The Care Act’s reforms to social care funding: key issues that need resolving

It may be 18 months until the cap on care costs comes into force, but problems with the policy need to be addressed now, says Belinda Schwehr

Pic credit: Nick Wright/Rex Features

By Belinda Schwehr, Care and Health Law

The Care Act 2014 is supposed to solve the hugely unpalatable truth that none of us knows whether we will be one of the few who will be unfortunate enough to need care and also be liable to pay for it out of our own pocket.

A relatively small number of older people (1 in 10) spend in excess of £100,000 on meeting their own needs, but it seems unfair that those who pay are the ones who may have saved money rather than spent it during their working lives.

The proposed solutions are a ‘cap’ on the care costs people will face and an extension of means-tested support for residential care to more homeowners.

These provisions – first proposed by the Dilnot commission in its 2011 report – do not come into force until April 2016, a year later than the rest of the Care Act. The draft regulations and statutory guidance on these funding reforms are not due out until the end of this year, to allow councils to get to grips with the first set of regulations and guidance for the 2015-16 reforms.

However, the issues raised by the changes are so significant that local authorities need to start thinking about the training challenge now.

What are the key changes?

From April 2015

  • When a person has care and support needs but does not qualify for financial support from the local authority, they may require that the local authority meets their needs as required. Where the council arranges the care and support necessary for that sort of individual, the Act gives the local authority a power to charge an administration fee to cover the costs of arranging that care and support.

From April 2016

  • Where a person is assessed as having unmet eligible needs, is not eligible for financial support to meet them and does not request that the council meet them, councils would not be under a duty to meet needs; however, they would come under a duty to provide the person with an independent personal budget setting out what it would cost the council to meet their unmet eligible needs..
  • This would be based on the cost of a typical council funded package for that level of care, in that local area – not the actual cost to the client who goes and buys it privately! This is to ensure that people who choose to spend more on their care than is deemed necessary, do not reach the cap, explained below, more quickly.
  • Councils must set up and update a care account for all people with a personal or independent personal budget, setting out the accrued costs of meeting their eligible needs. This would be the real costs – inclusive of the person’s financial contribution – in the case of a person with a personal budget – and the notional costs in the case of a person with an independent personal budget.
  • When the total amount accrued in the care account passes a figure defined in regulations, the person becomes eligible for full funding for their care and support and will not be liable for charges. This figure is due to be set at £72,000 in 2016-17 and will rise each year in line with average earnings.
  • The care account will exclude the “daily living costs” of people in residential care. In residential care, they will pay a ‘contribution’ of £12,000 in 2016-17 to ‘help’ meet expenses associated with room and board. The Act ensures that progress towards the cap will not include people’s contribution towards these general living costs. Also, people will be liable for charges for daily living costs even when their accrued care costs pass the cap.
  • Financial support will be provided to more people overall to help them with care costs from April 2016. This will help people with their care home costs if they have personal assets of up to £118,000 including their share of the value of their home, if it is not otherwise disregarded, for example, if a spouse or dependent is living there, up from £23,250 in 2015-16.
  • Where the value of a care home resident’s home is disregarded, or where a person is receiving care at home, they will be eligible for financial support with their care if they have assets of £27,000 or less, up from £23,250.
  • The lower capital limit for means-testing residential care will rise from £14,250 to £17,000. So, from 2016-17, where care home residents have assets of between £17,000 and £118,000 – and the value of their home is taken into account – they will pay tariff income of £1 per £250 in capital. This means the maximum that can be charged in tariff income will rise from £36 to £404 per week from 2015-16 to 2016-17.
  • The Act includes a power for ministers to set the cap at different amounts for people of different ages in regulations, including zero for specified categories of person, for example people who have eligible needs for care and support at the point when they turn 18, or even 25. People of working age who develop care needs before retirement age will benefit from a cap that’s lower than £72,000.

What issues do they raise?

The younger adult ‘zero’ cap

A person’s cap will be set the first time that they have eligible needs identified and this will mean that people who develop needs in childhood or young adulthood cannot be charged from their income. This creates an indefensible inequity, where people will not be charged even if they can manage to pay, for example by dint of inheritance or winning the lottery, just because they were young when first in need.  You may even have cases of a young person needing support for a very short period of time – for example three months at the age of 22 – acquiring a zero cap, and then receiving free care when they acquire needs again in their older age.

The alternative would be for the cap to change when one gets older, as opposed to being set by reference to when one first becomes eligible for social care. Then a learning disabled person would become chargeable after all, if they reached state pension age.

Prepare for the Care Act

Belinda Schwehr will be explaining the implications of the Care Act for social work practice at Community Care’s forthcoming conference on the subject, in London, on 17 September 2014. The conference will also include a discussion on the cap on care costs. Register now for a discounted place.

Although that looks bad, the reality would be that it would not have any impact on a person who had never been in the world of work, and thus had not been able to build up assets: so it would have been easier to explain than a scheme that actually makes it look as if it is only an older person’s money we are after sucking into the system!

If a working-age adult has somehow acquired or been able to generate the necessary qualifying assets or savings to be a self-funder, there appears to be no strong argument why they should not contribute the full cap irrespective of their age.

The treatment of discretionary services

The policy also raises the issue of the treatment of services provided by councils on a discretionary basis, as part of their power to meet needs under section 19 of the act.

These must be included in the person’s care and support plan, as part of the statutory requirement to set out what needs the council will meet and how it will meet them (section 25 (1) (c)). There is no clarity over whether the costs to the council of arranging these services will count towards the cap.

In my view, we need a principle that anything that is not in the unmet eligible need category and is provided through a council’s discretion, even if provided and charged for, does not count for the cap, in my view. But that might not be politically acceptable. If the cost to the council of meeting such needs are to count towards the cap, there needs to be a piece of software for sorting that out.

Instability in the care market

The scope for instability is most acute among care providers, who are realising that in less than three years, all the ‘self-funders’ they serve will be made aware of the cheaper ‘usual’ rate paid by their council.

As set out above, from April 2015, people with unmet eligible needs but who are too wealthy to receive financial support for their care, would be able to require their council to arrange care for them, for an administration fee. From April 2016, this group would be able to obtain a care account and start making progress towards the cap.

Once people grasp that they have to be assessed to get their cap progress started, and they are told that care bought by the council need only cost £x, whereas the private client rate is twice as much, the economically rational decision is to ask for your care to be arranged by the council, because it means more of your money will be left for your relatives. Hence the assessment workload will increase significantly, it is thought, and private client markets for care homes will shrink, as more relatives pay top-ups, but on top of a council imposed rate, not a private payer’s rate.

But there is a confusion in the draft statutory guidance as to whether the purchase in this situation is brokerage –  done by the council for and on behalf of the private client as his or her agent  – or done by the council for the client as if they were a council client.

If it is brokerage, the client will pay the private client rate and the private client market will not diminish. If it is purchasing as a council, then the council will retain ordinary residence responsibility for any self-funder whom it persuades to have their care arranged for them, but the better off public’s money will go further, before any of them reach the cap. That surely is the real policy agenda here.

Notional versus ‘real’ costs of care

There will always be a difference between the rates that self-funders will be charged and the rates that local authorities pay, for one and the same thing, so trying to get rid of it is not possible. A service that is adequate to meet unmet eligible needs is all that the public sector has to purchase, not the service user’s preferred way of meeting these needs, and buying in bulk always attracts a discount compared to a single unit purchase.

If the Dilnot changes lead to significantly fewer private funders, the market works, and commissioners seek to ensure the sustainability of the market, there will ultimately be less of a gap between the notional and actual cost of care.

However, without a proper comparison of what constitutes a lawfully adequate service response from a council as against the service user’s preferred service response, disputes about the difference between what the council asserts as the notional cost of meeting a self-funder’s need and the real cost to the self-funder will bring the system to its knees, in my view.

This will be especially so if there is no fleshed-out care plan for the people with an independent personal budget, because there is no duty to meet need.

I think that these disputes will continue to rage for the following reasons:

  • Nobody can predict whether anyone will have the means and the determination to bring a judicial review of their individual personal budget figure.
  • Even if they do, the council can just change that figure, without changing anything that would affect anyone else, so there will never be a judgment about the legitimacy of the rate.
  • Council commissioners and contractors have long been the most under-resourced, unprofessionalised and legally illiterate body of staff within council adult social services departments.
  • Costs brokers are asked to do the dirty work for the councils, often on performance related pay, and therefore are bound to be wilfully deaf to any training about the legal framework that binds them and the local authorities they are working for.

Living costs and top-ups

Since 1992, care homes were supposed to charge top-ups to local authority care home fees for environmental benefits, such as larger rooms or views, not for extras, in terms of service inputs, and definitely not for better quality care, or care of a specialist nature that was actually needed, not merely wanted.

Councils have long since exploited top-ups as a bridge between what they wanted to pay and what care homes wanted to charge. Top ups are running at such a high rate in terms of numbers of homes asking for them, in some areas, that it is clear that relatives are subsidising the cost of standard, or barely adequate care, when in fact they should not be at all, if their relative is entitled to an appropriate package from the State.

The government is now saying that daily living costs for people in care homes should be £12,000, when they are not, either individually or consistently across the nation’s very different economic micro-cultures.

The daily living costs in a very expensive home are probably going to be more than £12,000 but the government will still say that it is a standard £12,000. In ordinary homes, it will be far less. That difference in a posh home is going to make it look as if it’s the care that is especially expensive, and these apparently inflated care costs will not count towards the cap because the cap is measured by the notional costs of a standard package, not a desirable one. That fact alone could kill the private care market. The government’s response will be to say that market forces will mean that providers have to justify their costs in relation to one element or the other.

But to my mind, transparent top-up arrangements are not workable, without a definition of what a standard environment should amount to, or clarity about why x hours, or x inputs, are thought to be enough to meet assessed needs of an individual. The new rules about choice of accommodation extending to a particular provider of supported living or an extra care setting,  will mean that top-ups become chargeable explicitly for additional premiums for care, and not just the accommodation. The government’s consistent message through the Care Quality Commission is that it is the provider market which is responsible for quality, not commissioners, when in fact everyone who has ever gone shopping, knows that you usually get what you pay for.

I believe that everyone should know that the State only has a legal duty to pay for what is adequate. But that would make social care into a much more upfront political issue, and I suspect instead that the agenda is, ‘let’s do for care costs, what we have always done for accommodation: let’s get the relatives to pay for what we should be paying for’.

The use of procurement frameworks at a set contractual price for all providers who wish to bid, have done their bit towards stopping the consequence of market forces. Some councils have offered frameworks with a set overall price; others have made it clear that the fee rate that must be acceptable in order merely to bid, is not the overall price, but the contribution from the council, so as to allow for top-ups to be built in. This still obscures a problem of specification, even in those frameworks – what is a ‘standard’ package of care, or ‘standard care, together with standard accommodation’. The focus in the draft statutory guidance about the council needing to do due diligence on top-up offers will help a bit.

What will happen to the progress to the cap, where the person who is a full cost payer, by reference to means, has to be placed in a more expensive home, even though its service level is surplus to requirements, because other care homes won’t take the person on, or there are no vacancies then? How is a deemed bedroom cost that doesn’t count towards the cap ever going to be seen as fair to the payer? He is being done out of putting a portion of the overall cost into the cap, and he knows it’s for care that’s needed, not just living costs.

Tracking changes in self-funders’ actual needs

People are saying that better off people will get their informal carers to lie, so as to have their contribution excluded from the independent personal budget, meaning they will make quicker progress towards the cap. People will also argue that the most expensive things are the most needed.

Adaptations funded above and beyond Disabled Facilities Grant levels will be said to be facilities – examples of adult social care, at the moment, and enough to get one to the cap very quickly.

There is also a very real risk that people will try to stay in the community inappropriately in order to reach the cap before moving into residential care in order to avoid the value of their property from ever being included in their financial assessment.

The training impact

It is the Dilnot provisions that hugely complicate the hitherto simple question, ‘when does the duty to meet need arise?’, because one has to consider the financial position of the individual, instead of just treating the council’s eligibility finding as the trigger to the legal duty to provide.

In an era of litigiousness, the social services sector needs legally literate trainers and advocates to help it negotiate the issues listed above.

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