CCN News 2015 | 16 July 2015
There has been much discussion on the Care Act’s impact on councils at time when the social care system is under severe financial strain.
The County Councils Network (CCN) has now opened up a new front in this important debate.
Since the reforms were first announced, CCN has been one of the few national organisations to consistently raise our concerns over fears that the Act could adversely impact the residential and nursing care home market in England.
Care Act implementation will come at a time when it is widely reported that all major care home groups with high exposure to council funded residents are witnessing consistent falls in operating profits, with many providers having an overreliance on unsustainable ‘self-funder’ premiums to maintain their profitability.
Although it is widely recognised that a ‘cross-subsidy’ is in operation in the social care market, the extent of the difference in local authority fee levels and those paid by private users is coming into sharp focus in the lead to April 2016.
The Care Act actively encourages self-funders to approach their councils for the first time, either to access the Cap on Care or ask commissioners to arrange care on their behalf.
Increased contact with self-funders will inject much greater transparency over the pricing model within the social care market while section 18(3) of the Care Act could potentially allow those who previously arranged their own care to access lower local authority fee rates.
CCN has argued that due to these reforms there is the potential for erosion in the fees paid by self-funders through a process termed market equalisation.
This is where the higher fees paid by self-funders begin to fall, with councils needing to raise fees to compensate providers, stabilise already fragile markets and prevent provider exits.
For some 10 months now, CCN has been working with the healthcare specialist LaingBuisson to undertake ground-breaking research to help demonstrate the scale of the risks posed by underlying market instability and the potential impact of the Care Act.
Our research report, County Care Markets: Market Sustainability and the Care Act, reaches three key conclusions.
Firstly, council funding cuts and subsequent reductions in council fees have significantly increased cross-subsidies in the residential and nursing care market.
In light of market trends and the Care Act, this is no longer sustainable over the medium to long-term.
While cross-subsidy may be a typical and necessary feature of many public and private sector markets, our research shows that the extent and scale of cross-subsidy between private and public care is destabilising care markets in many areas, and its root cause is insufficient funding for social care.
Secondly, increased contact between councils and self-funders will alter purchasing behaviours and change the funding balance in the residential and nursing care sectors.
In short, some movement towards market equalisation is highly likely and currently unfunded, with potentially severe negative impacts on provider profitability and council budgets.
Finally, the reforms will potentially accelerate a polarisation within the national care market – meaning the development of a two-tier care home system for public and private care users.
Polarisation will weaken councils’ position in the market, leading to additional unfunded costs for local authorities, with councils having to raise fees to sustain a functioning market.
Due to higher fees and polarisation, councils and the NHS could be locked out of the market, finding it difficult to place service users in residential and nursing care.
Our research clearly adds weight to the argument that social care is underfunded and the necessary starting point for stabilising the system is a fairer funding settlement.
However, more cash isn’t the only answer.
Reducing demand for residential care through radical integration and better community-based services is crucial while Whitehall, local government and providers need to work together to better understand the condition of the market and devise mitigation strategies.
Ultimately, our conclusions raise serious questions over the implementation timescales for the Care Act, a decision now at the forefront of the minds of social care professionals