State Care Funding in the UK

Public expenditure on adult social care has long been under pressure with expenditure decreasing in real terms by about 8% per annum. This is causing the sector to face challenges to its sustainability due primarily to the low fee rates being paid by local authorities for state-funded care residents. Add to that the increased cost pressures on care home operators such as wage costs and it is easy to see that the sustainability of the adult social care market is approaching a tipping point. Some causes are shown below:

Local Authority fee Structure

The average fees paid by Local Authorities in England to private care home operators are generally below the full cost of the care provision and this leaves care homes that depend on local authority referrals in the position where they are barely able to cover their operating costs.

Sustainability of Local Authority Fee Structure

Most local councils now recognise that they need to increase their funding of care if residential care home services are to be maintained. If they do take this action and improve their payment structure to private care homes then the profitability and sustainability of the sector will improve. If this is not implemented we will continue to see decline in those care homes that remain reliant on local council support.

Funding Imbalance in Care Homes

Recent research suggests that about a quarter of care homes have more than 75% of their residents funded by Local Authorities and that these will be the ones that will be most at risk of failure this imbalance in local authority funding continues.

Self Funding care

The majority of care homes hold a mix of self-funded residents and residents funded by Local Authorities but generally these care homes rely on the higher fees from self-funders to remain viable.

With the standard of care being provided to both types of residents being equal, in any individual care home, it is clear that self funding residents are actually subsidising the local authorities by meeting a much greater proportion of the care homes fixed costs.

Care Home Fee Differentials

Fees paid by self funding residents are now, on average around 41% higher than those paid by Local authorities within the same care home and this represents an average differential of around £236 per week or over £12,000 per year.

Local Authority Unfairness

This difference between self-funded and Local authorities, for the same service, is understandably perceived as being unfair, particularly as the large majority of self-funders are not always wealthy people. Current savings thresholds for support means that practically anyone who owns a property will be ineligible for state funding until its value has been depleted to very low levels. The public remains generally unaware of this unfairness which lets Local authorities avoid having to justify their approach to the fees they pay to care homes.

The Move towards self funding care homes

Care home that can attract self-funders are likely to move away from serving a mix of residents and we note that nearly all new care homes being built are in areas where they can focus on self-funders. These care homes will be completely sustainable and highly profitable in the long term and will represent the future for care home investment.