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Care home funding shortfall

24 April 2017

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 April 24, 2017
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Self-funding, or private-pay, care home residents are keeping the sector afloat, due to a care home funding shortfall, according to the latest figures from LaingBuisson.

The latest update to its Care Cost Benchmarks toolkit has found that the average fee per resident paid to care homes falls short of the real costs of service provision by more than £100 a week – a situation which means that those residents who pay from their own finances are filling a funding gap of £1.3bn a year.

Headline figures from the toolkit show that residential care homes in England for older people, which employ average levels of staff at average pay rates, currently need to charge fees of between £648 and £590 per week in order to generate a reasonable annual return on capital (set at 11% in the Care Cost Benchmarks model, a level appropriate for a moderately risky business).

The higher figure reflects the fee level required for new premises, while the lower is for premises which do no more than pass basic regulatory standards. Actual fees being paid by councils, however, compare poorly with these levels.

According to LaingBuisson analysis of NHS Digital returns, the costs borne by English councils for residential care of older people in independent sector care homes, including council overheads, stood at just £534 per week in 2015/16. After stripping out those overheads, and projecting forwards, LaingBuisson estimates that average fee paid by English councils for residential care of older people was just £486 per week in 2016/17 – £104 per week below the ‘floor’ level of the Care Cost Benchmarks.

Commenting on the figures, LaingBuisson founder and creator of the Care Cost Benchmarks toolkit William Laing said that the adoption of the National Living Wage and requirements to employ more care staff to support residents with increasingly complex dependencies has fuelled an ‘inexorable rise’ in care home costs.

Responding to the analysis, Chairman of the Local Government Association’s Community Wellbeing Board, Cllr Izzi Seccombe, said, ‘The historic underfunding of adult social care is impacting on the cost and quality of care and access to it. The consequences for the provider market are particularly acute and the gap between what providers say they need and what councils are able to afford is now at breaking point.

‘Social care faces a funding gap of £2.6bn by 2020. Without urgent and genuinely new government funding more providers will leave the publicly-funded care market or go out of business completely.

‘As we have warned before, this risks creating a two-tier system between those able to choose and pay for their own care, and those reliant on increasingly overstretched council-funded care that will struggle to meet people’s needs, which is at odds with the Prime Minister’s pledge for a shared society.

‘Councils, care providers, charities and the NHS are all united around the need for central government to fully fund adult social care. This is essential if we are to ensure people can live independent, fulfilling lives, as well as alleviating the pressures on the NHS.’

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