What is the real cost of long term care in the UK and how can you afford it?

What is the real cost of long term care in the UK and how can you afford it?

You may be aware that the cost of long term care in England is expensive. But, do you have a good idea of exactly how much it is?

Many readers will know of family members who needed formal care during their later years. Common public opinion is that the majority of elderly people will go into a care home at some point in their lives; it can be seen from statistics, however, that this is not actually the case.

In addition to the emotional effect of care, the financial cost can be worrying.

This blog outlines the costs associated with formal care, as well as the differences regarding the services required. There are various forms of care on offer. It explains how families can get help, support, and guidance. For families who have a funding gap, this blog explains private funding and the use of a family home as an alternative. The blog gives some useful tips about planning ahead.

Approximately 416,000 people currently live in care homes (Laing and Buisson). This is 4% of the population aged 65 years and over, and 16% of those aged 85 or more. This statistic illustrates that, contrary to popular belief, the majority of those who are over the age of 65 do not live in care homes.

The cost of care

“It’s as long as a piece of string” comes close to explaining the difficulty in pinning down the cost of care in England. The latest figures show the following averages:

Region/Town Residential Care per year Nursing Care per year
England – average £34,060 £48,720
St Albans, Herts £51,532 £62,300
Trowbridge, Wilts £43,260 £52,300
Alnwick, Northumberland £36,088 £43,630

Source: which.co.uk

You can find a useful care calculator here.

Much depends on where you live, and where the care home is situated. It, of course, would make the most sense to place an elderly relative in a care home that is close to where they live, even though this may be relatively expensive. Relocating an elderly client 300 miles away to save on care home fees would be an unusual concept.

Any special care needs, such as dementia care, increases the annual cost. Funding the ‘average’ costs in the table above privately will increase the cost, in some cases by a significant sum.

It has been determined that a person’s ‘average’ earnings in the UK in 2019 were £30,500 before tax. The cost of care is about double this value, after tax; this illustrates the significant financial burden of care.

Due to the fact that many retired people choose to relocate nearer to the coast, these seaside towns have a demographic that differs from the rest of the country. The 10 local authorities with the highest percentage of the population aged 65 years and over are on the coast. This age demographic can place a severe strain on the local care services.

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Care home or home care?

This is a common question. Should care provision be at a family home, or should the care be delivered in a specialist home?

Most care for older people is delivered outside the publicly funded system. Over a third, 37.5%, receive the majority of their help with care needs from family and friends, and 12.5% from privately funded sources. In comparison, 21% of older people are estimated to receive the majority of their help from their local authority. An estimated 30% receive no help (BBC 2018).

Many families prefer the surroundings of the family home, which is both practical and affordable. It also has the added advantage of neighbours and surroundings that may be reassuring during difficult times.

This may involve, however, converting a dining room to a bedroom and adding a nearby bathroom, which is costly.

Then, there is the cost of regular nursing care. Taking the St. Albans example from the fee box above, nursing care is likely to cost in excess of £21 per hour. This is based on the UK Home Care Association recommendation that local authorities pay a minimum of £20.75 per hour to home care providers in the area of Hertfordshire County Council.

There is also a strain on the carer themselves, which is often overlooked.

Carers face a number of challenges when caring for the elderly; these include the growing and aging population, complex medical needs and reducing access to care services. The majority of social care is done by unpaid partners, family, and friends. They provide personal care and practical help, and coordinate formal services.

This pressure that is on carers may have an adverse effect on both their health and mental well-being; it is, therefore, imperative that carers are supported as those with support needs in their own right. This is an additional associated ‘cost’ involved with care for the elderly.

The question of care home or at-home care has been further explored in this blog: Care home or at-home care? How to make the best decision for elderly relatives.

Why are care home fees so expensive?

Care home fees vary depending on a person’s individual circumstances. The costs will make a dent, whether it’s large or small, in most family finances.

The largest cost-base is the staff themselves. Care homes require an army of staff in order to satisfy the social needs of the residents: the catering, cleaning, security, and other key tasks.

The 2018 Association of Directors of Adult Social Care (ADASS) members survey found that 83% believe the National Living Wage (NLW) to be the biggest driver of increases in unit costs for residential, nursing and home care.

The NLW, the statutory minimum wage for workers aged 25 and over, increased by 6% to £8.72 per hour on 1st April 2020; this increase is well above the rate of inflation. Rates for younger workers will also increase above inflation and average earnings. This is expected to cost local authorities in the region of an extra £585m.

In care homes, there is an average ratio of 18 patients per registered nurse during the day, and 26 patients per nurse at night. There is, however, a lack of data on nurse staffing levels; the data that does exist needs to be treated with caution (Royal College of Nursing).

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What are the alternatives?

  • Care at home: a range of services which is designed to help you remain independent and stay in your own home.
  • Retirement housing: purpose built flats and apartments. The residents are encouraged to remain independent, but help is available on site if required.
  • Sheltered accommodation: properties (e.g. bungalows, flats etc) which residents can buy or rent. They encourage independence but have a warden on hand if required.
  • Assisted living: like sheltered accommodation, with a higher level of care. Often in the grounds of a care home.

What is a needs assessment?

This is a review, conducted by social services, with the aim of determining the physical and mental needs of the patient. They will explore at any physical problems, plus the emotional/social aspects of their life in order to determine the appropriate level of care.

The range of services available varies between local authorities, so you may not be offered everything that you need. Social services have specific criteria used to determine the individuals that may require help, and patients must meet these criteria in order to receive help.

They carry out a financial assessment which explores the capital and income of each patient; the aim of this is to determine whether they are able to contribute towards the cost of their care.

After the assessment, a care plan is produced outlining the services available and how these will be delivered. The patient is allocated a ‘care manager’, i.e. someone who is responsible for arranging this for them.

Social services can arrange services. Or if you wish, can offer a subsidy for your own care called direct payments.

Can you get financial support?

Once again, it depends. Any local authority needs assessment will be means-tested.

Your savings What you pay
£23,250 or more No support, you must self-fund.

 

Between £14,250 and £23,250 The local authority will fund some of your care and you will contribute to the rest.
Below £14,250 This will be ignored and will not be included in the means test – the local authority will pay for your care. However, they will take your eligible income into account.

If you receive local authority financial support, then the local authority will select the care home, not you. This may be the difference between a publicly funded Gas Works View and a private Pines Meadow.

Local authority spending on people aged 65 and over in England has fallen by 24% between 2011 and 2018 (BBC 2018).

Demand and cost pressures on adult social care are projected to grow at a rate of 3.7% a year, increasing costs by around £12.2 billion a year by 2030/31 (Watt 2018).

When deciding on a care home, a person may be faced with a third-party top-up fee; this is the difference between the rate a local authority is willing to pay, and the chosen care home’s fee. These should only apply when someone has chosen a more expensive care home, after they have been offered suitable options within the local authority rates.

This may be because a person wants to live in a care home that is more expensive than the local authority is prepared to pay, for extras (such as a large room, a better view, or a private balcony), or because they were previously self-funding their care home fees and want to stay in the same home.

There is no legal requirement for anybody to agree to pay a third-party top-up fee and the decision to meet this cost must be entirely voluntary. An estimated 11% of care home residents pay top-up fees (Laing 2018). There is a significant gap between the rates paid by local authorities, and those paid by self-funders, and it is increasing year-on-year.

There have been instances in which families agree an arrangement even though they do not fully understand their rights, or they are pressured into paying the costs themselves when they are eligible for funded care.

The Ombudsman has found errors relating to top-up fees, with people being incorrectly charged for care (Haynes 2018). This includes being given limited or poor information about top-up fees, leading them to enter into agreements that they do not understand.

Care home providers have responded to this pressure on their finances by increasing prices for self-funding residents. It was determined by the CMA (Competition and Markets Authority) report that fees for self-funders are now 41% higher on average than for local authority-funded beds in the same care homes – equivalent to an extra £236 per week.

Are care homes financially sustainable?

When considering the long-term care needs of an elderly family member, it is important that they are somewhere they will be safe, secure and comfortable. If the selected care home goes bust, the family anxiety and turmoil can be huge.

The average annual fee for ‘self-funders’ is £44,252 a year, compared to a typical £31,720 for council-funded residents.

The difference equates to more than £1,000 a month compared to local authority-funded residents.

The Competition and Markets Authority has identified that the number of care homes charging different fees to local authorities and self-funders has increased. In 2005, 20% of care homes operated a differential pricing policy, compared to around 90% today.

The fees charged to local authorities do not cover the total cost of running the care home for those patients; therefore, the fees charged to self-funders must be increased in order to account for this.

It pays to ask very specific financial questions before considering a care home.

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What are deferred payments?

A deferred payment agreement (DPA) is an arrangement between a social care recipient and their local authority. It enables people to use the value of their homes to help pay care home costs.

If a person is eligible, their local authority will help to pay the care home bills. It places a legal charge on the property and recovers the money when the person’s home is sold.

Local authorities can charge interest on deferred payments to cover costs. The Care Act 2014 assures that this interest cannot be more than a government-approved standard rate; this equates to around 2%.

While DPAs have been available for many years, 2017/18 is the first year for which there is a complete data set. In 2017/18, there were 3,105 new DPAs in England, with a total value of £37.4 million (NHS Digital 2018).

The number of outstanding DPAs as of 31 March 2018 was 6,335, with a total value of £193.0 million.

Approximately 98.1% of DPAs relate to individuals over the age of 65. The number of DPAs issued is low compared to the number of older people accessing long term care. In 2017/18, for every 71 elderly people accessing long-term residential care, there was one new DPA agreed.

Not everyone will be a property owner, and of those who are, not all will want, or be eligible, for a DPA. The low number of people with DPAs is consistent with reports which indicate that public awareness of DPAs is low. It reflects concern amongst local authorities about the financial burden and the long-term risk of recouping the financial outlay.

Going solo

In recent years, there has been a clear trend illustrating the increase in private expenditure on healthcare. Private self-pay healthcare, excluding private insurance and cosmetic surgery, has increased year-on-year; it has more than doubled since 2010 (Laing Buisson).

This is driven by procedures mostly undertaken by older people, such as cataract surgery and hip replacement. Orthopaedic surgery and eye surgery are the most requested one-off, self-pay. non-cosmetic procedures.

The big issues

In 2015, MHA carried out a large-scale study which included almost 5,000 people across the UK.

People were asked about their hopes and fears relating to the ageing process. The top three topics explored are:

  • Personal finance – whether people would be able to afford a good retirement. Including paying for care and support;
  • Health and well-being – concerns about maintaining health and independence into later life;
  • Companionship or loneliness – being able to maintain friendships and family ties. To avoid boredom, loneliness, and isolation.

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Care home tips

If you or a family member are considering care needs, it is worth beginning the research process as soon as possible.

There is a lot to think about and evaluate. Leave nothing to chance. The main focus is on the best needs of the patient and the quality of their life, as well as the standard of care.

Is care at home the first option, or are the care needs beyond that?

The ease of visiting is important; a long and difficult journey will soon become a negative factor.

Cost is important, both capital and income. Is care affordable for the family? What are the consequences? What financial support is on offer?

Are there any psychological consequences for other close family members? Will anyone need to downsize and leave the family home?

Are there Lasting Powers of Attorney in place, and is the will up to date?

Has a family group discussion been held, and is everyone in agreement?

Visit several care homes in person. Check the Care Quality Commission website for grading assessments. Ask tough financial questions and check accounts. Do your homework.

If you would like help with your family circumstances, contact us today.

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