A smiling carer chats with an elderly lady

Funding of care fees: a cautionary tale

The Dilnot report and its aftermath

Many older people receiving care, and others who anticipate needing help in their later years, will have read with interest, and some optimism, about the Dilnot Commission’s report, the Government’s response to this and its encapsulation in the Care Bill currently going through parliament.

Most will have focussed on the fact that, rather than facing an open-ended liability to fund their own care needs, the proposals will introduce from 2016 a “cap” on an individual’s requirement to pay for social care with that cap set initially at £72,000.

Older people will also have welcomed the news that the higher capital limit (the amount of savings which a person can have and still qualify for funding towards care fees) will be raised from the current level of £23,250 to a more generous £118,000.

The majority of people will not, however, be aware of the details of the proposed new provisions and how in reality these new rules are likely to work. In this article, in order to explain the complications of the proposed new system, we look at the case of Margaret, a 72 year old widow living in Devon.

Margaret’s story

Margaret is one of those who have taken comfort from the proposed changes. She and her late husband worked hard to buy their own home and it gives her pleasure to think that she should now retain some of its current value of £250,000 to pass onto the couple’s two children. Margaret also has cash savings of £50,000 and an income of £200 per week.

Two years after the new provisions come into force, Margaret finds that due to increasing age, and mobility problems caused by arthritis, she is beginning to need some help with her daily life. She approaches her Local Authority to request a needs and means assessment, but is informed that, due to a work backlog, it will be sometime before an assessment can take place.

Margaret is told that the new rules require the creation of a “Care Account” for everyone paying for care within the Local Authority area, so that a record can be kept of when any one individual reaches the new cap and becomes eligible for full funding. This has inevitably led to a huge increase in workload with which the Local Authority is struggling.

Ultimately, Margaret receives her assessment but is informed that her needs are currently assessed as being “moderate” and regulations applying nationally stipulate that an individual has to be assessed as having “substantial” needs before he or she receives means tested financial support towards care costs. Consequently, Margaret arranges and pays for her own care which costs £150 per week. As Margaret has little spare disposable income after paying for her food and household bills, she finds that £125 per week has to come from her savings, which are depleted by £13,000 over the two year period before her needs increase to “substantial”.

When Margaret is re-assessed after two years she is informed that the £13,000 she has spent from savings does not count towards the cap as only now that her needs are substantial do the costs of her care start accruing in her Care Account. Moreover, she is told that the cap has now risen to £78,000 as it is uprated each year in line with the rise in average earnings.

Margaret’s substantial care needs mean that she has to move into a residential home and, with her family, she chooses a home suitable for her needs which costs £650 per week. Margaret calculates that in less than 2½ years she will meet the cap.

However, Margaret is told that the amount that her Local Authority will pay for a place in a residential home is £590 per week, the lower rate reflecting the Local Authority’s block purchasing power. This amount will be the starting point for assessing the amount accruing in Margaret’s Care Account not the £650 per week which Margaret is actually paying.

In addition, Margaret is expected to fund the “hotel” element of her fees which means that after the Local Authority has deducted about £230 per week representing this element, £360 per week will accrue in the Care Account. It will, in fact, be over 4 years before Margaret becomes eligible for financial help.

By comparison, Margaret’s lifelong friend Jane, who is in a similar financial position, lives in Somerset where the amount the Local Authority will pay for residential care is £654 per week, meaning that Jane will qualify for financial help about a year earlier than Margaret.

After just over 2½ years Margaret’s Care Account balance has met the cap and she is reassessed. Her savings, now that the house has been sold, amount to £220,000 having spent about £80,000 from her savings on her care needs. Her care fees are now £675 per week but the amount that the Local Authority will pay remains at £590 per week. After deduction of her “hotel” costs of £230 per week, Margaret therefore receives £360 per week in help but still has to fund £315 a week, £115 of which will have to come from her savings. So Margaret is still depleting her savings despite the existence of the cap.

A cautionary tale?

Margaret’s story and her financial position are very typical of many older people. The replacement of unlimited liability for individual contributions towards care fees to a universal cap must be welcome news for many, but there are numerous complications in the proposed new provisions and far fewer older people will benefit from the changes than might be expected.

Margaret’s story illustrates some of these complications, including the regional variations in qualification for funding, but others exist .For example, if Margaret had savings of £117,000 on entering care (£1,000 below the upper capital limit) she might have expected to qualify for help immediately. However, if the current system of tariff income continues, she would be assumed to have an income of £400 per week from her savings. This, added to her actual income, means that Margaret would receive no help until her savings had decreased well below the £118,000 upper capital limit.

There may be amendments to the Care Bill as it passes through Parliament, and the regulations under it may help to clarify the situation, but the lesson from Margaret’s story has to be that care fees funding will remain a live issue for everyone, even after 2016.

To read more about this and related topics, please visit our Elderly Care and Court of Protection blog.

For more information about funding care home fees or the implications of the Care Bill, please contact Anthony Fairweather.