Councils rely on a ‘hidden tax’ on older care home residents
Data presented in the latest edition of the Care of Elderly People UK Market Survey 2012-13* shows that 175,000 older residents (43.4%) paid the full costs of their long-term care fees in 2012. A further 56,000 (14%), while being supported by councils, also relied on ‘top-ups’ from family or friends. This means that a total of 231,000 older residents were paying in full or in part from their own or their families’ resources – this marks a record high of 57% of all (403,000) older residents of independent sector care homes in the UK.
The remaining 43% of residents either had their fees paid in full by councils (143,000) or by the NHS under the continuing healthcare programme (29,000).
Commenting on the findings, author and Laing & Buisson chief executive William Laing predicted a further shift to private pay in the future.
Mr Laing said:
Mr Laing commented:
‘The reality is that independent care home providers are having to rely more and more on cross subsidies from private payers. Without these subsidies, large numbers of care homes would be literally bust. It is understandable that cash-strapped councils are seeking to pay care homes as little as they can, since this is now the biggest single cost that councils have to bear, but it needs to be recognised that this amounts to a ‘hidden tax’ on private payers, who are in effect bearing the brunt of austerity measures.’
Addressing the long-term funding debate, the report says that implementation of the Dilnot proposals would certainly reduce the burden on private payers and their families, but it will by no means remove it, because the proposal is that only ‘care’ costs will be paid by the state once an (as yet undecided) cap is reached, leaving the individual to pay for ‘hotel’ and other costs which are included in care home fees.
For the first time, Laing & Buisson has split care home costs into their component parts (see table below) for a care home meeting all the latest physical and other standards:
Mr Laing commented:
Table. Breakdown of care home fees £ per resident per week, England average
| Care Costs
|| Accommodation Costs
||Operator’s Profit|| Total Costs and Profit
On these figures, residents and their families would under the Dilnot proposals still have to pay £399 – £418 per week in care home fees on average, even after the state picks up the full cost of ‘care’. And in affluent parts of the country the costs to the individual will much higher. It would still be necessary post-Dilnot, therefore, for most private payers entering care homes to sell any house they own to pay for fees – either at the outset, or at death for those benefiting from deferred payment arrangements.
There are also hidden dangers from Dilnot for care home operators, according to the report. In particular, moving the upper limit of the asset threshold from £23,250 to £100,000 would mean that large numbers of care home residents who are presently private payers would be drawn within the ambit of local authority payment, meaning that a significant proportion of the premium fee rates which are presently needed to cross subsidise inadequate local authority fee rates may gravitate towards the low fee regime of councils.
Looking at the financial health of care home operators, and with one eye on government proposals to instigate some form of financial regulation on the largest corporate providers, the report highlights the very different fortunes of providers across the ‘north/south’ or ‘affluent/non-affluent’ divide. Those facing the toughest market, and bearing the brunt of council expenditure cuts, are operators with large slices of their care home portfolio in the North and the Midlands. Providers with a portfolio concentrated in more affluent areas are performing comparatively well, subject to the debt overhangs from pre-crisis days that still affect some healthcare providers.
Mr Laing added:
‘Market polarisation means that three of the four largest groups, including the market leader Four Seasons Health Care, are becoming increasingly unrepresentative of the market as a whole – and this is reflected in operating margins. Four Seasons, Bupa Care Homes and HC-One all have significantly higher than average exposure to publicly paid residents, and each has reported a significant decline in EBITDAR as a percentage of revenue since the austerity measures began. Meanwhile, the operating profitability of private-pay focused Barchester Healthcare remained above 30%. The 2012 results of the largest groups will be awaited with great interest.’
Elsewhere the report once again shows that, despite public policy which seeks to divert elderly care away from residential settings, the overall number of people being supported in their older age in care homes is on the up. In 2012 there were 432,000 older or physically people in all residential settings (independent and public supply combined), compared to 422,000 in the previous year, representing growth of 2.2%.
This fuelled an occupancy rate growth in the year taking it to an average 89.9% in 2012, compared to 88.5% in 2011.
Of the total capacity of 487,800 care beds currently operating in the country, those owned and run by the state dropped by a further 11% in the year to 38,800. Independent providers took advantage of this fall, adding 8,300 beds to its market share (now at 449,000).
Mr Laing concluded:
‘A two decade declining trend in the volume of demand appears to have been transformed into a rising trend. Independent sector capacity from new registrations continues to run at about double the loss of capacity from closures, making this unexpected surge one of the most significant trends to emerge from recent marketing monitoring. Without rising demand the additional capacity would impact negatively on occupancy rates and profitability at a time when the sector is also being challenged by council finding. However, this had not happened and new capacity has been coming onto the market at a faster rate over the last four years and there is no sign of this falling off so far in 2013.’
- END OF RELEASE
Care of Elderly People UK 2012/13 – Key facts:
- At September 2012 care home capacity in the UK stood at 487,800 places in residential settings for long stay care of elderly and physically disabled people across all sectors (independent and public) – up 3,600 places over April 2011.
- Of this, 432,000 places were occupied in April 2011, up 10,000 over April 2011.
- The estimated annual value of the market is £15.2bn (2011: £14.6bn). This breaks down as: for-profit sector – £11.1bn (2011: £10.5bn); voluntary sector – £2.2bn (2001: £2bn); public sector – £1.9bn (2001: £2bn).
- Average care home fees across the UK for the financial year 2012/13 are ££731 (2011/12: £722) per week for nursing care and £531 (2011/12: £542) per week for residential care.
Non-residential care services
- Public and private spending on non-residential social care and community health services for elderly and physically disabled people is estimated at £7.4bn in England (2011: £7.7bn). Of this, £4bn was spent by English local authorities on services, of which 60% were provided by the independent sector. A further £2.6bn was spent by the NHS on almost exclusively in-house services such as district and community nurses. Private spending accounted for an estimated £1.2bn on home care services. A further £500m was spent via Direct Payments.
- Hours of homecare commissioned from the independent sector dropped from 175m to 168m in the year to March 2012 with council-supplied hours falling from 26m to 20m.
*Care of Elderly People UK Market Survey 2012/13. Priced at £835 for hard copy and £1,195 for hard copy and PDF. Available from Laing & Buisson, 29 Angel Gate, City Road, London, EC1V 2PT. Tel: 020 7833 9123. Web: www.laingbuisson.co.uk
FOR FURTHER INFORMATION:
|William Laing||Justin Merritt|
|Laing & Buisson||Laing & Buisson|
|Chief Executive||Operations Director|
|Tel: 020 7923 5347||Tel: 0207 841 0049|
- Four homes for elderly face axe in care overhaul (yorkshirepost.co.uk)
- Care home bills rise by £2,400 in two years (telegraph.co.uk)
- Report claims families are paying ‘secret’ fees for care of their elderly (manchestereveningnews.co.uk)
- Man fights to keep mother in care (bbc.co.uk)