Greater clarity needed over lifetime cap on care costs

Age UK released on Wednesday the first comprehensive overview of what the Government's new lifetime care costs cap will mean for someone who needs support in later life.

The overview is part of its report 'The Dilnot social care cap: making sure it delivers for older people in 2016'.

What the Age UK analysis shows is that the Government's proposed system of paying for care is complex and may prove difficult for many older people and their families to both understand and negotiate.

One of the key aims of the care costs cap is to help people plan for future care needs, so Age UK is calling for local authorities and the Government to make sure that information campaigns and training for social care staff start immediately.

This training must ensure that everyone involved can explain clearly the costs, eligibility and means test thresholds of the new care system.

Eligibility criteria

The new lower eligibility threshold of £72,000 was initially viewed as positive, but it now looks likely to be set at a level equivalent to substantial care needs. This will mean that many older people and their families may be disappointed to discover that only care costs incurred once they reach this threshold will count towards the cap.

These same people may also be surprised that the total amount they pay for residential care may not be taken into account when calculating their contributions to the cap.

Under the proposals the ‘cost' of a care home will be based on the amount that the local authority pays for a place, known as the 'usual rate'. As ‘bulk buyers' of care home places local authorities are able to negotiate lower fees than individuals.

What happens currently

At the moment, care home providers argue that the rates paid by local authorities are too low and, in fact, family members are often asked by local authorities to pay 'top up fees', even though their relative is entitled to free social care.

It has long been believed that those individuals paying privately effectively cross subsidise local authority residents in many care homes.

So, as Age UK's analysis shows, an individual may not be able to count the full cost of the ‘care' component against their lifetime cap. In addition, it's already clear that the ‘daily living component' of a care home fee will not count towards the lifetime cap either.

Why is this important?

Well, the Care Bill still requires all local authorities to find care at the 'usual rate' for anyone who makes a request.

This could mean individuals pay lower fees, but in the report Age UK flags its concerns around the potential impact on the care market.

There are around 175,000 people funding their own care in residential homes. Some individuals choose to pay higher fees as a premium for additional features above and beyond a standard quality care home, much like paying a premium for a luxury hotel.

However, many are forced to pay a rate higher than the local authority pays simply because they cannot find a care home place at the ‘usual rate'.

If local authorities try to buy care for far more individuals who want to pay for care at the local authority 'usual rate', then care home owners may either have to provide places at a price that they argue does not allow them to run a viable business, or turn people away.

Alternatively, those older people who organise and pay for their own care could find that their charges were significantly raised.

Pressure on care homes

This situation could result in care home owners being driven out of business or local authorities having to pay higher 'usual rates', because homes no longer able to cross-subsidise are forced to raise fees across the board.

This increase in fees would result in additional pressures on already-squeezed social care budgets and would also be unfair on older people forced to pay higher care home fees than they had previously anticipated.

The Age UK analysis uses a fictional person 'Mrs A' to illustrate the complexities of the proposed new system. While she has average income and assets compared to her peers, her care needs are more severe than average; for example, her stay in a care home is two years - longer than the median average of 22 months.

The analysis shows that although Mrs A is certainly not worse off under the new system and, depending on how her needs develop, is better off to varying degrees. However, the new system only offers limited protection and most people will still have to meet much of the cost of their care.

Age UK's comment on the report

Michelle Mitchell Charity Director General of Age UK said:

'I think our main finding from this analysis is that the proposed system is far from straightforward and both those planning for future care costs and families trying to sort out immediate care needs are likely to need help understanding it.

'For example, if only people with care needs assessed as "substantial" qualify for local authority support this means that care which people purchase to help with lower but still quite significant levels of need will not go towards the lifetime cap. There is likely to be further confusion with residential care and how much of the total fee will count towards the cap.

'If the Government wants to help older people plan for potential care costs, it needs to help people understand, ideally long before they actually need care, how the system will work and what individuals will actually have to pay.

'The Government and local authorities also need to carefully manage the impact of the new system on the care home market and council budgets. Government must ensure they help both care homes and local authorities adjust to the changes in the market caused by more people purchasing care at the usual rate, and this must not be at the cost of unreasonably raising fees for older people who fund and organise their own care.

'By levelling the playing field for self-funders these proposals could be a real help but there could be major unintended consequences if care home owners are forced to accept fees that are too low to enable them to run a viable business, or to deliver safe, high quality care.'