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Care Home Charges

Volume 475: debated on Friday 9 May 2008

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Roy.]

Care home charges could represent a vast subject. I do not want to abuse the form of Adjournment debates by getting into the whole area of the funding of social care, so I will focus on a narrow issue that has been drawn to my attention through constituency work: the specific question of cross-subsidy in relation to care home charging, and the related problem of third party top-ups.

The issue emerged locally when it transpired, given that I think that most people were not aware of it, that the council, under two administrations—this is not a party political issue—had a 25-year agreement with Care UK, which is one of the major providers. The deal was probably very good from the council’s point of view, but built into it was substantial price discrimination between two groups of residents. It emerged that self-funders were paying roughly £230 a week more than council-nominated residents. To be precise, those groups’ charges were £820 a week and £585 a week. The self-funders were thus making a transfer of approximately £12,000 to the other group of residents.

As I shall point out, there might be an element of rough justice in some of the redistribution, but for the most part, it involves transferring money from people who are quite poor to others who might or might not be quite poor. When Tracey Blackwood came to see me, she pointed out that her mother, who was a self-funder and was thus required to make the transfer, had no more income than her basic state pension, yet she was required to make large transfers on the grounds that she had a relatively small asset in the form of a modest house.

The problem is not new. The first trace of it that I can find in House of Commons records is from a speech made in 1992 by Lord Rooker when he was an Opposition spokesman. He said:

“The difficulty of the shortfall led to what I consider an immoral two-tier charging system in some care…home establishments. Residents with assets—usually the proceeds of the former family home—who can therefore fund themselves for a few years until their assets run out are charged between £40 and £90 a week more than other residents so that the proprietors can balance the books. That is immoral, but Ministers never refer to that cross-subsidy. Ministers cannot stay silent about the problem much longer.”—[Official Report, 4 June 1992; Vol. 208, c. 963.]

Ministers have undoubtedly considered the problem, but it still exists in very much the same form, although the amount of cross-subsidy is now much larger.

The problem concerns not only me and the care home residents and their relatives who have encountered it, but voluntary organisations and even statutory bodies. Age Concern refers to that anomaly, and the injustice involved, in its latest “The Age Agenda” report. It couples it with the fact that self-funders have the additional disadvantage of having weak legal protection. I recall holding an Adjournment debate in 2003 on alleged neglect and abuses at a care home in my constituency called Lynde House, owned by Westminster Health Care; the situation became something of a scandal. One of the points that emerged was that the self-funders, who are paying very substantial fees, have no legal protection against expulsion if they complain. According to Age Concern, self-funders suffer not only from cross-subsidy and price discrimination, but from lack of legal protection.

The Alzheimer’s Society has also drawn attention to the issue. It makes the point that of 700,000 Alzheimer’s victims, 245,000 are in care homes. It says that many of those people—who, almost by definition, have very little understanding of the price regime in operation—are, through their families, paying substantially more than what the Joseph Rowntree Foundation calls the “fair price”.

The Care Standards Commission, the relevant statutory body, did a study last October, in which it pointed out that a survey of 10 councils showed that 22 of 38 residential homes operated a system of discriminatory pricing. The Wanless report on social care, published under the auspices of the King’s Fund, calculated that the average cross-subsidy was £133 to £219 a week. The figures that I used are rather higher, but are of the same order of magnitude. The Office of Fair Trading, which answered a super-complaint on wider issues to do with care homes, found in a survey that 20 per cent. of homes had differential pricing and cross-subsidy, and 33 per cent. had third party top-ups—a similar kind of arrangement, with payments that may or may not be additional.

The OFT study showed the magnitude of the problem that I am describing. In 2005, there were roughly 410,000 older people in residential homes. Of those, 250,000 had council-supported places, and of those 150,000 were in independent residential care homes. Therefore there are roughly 150,000 council-supported residents in independent care homes; roughly the same number are self-funded. Half of that 300,000 population effectively cross-subsidises the other half.

The questions are: why has that happened, why does it matter, and what can be done? On why it has happened, I do not think that it is helpful to get involved in blaming people. What has happened is not the fault of care home owners, local authorities or the Government. We are dealing with a series of unintended consequences of policies that were often introduced for very good reason. However, in the independent care home sector, costs have escalated, partly because of the Care Standards Act 2000, a well-intentioned piece of legislation aimed at raising standards. Minimum wage legislation has pushed up costs, again for good reason. Local authorities have found their funding streams severely curbed, partly because they want to keep down council tax and partly because Government assessments give them more stars if they keep down costs, so local authorities are under pressure, too.

So what do care home owners do? They have a restricted range of options. They can cut costs and undermine quality, which is not satisfactory. They can do what growing numbers of them are doing, which is to exclude state-funded residents. As a result, there is a danger of a two-tier system emerging. They can resort to what are called third party top-ups. Top-ups are perfectly reasonable in principle. If someone wants provision to be made for a pet, or wants a room overlooking the sea or mountains, it is reasonable to ask them to pay a bit more, but top-ups have in practice simply become a mechanism for charging people who are desperate to get a place in a home, and have no connection to quality. Alternatively, care homes can introduce cross-subsidy, which is the phenomenon that I am describing.

Often, there are four types of room in care homes. Residents have identical service and quality, but some rooms are taken up by self-funders, some by NHS nursing provision, some are council-funded, and some involve people paying third party top-ups. There are different prices for groups of residents who receive the same service. There is something fundamentally wrong with that. It introduces invidious charging for people who are at their most vulnerable.

We know from our experiences with our relatives that when people are taken into a residential home, it often involves a stressful situation after they have been in hospital. There is also pressure from hospitals to get people into homes, and it is often difficult to find one. The last thing that families are in a position to do is shop around on the basis of cost differentials, of which they may not be aware.

It is sometimes argued that discriminating against self-funders is rough justice according to the Robin Hood principle by which the wealthy cross-subsidise the less wealthy, but that is not the case in many instances. In some cases, people on very low incomes cross-subsidise people with higher incomes. It may be that the self-funders have property—it could be a modest property, such as a working-class terraced house—and the fact that they have that asset makes them self-funders. In many instances, relatively poor people are cross-subsidising people who have no assets but more income. The system is invidious.

There is also a danger that the situation will become more and more extreme. In a home where, for example, 70 per cent. of residents are state-funded and 30 per cent. are self-funded, the 30 per cent. of self-funders will be levering up a large element of subsidy to keep the state-funded residents in place. There are also perverse incentives. People are told that because of the means-tested provision, they must not commit waste—in other words, families must not sell the family home, because that would prejudice their ability to fund care—but once they are in the home, they are required to commit waste by spending more than the cost of residential accommodation, which depletes their assets unnecessarily quickly and ultimately makes them dependent sooner.

Many self-funders do not enjoy proper legal protection. They pay extensively, but they are in a weaker legal position than other residents. It is apparently an anomaly in the law that if they have a major dispute with a care home owner, they cannot resort to civil law and can only use criminal law. The Commission for Social Care Inspection, which is the statutory body, will not consider individual complaints.

What can be done? There are two possible approaches. The first involves trying to improve individual choice, where possible. The Government have addressed that argument. In September 2006, new regulations were introduced to make it a requirement that information relating to cross-subsidy and charges should be included in the user guide, but that has not proved to be satisfactory in practice. Age Concern has sent me its appraisal of the scheme, which states that

“the regulations are vague so care homes often do not state this clearly and there are questions about how much prospective residents can choose to avoid these homes.”

The choice model that the Government have worked with has not worked well, and the question arises whether anything can be done to improve it.

There are one or two examples of tough legal action. A local care homes association took legal action against a council that engaged in that practice, as a result of which substantial improvements were obtained and the council was required to publish the true costs of care. A more transparent regime emerged, so the question for the Minister is whether that legal precedent can be used to obtain substantially improved provision from other councils that are much less transparent.

The second approach involves Government funding. It would be trite in the context of this Adjournment debate to say that there should be lots more Government money. The question is whether more can be done within the Government’s existing funding commitments to require local authorities to do more for their self-funders through ring-fencing and guidance. For example, if the Government are funding local councils, when councils negotiate bulk contracts, which has happened in my constituency, they should be required to negotiate on behalf of their self-funders as well on behalf of council nominees.

I want to finish with a series of questions. Does the Minister accept the scale of the problem? A Green Paper is due on some of the wider questions in the field, but will the consultation that precedes it enable us to quantify the problem and discuss ways of dealing with it? Have the Government any further proposals, beyond the September 2006 regulations—in practice, those were not very effective—to improve the position of care home residents? Finally, do they have any proposals to enhance the legal rights of self-funders, having discovered that self-funders have very little protection in law through civil action and in other cases when there has been abuse and neglect?

I congratulate the hon. Member for Twickenham (Dr. Cable) on securing this debate on care home charging. Charging for care in care homes is not new; people have always had to pay for, or contribute towards, the cost of residential care. I understand his concern about the cost of a care home place for residents who fund their own care. As I make progress, I hope to be able to answer some of those questions, or at least provide reassurance that they will be considered.

Contracting arrangements between local authorities and independent sector care homes are a matter for those involved in the contract. The Government do not set or recommend the level of fees that local authorities pay; we think it important that local authorities should be able to tailor contracts, as necessary, to specific local circumstances. However, we expect decisions made by local authorities commissioning care home places to be made on the basis of judgments about quality, best value and, importantly, the outcomes for individual residents.

More than 90 per cent. of care home places are in private and voluntary sector care homes. It is for care homes to negotiate the fees that they charge with the person or organisation that pays the bill. Local authorities are major purchasers of care home places and are sometimes able to negotiate very competitive prices. That can sometimes lead to suspicions of cross-subsidisation. However, such rates can be achieved because, as a block purchaser of care home places, a local authority can give care home operators greater confidence about future occupancy levels. That security about business prospects allows councils and care home owners to agree lower fees than is the case when an individual contracts directly with a care home. We are, of course, talking about people and where they live. I realise that using the language of contracts and business is not necessarily how we want to discuss the issue. However, it is necessary to use such terminology to explain about cross-subsidisation in particular.

As local authorities have greater purchasing power, some offer to help arrange placements for people who are self-funding their care, so that those individuals can also benefit from the favourable fee rates. When a local authority funds a person’s residential care, the authority charges the person for that care. Regulation 20 of the National Assistance (Assessment of Resources) Regulations 1992 states that when it is being decided whether the local authority should fund residential accommodation, no resident shall be assessed as being unable to pay for his or her accommodation at the standard rate if his or her capital, calculated in accordance with regulation 21, exceeds £22,250.

The National Assistance Act 1948 sets out a regulatory framework within which the local authority decides how much people can afford to pay. The resident’s capital assets and income, including the former home, are taken into account as that assessment is made. People have the right to move into more expensive accommodation than they would have been offered by the local authority provided that a third party—usually family or friends, or, in certain circumstances, the person involved—is willing to make up the difference between the care home’s fees and what the local authority would usually expect to pay.

A local authority cannot insist that a third party should make additional payments on a resident’s behalf, but if that is not done, the authority may be entitled to arrange for the resident to move to alternative accommodation. However, if a resident’s needs can only be met in specific accommodation, the local authority should make up the difference between the resident’s contribution and the care home fees. In those circumstances, a third party should not be expected to make a top-up payment so that the resident can continue to live there. If this route is not taken, and individuals deal with care homes themselves, the contractual arrangements are entirely a matter between the care home owner and the individual resident. The cost may be more or less than a local authority contract.

Having known the hon. Gentleman for some years, I know that he has concerns about the transfer of assets to avoid higher charging. When carrying out a financial assessment, the local authority will decide whether the resident has deliberately deprived themselves of assets to avoid paying for care. If the asset was transferred less than six months before the resident went into the home and the local authority believes that deprivation has occurred, it can pursue the third party for the cost of the resident’s care. If the transfer took place more than six months before, the local authority can still take into account the asset value when deciding how much the person should pay for their care.

There have been suggestions that in some places higher fees paid by self-funders are being used to cross-subsidise insufficient fees paid by local authorities. We do not find that acceptable, so, as the hon. Gentleman said, we have taken steps to make fee charges by care homes more transparent. With regard to the NHS paying for nursing care, we have issued a single central model contract for the NHS to use with care homes that ensures that any NHS contribution to pay for the resident’s nursing care is accounted for separately.

In June 2006, we amended the care homes regulations to address concerns relating to price transparency, and these came into force in September 2006. The new regulations require care homes to provide clear information on terms and conditions, including fees, before a resident moves in. That helps people acting on their own behalf or families choosing care homes for relatives who may, of course, be frail or vulnerable. Department of Health officials have been working with the Commission for Social Care Inspection to support the effective implementation of the new regulations.

The Government have provided significant investment in local services, including in the area of social care, since taking office. Total Government allocations to local authorities have increased by 39 per cent. in real terms since 1997. That should enable local authorities to contract with providers at realistic prices.

In May 2005, the Office of Fair Trading published a report on the market for care homes for older people in the UK. We welcomed the report, which identifies some important issues where the care home market is not functioning well for older people as consumers—an issue that worries not only me but the Under-Secretary of State for Health, my hon. Friend the Member for Bury, South (Mr. Lewis), who is responsible for it as part of his portfolio. The OFT recommendations are in line with the Government’s vision to support the personal dignity of older people by providing them with information and support to enable genuine choice and greater security in their living arrangements.

Accordingly, in respect of England, the Government announced an action plan to implement their decisions. It set out Government policy for the regulation of care homes within the context of the Government’s vision and aims for adult social care and wider services set out in the Green Paper, “Independence, Well-being and Choice”. The White Paper, “Our health, our care, our say: a new direction for community services”, published on 30 January 2006, formally adopted the vision set out in “Independence, Well-being and Choice”. Work to implement the action plan is continuing.

We believe that, taken together, these measures ensure that the rights of care home residents as consumers will be safeguarded and strengthened. The costs of care in a care home are substantial over the long term, and we are determined to ensure that residents and their families receive good-quality care and information about all aspects of that care. This is an exceptionally difficult time for the resident and their family, and it has created a lot of heartache for many people.

In the 2007 pre-Budget report and comprehensive spending review, the Chancellor announced a Green Paper to set out options for the reform of the current care and support system. The Government are committed to a system of residential care charges that is fair to the residents of care homes, those who care for them, taxpayers and agencies, and which is sustainable. I take on board the hon. Gentleman’s points, particularly those relating to Age Concern. All social care, including that for self-funders, is within the scope of the Green Paper review. The Government are open-minded about the future funding system and will consult widely with interested parties. I know that my hon. Friend the Under-Secretary is looking forward to the consultation, and I feel confident that the hon. Member for Twickenham will be part of it, using his expertise, knowledge and concern about this issue during the debate on the Green Paper.

Question put and agreed to.

Adjourned accordingly at five minutes to Three o’clock.