March 2, 2017

Fees & funding in the care sector – could the crisis be averted?

Why are there financial challenges?

As you will be aware from experience, many of the financial challenges for providers stem from:

• stagnant local authority fee rates
• National Minimum / Living Wage increases. The recent rise from £7.20 to £7.50 (for staff aged 25 or over) equates to a pay rise of £624 per year for a full time worker
• mandatory employer pension contribution uplifts from 1% to 3%
• local authorities’ failure to pay the National Minimum/Living Wage for sleep-in shifts
• increased agency costs due to staff shortages in the sector.

What is the Government’s response?

Councils will be given more flexibility in how they use the social care precept so that from next year they will be able to raise council tax bills by 3%, and by a further 3% in 2018-19. However, it is widely accepted that this will be insufficient to plug the funding gap.

How will the gap be plugged?

In its budget announcement on 8 March 2017, the Government committed to increase social care funding by £2 billion over the next three years. However, there are concerns that this falls far short of the cash injection required.

In terms of any shortfall, recent research from Lang & Buisson suggests that the burden will largely fall onto private funders. William Lang states “The entire care home sector for older people is being kept afloat through cross subsidies from the 40% of care home residents who pay privately.”

However, this won’t provide any comfort to providers who cannot cross-subsidise from private fee payers. If this applies to you, you are likely to be in difficulty if funding doesn’t increase.

Why is increased funding essential?

There are plenty of reasons for the Government to increase funding, but to name a few:

• ensure the sustainability of the care market
• reduce strain on the NHS. There has been a considerable increase in delayed discharges from hospital due to a lack of social care funding, which costs the NHS £800 million per year
• enable care providers to invest in quality of care and attract and retain high quality staff
• enable compliance with National Living Wage
• remove the need for providers to cross-subsidise low local authority fees with higher private fees to keep their businesses financially viable.

For specialist advice on local authority fee negotiations, please contact James Sage using the contact details below.

Read more articles in this month’s social bulletin:

– CQC's next phase of regulation
– Crack-down on service user contracts?
Does self-employed status pose a risk to social care providers?


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