True Cost of Care

In the last decade, the Care Home providers have seen their operational costs increase disproportional to inflation. These operational cost increases have been due to the changes in legislation such as:

• Extra holiday entitlement,
• Increases in the minimum wage
• National Minimum Standards for homes built after 2002 and
• Increased standard requirements set by CQC and Local Authorities

In order to meet these increased costs, care providers rely on the Local Authorities to honour their contracts and obligations in legislation and guidance.

The Department of Health issued guidance in 2004 (LAC (2004)20) which states that :

 "the usual cost for care home fees should be set by Councils at the start of a financial or other planning period, or in response to significant changes in the cost of providing care, to be sufficient to meet the assessed care needs of supported residents in residential accommodation...... in setting and reviewing their usual costs, Councils should have due regard to the actual costs of providing care and other local factors. Councils should also have due regard to Best Value requirements under the local Government Act 1999"

Local Authorities are required to set care home fees that are 'fair and reasonable'. In setting fee levels, the Local Authority needs to have regard to this guidance within the context of budgetary constraints. The Government has set out 4 tests of fairness:-

To be fair to people using services- and to ensure that they get good quality care, in the right place, in the right quantity, at the right time. Inevitably this will almost always mean they have been involved in designing the package of services they are receiving;

To be fair to tax payers - and ensure that the services they are paying for are giving value for money and being targeted at the right priorities;

To be fair to providers - ensuring that they receive a fair return for their services and they have not been set impossible objectives or given tasks for which they are not funded;

To be fair to commissioners from the Local Authorities and primary care trusts who are entitled to choose between the services on offer and pay a price that offers quality at a price they can afford.

If the discrepancies between the fees paid and operational costs continue, then providers' profits will decrease year on year. This reduction in profits will result in:

• Less reinvestment in care homes
• New entrants being reluctant to invest and
• Financial institutes not being willing to fund growth

All these scenarios ultimately result in the residents suffering, due to poor quality of service and less choice.

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