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Funding reforms under The Care Act 2014 – exploring the new capped costs system

We consider the implications of the Care Act for the funding of adult social care and the role of local authorities in the process.

The Care Act became law in May 2014. One of its aims is to reform the provision of adult social care, including the way those receiving care will have to pay towards the costs of that care. The Act establishes a new capped costs system from April 2016 and introduces a higher upper threshold for means-tested financial support. The cap on care cost is intended to be £72,000 when it is introduced in April 2016 and the threshold, at today’s prices, is £118,000 in assets (savings or property).

“Eligible needs”

Patients will be responsible for their care costs, as assessed by the local authority, up to the £72,000 cap. They will also be responsible for any additional care costs, if they choose a more expensive care option. They will also have to pay for any support which is not within the care and support package as identified by the local authority as comprising a patient’s "eligible needs" (for example a cleaner or gardener) as well as general living costs which the patient would have had to pay for anyway if they were living in their own home such as food and energy bills.

Once the cap has been met, the local authority will have to pay for any further costs of meeting the patients’ eligible needs. It will be the local authority’s role to assess those costs.

Role of the local authority

The role of the local authority is to assess whether a patient has eligible needs, but also the costs involved in meeting the patients’ care needs. It is those costs which will count towards the cap or, once the cap has been met, will be paid for by the local authority. This is not only an issue for the patient, who will have to meet any additional costs of the eligible care needs, but also for care providers. Providers whose prices are significantly in excess of the amount set by the local authority may find they are unaffordable to service users.

Under the draft statutory guidance issued by the Department of Health (and which is currently subject to a consultation process), local authorities are obliged to ensure that the method used for calculating the personal budget produces equitable outcomes to ensure fairness in care and support packages. A number of calculation options are mentioned in the guidance.

There is some concern across the care providing community that local authorities are keen to implement a tariff-based approach to the costs of care. However, although local authorities have a degree of flexibility in terms of the approach they adopt, the guidance requires that the budget is robust so that people have confidence that the personal budget allocation is correct, and therefore sufficient to meet their care and support needs.

It also requires that the personal budget should reflect the cost to the local authority of meeting the person’s care needs. In this respect, the guidance suggests that in identifying the "cost to the local authority" that consideration should be given to the cost of the service at an appropriate quality through local provision, to ensure that the personal budget reflects local market conditions. The guidance points out that any concerns about the budget being insufficient because the "costs to the local authority" would reflect the authority’s bulk buying power should be allayed through the requirement for the personal budget to be based on the price of quality local provision.

As local authorities get to grips with the budget setting process, it will be interesting to see how many disputes arise not only with those requiring care but also those providing it.

Regulations and guidance for local authorities to implement the Care Act reforms, in the context of how people pay for their care and support will be published for consultation soon.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

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