Funding social care, and the care home market (England): Briefing ...

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BRIEFING PAPER Number 07463, 10 February 2017

Funding social care, and the care home market (England)

By Tim Jarrett and Hannah Cromarty

Inside: 1. Key features of the market 2. Key issues facing the care home sector 3. Regulation of the market 4. The outcome of the 2015 Spending Review 5. Provisional local authority funding settlement 6. Social Care in Crisis? 7. Autumn Statement 2016 & Local Government Finance Settlement 2017 to 2018

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Number 07463, 10 February 2017

Contents Summary

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1. 1.1 1.2 1.3 1.4 1.5 1.6

Key features of the market Domination by the private sector The “big four” private sector providers Composition of clients – self funding vs local authority funded Local authority purchasing power Cross subsidisation of local authority funded clients by self-funded clients Substantial debts

5 5 5 5 6 6 8

2. 2.1 2.2

Key issues facing the care home sector Introduction of the National Living Wage Trends in local authority funding for state-funded residents

9 9 11

3. 3.1 3.2 3.3

Regulation of the market Monitoring the financial health of “difficult to replace” care home providers Care Quality Commission Local authorities Responsibilities of a local authority when a provider fails The “market shaping” role of local authorities

12 12 12 12 13 13

4. 4.1 4.2 4.3

The outcome of the 2015 Spending Review Analysis of the 2% precept for social care Extra resources for the Better Care Fund Reaction to the Spending Review

19 19 20 21

5.

Provisional local authority funding settlement Social care funding Interaction of the 2% social care precept and the Better Care Fund

24 24 24

6. 6.1 6.2 6.3 6.4 6.5 6.6

Social Care in Crisis? The Local Government Association Association of Directors of Adult Social Services (ADASS) Care Quality Commission - State of Care Report 2015/16 United Kingdom Homecare Association (UKHCA) Care England Health Select Committee

26 26 27 28 28 29 29

7.

Autumn Statement 2016 & Local Government Finance Settlement 2017 to 2018 Autumn Statement 2016 Social Care Funding Debate – 12 December 2016 Local Government Finance Settlement 2017/2018 Social Care Precept – 2017/18 and 2018/19 Adult Social Care Support Grant - 2017/2018 Reaction to the Local Government Finance Settlement announcement

31 31 32 32 33 34 34

7.1 7.2 7.3 7.4

Cover page image copyright: Wheelchair / image cropped

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Funding social care, and the care home market (England)

Number 07463, 10 February 2017

Summary This briefing paper considers the current state of the market for residential care (i.e. care homes), and also the announcements made in the November 2015 Spending Review (and subsequently) regarding funding for social care. The rather fragmented nature of the care home market combined with the fact that local authorities are the largest single purchasers in most parts of the country, means that local authorities have what has been described as monopsony purchasing power (a single buyer, but many sellers). Given the pressures facing local authority budgets, they have sought to negotiate lower prices for the care home places they finance; this has prompted care home providers to seek further cross-subsidisation from self-funded residents, in a situation where many care home providers have significant debts and the introduction of the National Living Wage has increased costs. The briefing paper also considers the role of the Care Quality Commission (CQC) in monitoring the financial health of strategically important care home providers, and the duties of local authorities in the event