Revealed: the true cost of care (for those who pay)
The extra costs borne by those who pay their own care home fees are much higher than previously thought, says Olivia Rudgard
Middleclass families who have to pay for their own care are not merely subsidising council-funded residents but becoming the sole source of care homes’ profits. This means that previous calculations of the “self-funder tax” – the difference between fees paid by private residents and fees paid by councils – have been hugely underestimated.
The disclosure, based on research undertaken for Telegraph Money, comes as Britain’s care crisis moves back up the political agenda, with more homes facing closure and more choosing to turn away council-funded residents in favour of self-funders.
Figures calculated for this newspaper by Valuing Care, a consultancy, show that self-funders now spend £713 a week on average on a residential care home. This has risen from £674 in 2013.
Nursing homes, which provide a higher level of care, have increased their fees by even more. A standard nursing home cost £798 in that year. It now costs £874, a rise of almost 10pc in three years.
But one factor behind that increase is a move by care homes to extract more profit from self-funders.
Last month Laing Buisson, the most authoritative analyst of the care sector, suggested that councils paid care homes £104 per week less, on average, than the real cost of each place. This figure, however, built in an element of profit margin for the care home. By Laing Buisson’s calculations this leaves self-funders making good a £1.3bn shortfall each year.
Valuing Care argues that the overall figure is likely to be far larger.
Ray Hart, a director, said: “Everyone points to councils’ underfunding of care home places, but the reality is different. The profit motive of these businesses is working its way into the system as well.”
Laing Buisson’s figures are based on care homes taking an 11pc profit margin from the business. This 11pc applies whoever pays.
But Mr Hart said that the low fees paid by council-funded residents, in real life, allowed care homes to take only a 7pc profit margin. If care homes were to achieve their 11pc target, selffunders would have to cough up the difference. There is also a suspicion, said Mr Hart, that where care homes think they can get away with it, they will increase the differential even further.
For example, Valuing Care estimated that the weekly cost of providing care in Surrey in 2014-15 was £558. The council paid £326, leaving a shortfall of £232. The amount that would have been charged to self-funders to cover the shortfall was therefore £790.
If – in the way Laing Buisson surveys the industry – it was simply the case that self-funders paid the difference, their fee should approximate to that figure, argues Mr Hart. But the real fee charged was £960, a significant £170 above the amount that would have made up for the council shortfall.
While the majority of care homes in the sector are small, independent businesses, around 20pc of beds are provided by care home chains.
These are shareholder-owned businesses where, in some cases, high levels of debt are pressuring the directors to raise revenues.
A 2016 report by the Centre for Research on Socio- Cultural Change at Manchester University claimed that larger care companies’ need for a significant profit margin was inflating prices.
The report said: “The big chains
now tell a trade narrative via the media about an urgent crisis in social care which is the result of not enough money from local authorities. This narrative oversimplifies the story: the issue is not simply how much money goes into adult care but where the money goes.”
Some care homes do not house any council-funded residents at all, because the fees are simply too high.
Anyone with assets worth more than £23,250, in some cases including their home, must pay for their care themselves, unless they qualify for NHS funding.
A promised care fees cap, which would limit the amount that an individual spends on fees in their lifetime to £72,000, was originally meant to come into force in April 2016 but will not now take effect until 2020.
Prof Karel Williams, who co-authored the Manchester University report, said some care home companies were moving from council-funded residents to self-funders – putting a further squeeze on available places.
He added that chains were building the vast majority of new care homes, meaning that the same problems were likely to continue or worsen as more of the sector was taken up by larger companies.
“Chains are the only ones building, and only in one format – the ‘ Travelodge-style arrangement’ with 60 beds – because that’s more profitable,” he said.
“Small companies are selling up because their buildings can be turned into flats.”
The Government’s proposed solution is to allow councils to charge extra council tax to help fund care home places.
On Tuesday Surrey Council, which had threatened to hold a referendum over imposing a 15pc rise, backed down and said it would introduce only a 5pc rise.
Another solution, suggested by Dr Sarah Wollaston MP on Thursday, would be to increase National Insurance.
But Prof Williams said more money alone would not solve the underlying problems.
“There needs to be more thought about business models rather than saying we need to put more money in,” he said.
Sarah Wollaston MP: ‘raise NI’