Recommendations on The Future of Residential Care for Older People in Scotland

A strategic examination of the purpose and desired structure of residential care services fit for the aspirations and needs of future generation.

Part 4: Sustainable Funding

Changing demographics - both for older people and for other age-groups - will impact on public finances. The need for a radical shift towards collaborative, outcome-focussed service planning, pooled funding, and pre-emptive, community-orientated preventative services is widely recognised. Even so, funding this shift remains very challenging.

The financial impact of demographic change is already here, and has been for some years, although not necessarily at the levels previously projected. Nonetheless, many councils have not been able to increase spending on social care in line with increasing demand, resulting in tighter application of eligibility criteria. The best evidence available is that the need to spend more on health and social care will continue at an accelerated pace into the future. As the Office of Budget Responsibility points out, "demographic change is a key long-term pressure on the public finances."8 The recommendations of the Task Force therefore need to be set within this wider strategic challenge around demographic change.

Care Home Funding

Local government currently spends a total of £637 million buying care for older people through (a) the National Care Home contract for publicly funded residents, and (b) paying out £111 million on Free Personal and Nursing Care (FPNC) payments for self-funders9.

Over time, and especially over the past 2 to 3 years, there have been significant and growing financial pressures within the care home sector from rising fuel, food and staffing costs - this strain has been experienced by providers within the private, voluntary and public sectors. The property boom and subsequent collapse in the property market has left many private sector care home providers with onerous debt obligations which are set to worsen if interest rates rise in the near future.

At the same time, Local Authorities are having to manage their budgets in a period of fiscal pressure. This trend, along with the strategic shift to allowing older people to stay in their own homes for longer, has caused downward pressure on occupancy rates in some areas of the country.

These pressures have been given expression within the context of the National Care Home Contract fee negotiations, which are taken forward annually between COSLA and Scottish Care. Over the past few years these negotiations have run into significant difficulty, largely associated with local government funding pressures. Care home providers accepted a freeze on payment rates in 2011-12 on condition that, in subsequent years, the sector would diversify and joint commissioning with NHS Boards would bring more resource into the overall funding envelope. This has not happened yet, and the providers have intimated that lack of investment impedes their capability to train staff and upgrade facilities. Despite subsequent uplifts of 2.75% and 2.5% for the period 2012-14, many providers continue to operate at the margins of viability.

It is the view of the Task Force that there is currently insufficient funding for investment in the care home sector. Publicly funded residents are generally being cross-subsidised by self-funding residents and many providers are relying on expensive and more complex debt packages to stay viable. New build properties are often being targeted exclusively at self-funders. None of these developments are in the interests of the majority of current and future residents. The implications of failing to provide adequate funding include: heightened risk of care home providers going into administration; still higher care fees for self-funders; a decrease in the level of quality of provision and services; an increased level of delayed discharges from hospitals; and increasing difficulties in the recruitment and retention of care home staff at all grades. In short, the funding of care is at the heart of building a high quality and sustainable sector into the future.

The view of the Task Force is therefore that there is a need to review funding levels within the sector and that the main vehicle for this should be around a separation of the accommodation, hotel and care costs. This will help to make it clearer that the individual's responsibility (where he or she has the means to do so) lies in covering living costs regardless of whether they are living at home, in extra care housing, or a care home, whilst the costs of care (personal and nursing) remains the responsibility of the state. This will necessitate a review of the current rates for Free Personal and Nursing Care. When we stratify the care home fee structure into its various strands, it raises questions about the costs of providing care and support arrangements within a homely setting. Work undertaken by Laing and Buisson indicates that FPC payments are unlikely to cover the true cost of nursing care. There is general consensus in Scotland that the "care" element of residential care fees should be fully funded by the state. As such, the Free Personal and Nursing Care contributions should be reviewed to more accurately reflect the costs of personal and nursing care in a residential setting. Furthermore, the Task Force holds the view that any additional investment in the sector through an uplifted FPC rate should be offered in the expectation that it delivers a quality dividend.

Charges to the Service User

If assessed as needing residential care, the local authority will carry out a financial assessment to determine the appropriate level of local authority funding. The National Assistance (Assessment of Resources) Regulations 1992 and associated Charging for Residential Accommodation Guidance (CRAG), provide the framework for local authorities to charge for the residential care that they provide or arrange.

Since the Scottish Government introduced free personal and nursing care (FPNC) for people aged over 65 in July 2002, the local authority will pay a contribution towards these elements of the care for all those assessed as needing them, regardless of their assets. Under the financial assessment anyone with capital, including property worth £25,250 or more, must meet his or her accommodation costs (over and above any assessed entitlement to free personal and nursing care) in full. Where capital falls between £25,250 and £15,500 a resident will be expected to contribute a proportion of his or her assets towards the cost of care. Capital of £15,500 or less is not taken into account in assessing a contribution, although the individual will contribute to the accommodation cost from any income e.g. pensions and benefits with the local authority funding the balance.

The current framework is often perceived as unfair by those with capital and assets greater than the upper limit because:

  • it often requires families to sell homes to pay for care;
  • a significant proportion of people accessing care homes for the first time will have assets greater than the upper capital limit;
  • Self-funding individuals have to negotiate their weekly fee rates directly with providers and do not have the benefit of bulk purchase negotiation - so invariably pay a significantly higher fee rate; and
  • The current system of charging is complex and difficult to follow, and families are often unaware of all the options to fund their care.

The UK Government has recently chosen to reform capital limits in England, following Andrew Dilnot's independent report in 2011. The financial limit used in the financial assessments for people in residential care will increase from £23,250 to £118,000 when the value of their home is considered as part of their capital (from April 2016). The Task Force recommends that work is undertaken to fully explore the opportunities and costs of amending the capital limits in a Scottish context.

Pooled Budgets

The formal integration of health and social care services through the Public Bodies (Joint Working) Bill provides an opportunity for local Health and Social Care Partnerships to pool resources. This is especially true with respect to the resources that partnerships deploy in support of older people with highly complex long-term care needs. For example, as mentioned above, councils currently spend in the region of £640million on this population while the NHS also has a significant expenditure on continuing care patients, most of whom are older people with complex needs. There is therefore an opportunity to rationalise this expenditure to deliver a consistent approach to care and support across this care group. It is recommended that Heath and Social Care Partnerships scope out this potential in their joint commissioning plans. Many NHS Boards already make use of the sector and this is a practice that we would like to see increase under integrated arrangements. More generally, the Task Force is aware that the Scottish Government has commissioned a separate review of NHS Continuing Healthcare and we await its conclusions.


Email: George Whitton

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