Care Act Could Open Floodgates To A New ‘Top Up’ Market In Care Homes

The advent of the Care Act could herald an increase in so-called top-up funding by care homes residents thanks to legislation which would for the first time legally allow council-funded clients to dip into their own savings in order to secure a bed in a more expensive long term care facility.

Research published by healthcare experts LaingBuisson today suggests that despite plans within the Care Bill which will bring about a dramatic shift in the number of clients who are eligible for local authority support, a move to allow greater use of third party payments to part-fund care places could mean that more people actively seek out care places which have a higher price tag than those typically funded by councils.

At present councils fund care home places only for those people who have personal assets of £23,250 or less. Following recommendations made by in the Dilnot Commission in 2011, this threshold will rise to £118,000 in 2016.

Writing in the latest Care of Older People UK Market Report, chief executive of LaingBuisson, William Laing said: ‘The implementation of the Dilnot reforms is expected to shrink the present ‘pure private pay’ market share from 44% to 35% as around 35,000 English care home residents become eligible for local authority funding. A critical issue for the sector is whether most or all of these newly enfranchised residents will move into the quasi-private pay category by part-funding their care with top ups or whether they will become pure local authority-funded residents.’

In what could be the start of a transformative period for UK residential care services, the report says that as a result of these two changes, new money could begin to run into the lower end of the residential care market or, if that is not the direction of travel, those care groups with client bases which are already primarily made up of council-funded residents could see grave new threats as councils fee rates continue to lag far behind Fair Price levels.

LaingBuisson’s report shows that the fees paid by councils have fallen by 5% in real terms in the last five years and that the average fee councils pay for residential care in England, at a little over £500 per week, is about £30 less than the calculated Fair Price ‘floor’ for homes whose physical environment is adequate only. This means that most care home operators have to rely on cross-subsidies from private payers.

The report also breaks down the cost of care into its component parts, including care, accommodation, ancillary support and operators’ profit. Profit absorbs 7-8% of Fair Fees for good quality homes – see Table 1 below.

LaingBuisson Care of Older People – 26th edition KEY FACTS

Care Homes

  1. As at September 2013 care home capacity in the UK stood at 486,8000 places in residential settings for long stay care of older and physically disable people across all sectors (independent & public) – down 900 places since September 2013
  2. Of this, 426,000 places were occupied in September 2013 – down 1.4% compared to the same time in 2012.
  3. The estimated annual value of the market is £15.1bn (2012: £15.2bn). This breaks down as: for-profit sector £11.2bn (£11.1bn); voluntary sector £2.2bn (2012: £2.2bn); public sector £1.7bn (2012: £1.9bn).
  4. Average care home fees across the UK for the financial year 2013/14 are £728 per week for nursing care and £550 per week for residential care (figures combine for-profit, voluntary and public sector beds).

Table 1 Maximum Fair Fees for English care homes which meet all modern physical standards, with breakdown into cost items 2013/14, £ per week

  Care cost Accommodation costs  Ancillary support Operator’s profit Total cost & profit
 Residential care – frail elderly

 £197

 £153

 £201

 £44

 £596

 Residential care – dementia

 £238

 £153

 £201

 £47

 £630

 Nursing care – frail elderly

 £356

 £156

 £209

 £60

 £781

 Nursing care – dementia

 £356

 £156

 £209

 £60

 £781

 

QCS

 

 

Lakeland2

 

 

CHSA

 

 

Fusion

 

 

 

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