by Andy Hopper, Independent Financial Adviser
and Long-Term Care specialist, Manning and Company
There are potentially serious financial implications for care home
owners if it is adopted by the Government as presented. The key thing is - how
much of it will the Government implement – and how will they pay for it?
The likely initial costs to the Treasury of all of Dilnot's
recommendations is a minimum of £1.7 billion per annum - a conservative
estimate, with over £2 billion more likely, rising annually thereafter. So, cost is a likely barrier to implementation
- and probably the main reason why the health secretary Andrew Lansley
MP referred to the report’s findings, when first published, as a 'basis
for engagement'.
Most of the cost to the Treasury will go on the recommended uplift
in the amount people can retain as their personal wealth before they become
responsible for their own care costs. Currently it's £23,250: Dilnot's
recommendation is for it to rise to £100,000.
However – and this is important for care home owners – the report
also suggests capping care costs to £35,000 for life for the care
element, and up to £10,000 per annum for the residential element. The balance of the costs of care will have to
be met somehow… and care home owners could find themselves in the position of
having to fund the difference.
Here's an example. A person
in care with a nursing need would expect to pay a total of £36,000 per annum
using the UK national average of nursing home fees. Over a 3 year period, the
total costs of that person's care and nursing would total £108,000, assuming no
annual rises. Under the Dilnot scheme,
the maximum payable in this scenario would be £65,000. That's a reduction in care/nursing fee income of £43,000
over 3 years, or £14,300 per year. For a nursing home with a certain
number of self-funding residents, the financial consequences are potentially
monumental.
Returning to the question I asked at the start of this blog - how
much of this will the Government implement? And what exactly did the health secretary
mean by “a basis for engagement”? Well,
this last week has seen the publication of the Care and Support White Paper,
and the draft Care and Support Bill. While
it expressed the right sentiments, it's very much a holding action for now - a
gesture that says: 'Yes we're looking at this and working hard, but the issue
is devilishly difficult - so it's going to take a while yet to establish what
we're actually going to do and how it will be paid for”. We’ll have to wait for the next spending review
to find out.
But importantly and significantly, the government has agreed – in
principle at least – to the Dilnot principle of capped funding. The levels proposed in the Dilnot report seem
unfeasibly low, hence higher figures are now being discussed. But whatever the final level, a cap is a cap –
and thus care home owners would be well advised to keep this important issue
very much on their radar.
