Caring Times: Third Party Contributions – Get it Right

The Local Authority Ombudsman decision reported in last month’s issue of Caring Times is a stark reminder of the risks of third party contributions charged in breach of the legal rules.  In that case, a care home charged relatives the difference between what it charged the Local Authority for placements, and what it charged self-funded residents (literally topping up the rate agreed with the Local Authority).  There was no agreement in place between the Local Authority, the home and the relatives in respect of those payments.  The Ombudsman was scathing in her criticism of the arrangements and laid the blame at the feet of the local authority which is refunding payments.

So, what was wrong with the arrangements and why was the Local Authority to blame?

The starting point is the Choice of Accommodations Directions 1992 which provide that when service users are eligible for care and accommodation under section 21 of the National Assistance Act 1948, the Local Authority must place them in accommodation of their choice.  The Directions only apply, however, where the cost of the accommodation is not more than the Local Authority would usually expect to pay for the person’s accommodation (‘the usual cost’).

However, the Directions and subsequent regulations provided that in cases where a third party is available to make up the difference between the usual cost and the cost of the service user’s preferred accommodation, and can reasonably be expected to do so for the duration of the arrangements, the local authority remained bound to place in the service user’s preferred accommodation.  The Department of Health provided further Guidance on the provisions in 2003.

Third party contributions can only be agreed to fund the difference between the Local Authority’s usual cost, and the cost the home charges the local authority.   Contributions must not be charged over and above the rate that the Local Authority agreed with the care home.  That was what happened in the Merton case.   Perhaps unfairly, the blame was laid at the feet of the Local Authority despite the fact that it seems that it was not even aware of the arrangements.  If the Local Authority was indeed unaware of the arrangements, it would likely have a good claim against the provider for the payments it had to refund the third party.

To avoid the risk of having to refund top ups, providers should consider the following points:

  • Third party contributions are a contribution by the third party to the cost charged by the home to the Local Authority.  They are not top up payments over and above the agreed rate.
  • All parties (provider, Local Authority and third party) should agree the third party contributions in writing and the agreement must be clear as to how much is to be paid;
  • Third party contributions are only available when the care home fees are more than the local authority would usually pay.  Providers cannot, therefore, charge more in respect of some Local Authority funded residents than others for the same care and accommodation depending only on whether the particular resident has a third party available to support them;
  • If accommodation is not available at the Local Authority’s usual cost the Local Authority must fund the full cost of care without requiring a top up.  The provider’s agreement with the Local Authority should therefore include a warranty by the Local Authority that accommodation at the usual cost is available but the service user has chosen the more expensive accommodation;
  • Top ups must not be charged when the person has not expressed a particular preference for the more expensive accommodation.   If Local Authorities place a service user in accommodation that is more expensive than their usual rate, and the service user has not expressed a preference for that accommodation, the Local Authority (not a third party) should make up the difference.  If a top up is to be charged, therefore, it is important to be able to evidence the service user’s preference;
  • The usual cost of care must be sufficient to pay for the resident’s care.  If third party contributions are being routinely asked to pay top ups because the usual cost cannot cover the actual cost of care, the charges will be unlawful.  It is important to know what the local usual rate is and whether placements are actually being made at that rate.

Providers who take the above into account should find top ups a useful, trouble-free resource.  If third parties do query payments, however, the sooner providers seek professional advice the less costly and complicated the situation is likely to get.  It is important that the legal position is established promptly.  Where something has gone awry, disputes in these cases cry out for sensible settlement at an early stage.  Equally, where a provider has conducted itself properly, it should have the confidence to resist claims for refunds.

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