The implied daily living costs, c. £450-£470 per week, are materially higher than the daily living costs initially set by the Government on 19th Nov. (“For simplicity, these costs (daily living costs) will be set at a national, notional amount of £200 per week”). We would welcome further clarification on the calculation of the daily living costs, which seems to be a gross oversimplification (as it does not account for regional variations and different home standards) and an under-representation of the true costs for care home operators in providing the accommodation and sustenance. We are sure we will hear more on this topic in the months to come.
Instead of the Government figure, we have used LaingBuisson’s current care cost estimates as a guide as they seemed to be more realistic. On this basis, it will take a resident in a nursing home about three years to reach the care cap, significantly longer than the average length of stay of 16 months; for an individual in a residential home, it would take about six years to reach the cap, more than twice the average length of stay of 2.5 years. Service users receiving domiciliary care in their own homes will take approximately nine years to incur sufficient expenditure to reach the cap. These time frames will slowly shorten over time if the cap remains static due to rising care costs.
The introduction of the cap aims to prevent people from facing “unpredictable or unlimited care costs”, and it is hence logical that only a small fraction, the outliers, of the care home resident population will stay long enough to breach the cap. We estimate the proportion to be c. 10% of the care home population, leveraging a Bupa census on its care home residents (from 2012) and recent comment from a leading care home operator. These conclusions do not vary meaningfully from international benchmarks, e.g., average care costs in care homes in Germany are about 60% of the total (Germany has a long tradition of tracking and managing care cost separately).
Will the average weekly fee of a self-funder drop to the level of a public-funded resident once they reach the care cap? The Plan does not give any indication and the ‘small print’ has yet to be written. However, we consider it to be unlikely, for these reasons:
- The basic care costs, by definition, should be the same for private and public residents as the providers are not allowed to distinguish the quality of basic care provided based on funding sources.
- Even if the local authorities dispute the existing care costs and are reluctant to pay those in full, fee erosion should only affect the care component. General living costs, which account for c. 50% of the total costs, still need to be paid in full by the self-funders.
- Top-ups continue to be allowed, and there is a strong preference from all stakeholders to keep the individual in the same setting if possible.