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In September 2021, the Government set out plans to reform adult social care in England (PDF). £5.4 billion of revenue from the new Health and Social Care Levy will be used to fund the reforms over the next three years:

  • £3.6 billion will be used to reform how people pay for social care. This includes £1.4 billion to help local authorities move towards paying a “fair cost of care” to care providers.
  • £1.7 billion will be used to support wider system reform.

The briefing focuses on the proposed reforms to how social care is paid for. Section five provides brief information on the plans for system reform.

Cap on care costs

From October 2023, the Government plans to introduce a new £86,000 cap on the amount anyone in England will have to spend on their personal care over their lifetime. The cap will apply irrespective of a person’s age or income. The legislative framework for a cap is already provided by the Care Act 2014, but the relevant provisions are not currently in force.

Only money spent on meeting a person’s personal care needs will count towards the cap. Spending on daily living costs (commonly referred to as “hotel costs” in a care home) is not included. The Government has said daily living costs will be set at a notional level of £200 per week at 2021/22 prices.

The cap will not apply retrospectively (ie costs accrued before October 2023 will not count towards the cap).

Health and Care Bill

In November 2021, the Government announced it would seek to amend the Care Act 2014 so that any money paid by a local authority towards meeting a person’s eligible care needs will not count towards the cap. A clause to this effect was added to the Health and Care Bill at report stage in the Commons.

The proposed change proved controversial and was the subject of disagreement between the Commons and the Lords during the Bill’s passage through Parliament. However, the change has been included in the agreed final version of the Bill, which at the time of writing is awaiting Royal Assent.

Changes to the social care means test

From October 2023, the Government proposes to make the means test for accessing local authority funding support more generous. The upper capital limit (the threshold above which somebody is not eligible for local authority support) will increase from £23,250 to £100,000. The lower capital limit (the threshold below which somebody does not have to contribute towards their care costs from their capital) will increase from £14,250 to £20,000.

Fair cost of care reforms

Local authorities can use their position as a large purchaser of social care to obtain lower fee rates from care providers, which can be less than the cost of providing the care. To compensate, providers often attempt to cross-subsidise by charging more to people who fund their own care. The Government says this leads to market failure and has announced two measures to address the issue:

  • Provisions in the Care Act 2014 will be brought into force enabling self-funders to ask their local authority to arrange their care for them so that they can benefit from lower rates.
  • £1.4 billion will be provided to local authorities over the next three years to support them to increase the rates they pay to providers where necessary (move towards a “fair cost of care”).

Analysis of charging reforms

The Government says the proposed reforms will mean “people will no longer face unpredictable or unlimited care costs”. It estimates the proportion of older people in care receiving support from the state would increase from around half to around two-thirds as a result of the reforms.

The proposals have been broadly welcomed by stakeholders, but it’s also been suggested they may “not live up to their marketing” and that the cap will “help relatively few people.”

The main area of controversy has been the proposed amendment to the Care Act 2014, under which a local authority’s contribution will not count towards the cap on care costs. Stakeholders have highlighted the change will mostly affect those with modest levels of wealth and in lower wealth regions. However, the Government says the change makes the reforms fairer and that the savings created have allowed the proposals to be made more generous in other areas.

The Government estimates the annual cost of the charging reforms, including the “fair cost of care”, start relatively low (£1.42 billion in 2023/24) but increase to an estimated £4.74 billion by 2031/32 (in 2021/22 prices). It has said an increasing share of funding from the Health and Social Care Levy will be spent on social care in future years to account for this increase. However, some stakeholders have raised concerns that the funding committed to the reforms is insufficient. They have also highlighted challenges with transferring revenue raised by the new levy from the NHS to social care in the future.

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