‘Tax’ on self-funders keeping care homes afloat amid council cuts

Growing numbers of self-funders are keeping many care homes from going bust by subsidising providers squeezed by low council fees, say market analysts Laing & Buisson.

Council fees to residential care homes averaged £480 a week in 2012-13, well below the £523-£628 range that Laing & Buisson calculate is a fair market price. At the same time a record proportion of UK residents are either paying the full cost of their care (43%) or are having council fees topped up by family or friends (14%), said the company’s Care of Elderly UK Market Survey 2012-13. 

Author and Laing & Buisson chief executive William Laing predicted further growth in the private payers’ market as councils continued to freeze care home fees or provide sub-inflationary uplifts, on the back of government cuts, and because of rising demand for care from homeowning older people.

Homes saved from ‘going bust’

“The reality is that independent care home providers are having to rely more and more on cross subsidies from private payers,” he said. “Without these subsidies, large numbers of care homes would be literally bust. It is understandable that cash-strapped councils are seeking to pay care homes as little as they can, since this is now the biggest single cost that councils have to bear, but it needs to be recognised that this amounts to a ‘hidden tax’ on private payers, who are in effect bearing the brunt of austerity measures.”

The report found that the care home market was continuing to grow following a long period of decline, with 432,000 residents in places in 2012, up from 422,000 the previous year, and with occupancy rates rising from 88.5% to 89.2%.

However, this masked a growing polarisation in the health of the care home sector between providers in affluent areas, with higher levels of private payers, and those in more deprived areas, who were more dependent on funding from the state, and were struggling as a result.

Lack of protection from Dilnot

The report also highlighted the extent to which self-funders would not be protected from catastrophic costs by the implementation of a cap of care costs, along the lines proposed by the Dilnot Commission. The government is expected to introduce proposals for a cap in the coming weeks, in particular to prevent people from having to sell their homes to pay for care.

Laing & Buisson calculated that “care costs” for people in residential homes, which would be covered by such a cap, amounted to £197 to £221 a week on average; however, accommodation and ancillary costs, and provider profit, which would not be covered by a cap, amounted to about £400 a week on average.

“It would still be necessary post-Dilnot, therefore, for most private payers entering care homes to sell any house they own to pay for fees – either at the outset, or at death for those benefiting from deferred payment arrangements,” said Laing & Buisson.

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