Care reform is not a new topic. In 2011 the Dilnot Commission set up under the coalition government recommended placing a cap on care fees and now the issue is once again at the forefront of government agenda. Boris Johnson has announced that from Autumn 2023 a cap on care fees of £86,000 will be introduced.
What will count towards the cap?
Whilst these reforms may go some way to avoid situations where people needing care are faced with the risk of losing everything, it is important to understand how the cap works and what care related costs are excluded.
Firstly, the cap only applies to care fees incurred after October 2023. All care costs paid up until this date will not count towards the cap.
Secondly the cap only applies to the cost of care and does not include fees incurred for the provision of accommodation. Figures suggest that approximately 60% of the cost of care is attributable to care and 40% covers the cost of accommodation, food and associated costs. More clarity and guidance on how to calculate the cost of the ‘care’ portion of fees is needed.
Furthermore, the cap is not based on the actual cost of the care but rather the weekly price that your local authority would be prepared to pay for care in your area.
If we look at a case study, it becomes clear that an £86,000 cap looks very different when compared with actual spend.
Mrs Ellison is 86, widowed and has assets of £300,000 and her care home fees are £1,000 per week. The cost of her care only accounts for 60% of the weekly fee and the remaining 40% is attributable to accommodation costs. This means that only £600 of her actual weekly spend is used against her cap and so Mrs Ellison would need to spend £143,000 on her care before she would be deemed to have exhausted her cap. Sadly the situation gets worse for Mrs Ellison because the local authority approved funding rate in her area is £800 per week and as the cap only applies against local authority funded rates and not the actual cost of care, this reduces the amount which can be used against her cap to £480 per week, in turn increasing Mrs Ellison’s total spend before her cap is exhausted to £179,000, making a significant dent in her savings.
Mrs Ellison lives happily in the nursing home until she is 93 and therefore benefits from the cap. For most care home residents this will not be the case as the average length of time in a care home in the country is around 2 years. For Mrs Ellison, it took nearly 3.5 years to reach the cap.
Narrowing the local authority rate gap
It’s not all doom and gloom. The government have said that part of the £5.4billion social care funding package will include a move towards councils paying a ‘fair rate’ for care which would in turn reduce the amount of top up required from the individual meaning that Mrs Ellison (in the above scenario) will pay closer to £143,000 for her care, rather than £179,000.
What should I do if I am concerned about care fees?
Mounting care costs against an ageing population is a very real and sensitive issue. Whilst the government may go some way to introduce beneficial reforms, my advice is to seek sound financial and legal advice as early as possible when considering care. There may be funding solutions and ways you can structure your assets to mitigate the impact the cost of care has on your estate.
For more information, contact our specialist Wills, Trusts and Probate team.