Private care home residents plug £1.3b shortfall in funding, experts warn

Self-funding care home residents are keeping the sector afloat at a rate of more than £100 a week each

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Privately funded care home residents are plugging a £1.3 billion gap in funding each year, healthcare analysts have warned.

Self-funding care home residents are keeping the sector afloat at a rate of more than £100 a week each, according to the latest figures from healthcare market intelligence provider LaingBuisson.

It found the average fee per resident paid to care homes falls short of what it costs them to provide care by £104 - a shortfall that is picked up by private fee payers in what the consultancy has dubbed a hidden "care tax".

LaingBuisson founder William Laing said: "The £1.3 billion can equally be viewed as a hidden 'care tax' that government and councils are content to see private payers contributing to keep mixed funding homes in business.

"This 'care tax' equates to about £8,000 a year on average per privately paying care home resident. Moreover, in all probability it will take another step upwards in April 2017 as care home owners seek to recover increased costs."

Residential care homes in England for older people, which employ average levels of staff at average pay rates, currently need to charge fees of between £648 and £590 per week in order to generate a reasonable annual return on capital, LaingBuisson calculated.

But the consultancy found the average fee paid by English councils for residential care of older people was £486 per week in 2016/17 - £104 less than the lowest amount it estimates care homes must charge.

Adoption of the National Living Wage and requirements to employ more carers to support residents with increasingly complex dependencies has fuelled a rise in costs, it says.

Charity Director at Age UK Caroline Abrahams, said it was "truly shocking" that the funding shortfall was so high, adding the situation was "undermining the NHS".

She said: "More and more older people are paying their own care home fees and they are increasingly at risk of a raw deal because they are propping up a system that is seriously underfunded.

"Sadly we are seeing more and more rationing of social care and in this instance it looks like Peter is being robbed to pay Paul.

The charity is calling for the Government to inject more funds into social care in the Spring Budget.

Chairman of the Local Government Association (LGA)'s Community Wellbeing Board, Councillor Izzi Seccombe, said the gap between what providers say they need and what councils are able to afford was now at "breaking point".

Cllr Seccombe added: "As we have warned before, this risks creating a two-tier system between those able to choose and pay for their own care, and those reliant on increasingly overstretched council-funded care that will struggle to meet people's needs, which is at odds with the Prime Minister's pledge for a shared society."