Healthcare Business: What do the care and support funding reforms mean for providers? The elephant in the room

Amidst all the Ministerial fanfare on 11 February 2013 about the social care funding reforms, scant attention was given to the commercial interests of providers who at the end of the day make the whole system work.  What the reforms will not do is address the funding deficit in social care. The reforms also perpetuate the archaic split between health and social care even though the case for integrated care is compelling given the state of the nation’s public finances.

The Government has said that the reforms will end the risk of service users incurring catastrophic care costs given the proposed cap of £72,000, due to come in from April 2016. However, if you read the small print, the proposal is far less generous than it appears. In actual fact it operates more as a “cap” on the State’s liability, dressed up as the State and the individual sharing the burden, with a statutory minimum threshold for eligibility which will operate as the basis for rationing entitlement.

Key elements of the reforms to take effect from April 2016 include:

  • raising the upper capital limit for residential care to £123,000 which is currently £23,250;
  • raising the lower capital limit for residential care to £17,500 which is currently set at £14,250; and
  • setting a £12,000 per annum contribution from the service user towards general living costs in residential care once the £72,000 cap has been reached.  Until the gap is reached, the service user will be required to pay for the full costs of board and accommodation (subject means testing)

There are also two additional reforms of significance due to come in from April 2015 (subject to legislation), namely:

  • a new national minimum threshold for eligibility to be enshrined in regulations; and
  • a deferred payments regime that will mean that no person will have to sell their house to pay for social care during their lifetime.

One area of concern that has not been fully explained is how local authority funding is going to be calculated in terms of care and support costs. At present, providers do not split fees up between care and general living costs. Local authorities pay for personal care and accommodation as part of a global comprehensive fee, with any nursing covered by the NHS free nursing contribution.

Under the new system, local authorities will determine the amount they are prepared to pay in relation to “eligible care and support.” Only this will contribute to the £72,000 cap. Board and accommodation will also not count towards it.  Given that is the case, several commentators have suggested that it might take 4-5 years to reach the cap, whereas most people are accommodated in a care home for no more than two years.

Care homes will have to determine what their rate is for care and support, as opposed to other costs.  If the cost of care and support in the care home is more than the local authority is prepared to pay, the resident or their family will have to pay a top up.  Thus the new system will force providers to identify the real costs of care and support.  As part of that exercise, providers will need to distinguish the costs of board and accommodation, as well as other costs such as nursing, activities and, possibly, social support.  This will require a cultural as well as commercial shift in the way providers cost their services and make such information available to the public.

The concern for providers is that local authorities will seek to minimise the “care and support” rate so that the £72,000 “cap” on liability lasts as long as possible. This will make it all the more important for providers to identify the true costs of care to try to ensure that a fair rate is set by the local authority.

What local authorities should be doing is negotiating sensible commercial arrangements with providers.  However, the additional concern is that this new system will restrict commercial deals being struck with providers in favour of a one size fits all approach to fees.  To allow for flexibility within the system, local authorities should be able to estimate an appropriate rate for care and support while allowing for negotiation with particular providers.

There is also the bureaucracy and complexity that will go with the new system that providers will have to grapple with.  All potential residents will be entitled to an assessment by the local authority with a Care Account determining how much has been spent by each resident towards their £72,000 cap.  An army of social workers will be required to support this assessment and review system.

There is then the battle line between the NHS and local government which may become even more pronounced under the new system given that it is not as generous as the Government might have us believe.  If you can get full continuing healthcare funding, care and general living expenses will be free irrespective of income and capital, up to the level the NHS is prepared to fund (above which top ups will apply for additional services and facilities)

What is clear is that providers will need to gear up to the changes and decide on how they are going to position themselves to survive in a radically different assessment, costing and funding framework.

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