Embargo: for publication after 00.01hrs Thursday 20th May 2004
Care homes for older people ‘remain underfunded despite recent fee increases’

Care homes for older people who need nursing or residential care continue to be underfunded despite above-inflation increases in fees paid by local authorities. New calculations for the Joseph Rowntree Foundation show that council fees are now close to the rate appropriate for care homes meeting the minimum level of facilities for existing premises set by revised National Minimum Standards a year ago. But another £1 billion a year would be needed across England to pay for a fully modernised independent care home sector.

William Laing of health and community care analysts Laing & Buisson – who reported two years ago on the gap between council fees and the reasonable costs of running a good-quality care home – finds that many local authorities have since raised their fees by more than inflation and a few by substantial amounts. But he also notes that no English council has yet set a baseline fee rate appropriate for the more demanding standards of physical amenities set for new homes, registered after April 2002.

Across England, the average gap between a ‘fair fee’ for homes meeting the higher standard and the actual fees that councils are prepared to pay is £127 per week for nursing care and £83 per week for personal care. On that basis, the report calculates that the extra cost to the public sector of fees for a fully modernised care home sector would be £1 billion a year.

William Laing said: “There is a price to be paid for care homes that meet the higher standard, but it is not only providers and investors who would benefit. Older people who rely on the state to fund their care would have access to better-quality facilities and there would be an end to the existing unfairness where relatives or charities are obliged to make ‘top-up’ payments to keep elderly residents in their chosen care home because local authority fees do not cover the cost.”

The updated report includes a revised ‘toolkit’ that local authorities can use to calculate a fair price for care home places. This takes account of changes in costs following new regulatory requirements introduced two years ago. It also includes a reduction in the estimated return that investors in care homes would expect on their capital from 16 per cent in 2002 to 14 per cent.

The report calculates fair fees for the different minimum standards that now apply to existing and new homes: described as ‘floor’ and ‘ceiling’ fees. It also replaces an illustrative national average calculation of a fair price for care in the previous report with sample figures for a low-cost, provincial area and for a typical location in the Home Counties or outer London where pay rates for care staff are around 20 per cent higher.

For example, in a low-cost area, the ‘floor’ fee for an older resident’s personal care is calculated at £312 per week, compared with a ‘ceiling’ of £392 per week to pay for provision meeting the higher standard of facilities. For London and its environs the equivalent figures are put at £409 and £488 respectively.

William Laing said: “The principle objective of this toolkit is to equip commissioners of care services, care home operators and others with an interest in the care sector with a transparent and robust means of calculating the reasonable operating costs of efficient care homes in any given locality. They will be able to use it to determine the fee levels necessary to sustain delivery of adequate care services by independent sector providers, now and in the future.”

Note to Editors

Calculating a fair price for care: A toolkit for residential and nursing care costs (second edition) by William Laing is published for the Foundation by The Policy Press and available from Marston Book Services, PO Box 269, Abingdon, Oxon OX14 4YN (01235 465500), price £11.95 plus £2.75 p&p.

The report is available by clicking the 'order report' link in the left margin.

For further information, contact:

William Laing (author) 020-7833 9123 (office)

Issued by David Utting, Associate Director (Public Affairs) 020-7278 9665 / david.utting@jrf.org.uk