Changes to Care costs and funding – are you up to speed?

 In Elderly/Vulnerable Client

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Inheritance tax can be a 40% tax on an estate (assuming no tax planning is done). Care fees can be a significantly higher percentage of a ‘tax’ on an estate – leaving an estate with only assets of £14,250. Which is why the headlines in September 2021, where Boris Johnson revealed his ‘solution’ to the social care crisis, gained a lot of interest.

What does it mean? Once the legislation passes through Parliament, a 1.25% rise in the National Insurance rate will be introduced from April 2022 which will affect employees, the self-employed as well as employers. This new levy is intended to raise money to help fund health and social care.

At the same time as introducing this new tax – the announcement was also made that from October 2023 there would be a lifetime cap of £86,000 so that once this level is reached, people would not have to fund their own care after paying this amount. This all sounds very appealing, but what about the figures behind the headlines? How do they really affect those who need care? Will the cap mean that people are able to leave an inheritance or will there still be a need for care to be funded?

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It is important to note that the proposed changes announced by Boris Johnson only apply in England. Nonetheless, these changes will have an impact on those who find themselves in need of care or organising care on behalf of someone else.

Ancillary or incidental costs

If the long-term care needs are deemed ancillary or incidental to the need for accommodation (and the care is not deemed to be fundable by the NHS under Continuing Health Care), this care currently needs to be privately funded if the available capital is over the threshold of £23,250. There may also be assistance available via Attendance Allowance and the NHS may pay a contribution towards the nursing care (provided by a registered nurse), where care is provided in a nursing home. Only when the assets fall to £14,250, will the local authority pay for the care in full.

The new proposal is that the higher capital threshold will now move to £100,000. The lower threshold is also to be increased to £20,000 and thus those holding assets between £20,000 and £100,000 will receive some support. This sounds appealing on the face of it, but it will be only when the Bill is published that we will know what that assistance will look like and how it will be provided.

The headline figure that no one will pay more than £86,000 over their lifetime for care, is what will be known as the ‘care cap’. This was first suggested in the Dilnot Commission’s Fairer Funding for All report in 2011. At the time, this was the subject of much discussion as it seemed that at long last there would be a fairer way to ensure that care that was required would be. As a figure it sounds very appealing, but what does it mean?

According to the King’s Fund “the average cost of a care home in England is around £35,000 a year and some people spend many years in care so, it is quite possible to end up paying ‘catastrophic costs’ of £100,000 or more. In 2011, the Dilnot Commission estimated that 1 in 10 people might pay more than £100,000.”

Crucially, however, the cap only applies to the provision of care. What does this mean? There is a clear legal distinction between care that is deemed health care, where the cost of that care is covered by the NHS, and that which is currently social, which is means-tested.

Assessing eligibility for care

The requirement to assess eligibility for care stems from the Care Act 2014. According to the Guardian, “nearly 1.4 million people aged 65 and over requested support from councils in England in 2019-20. Add to that 560,000 working-age adults and a steady rate of increase and the demand will soon exceed 2 million people”. Further, the Care Act stipulates that a local authority has the right to charge anyone for their assessed care needs. The Care Act already makes provision for a proposed care cap – so the new £86,000 cap can be implemented as soon as it hits the statute book.

What is going to be more difficult, however, is how these needs are to be assessed? Currently, the local authority must undertake a care assessment under s9 which will allow them to ascertain whether an individual is eligible for care – or whether the threshold has not yet been met. If the threshold is met, then the local authority has a duty to meet those needs and then prepare a care and support plan.

How are care needs ascertained? What does ‘meeting’ care needs look like? Will different local authorities consider care needs differently? Individuals may consider that they have care needs, but the local authority may disagree. An excellent example of this is the case of R (on the application of McDonald) (Appellant) v Royal Borough of Kensington and Chelsea (Respondent) [2010] EWCA Civ 1109 which granted local authorities wide discretion in balancing the needs of vulnerable individuals with “the economic wellbeing of the state” – essentially what people may want to have by way of care is not necessarily the same as what the local authority deems is a requirement. It can therefore be readily imagined that there is a disparate view on what care needs are depending on who is assessing those needs.

This will be very important when it comes to calculating the cap on the care as only eligible care needs will be counted. In addition, the cap only applies to the money needed to pay for care and does not cover the “hotel” costs – such as food, accommodation etc.

Different tariffs for different facilities

Care homes may therefore have significantly different tariffs for those who require enhanced care provision, e.g., ensuite facilities, better view, larger room and these will not count towards the cost of care. We know from case law that care homes rely on self-funders to subsidise local authority rates to allow a sustainable market.

This means that people could be paying for care for a considerable period of time before the cost even begins to count towards the cap. Add in the likelihood of there being a significant backlog of people able to complete the assessments, the situation appears to be one that will require significant investment in order to allow people to have their needs assessed and start the clock ticking.

Conclusion

The changes proposed by Boris Johnson are unlikely to have any great impact on the cost of care for many. From the sums of money received through national insurance contributions to the likelihood of it being difficult to establish what eligible care needs are, the ‘magic bullet’ of the cap on care costs is unlikely to have a significant impact on individuals who need care.

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Tim Farmer