never get this refunded once your mum leaves the nursing home. When you pay a RAD, you do get this refunded one your mum leaves the nursing home so the advantage of paying a RAD from a resident’s point of view is that you get it back, where as a DAP is a sunk cost.
We have heard of nursing homes preferring a RAD payment but they are not allowed to favour people who pay RADs over DAPs.

With regards to you changing your mind say 6 months in and changing from paying a DAP to a RAD, the important thing is to make sure that this option is included in your contract you sign when your mum moves into the nursing home as a full resident (not just respite). You’re right, it does seem unlikely that they would refuse this little clause is added in your contract.

If you have further concerns you could call the Department of Health’s financial division on 1800 227 475 and see if there is a set law on it that we are not familiar with. If they do, come back on this post, we would be interest to know.

We hope this helps,
the agedcare101 team