Last reviewed 30 October 2018
The future of the care homes market is an extremely important matter. Most managers of homes are both eager to master the issues and up for the challenge of exploring possible solutions, Jef Smith reports.
Last year’s substantial report from the Competition and Markets Authority (CMA) sets out some basic statistics: the total UK care sector is valued at around £15.9 billion a year. About 5500 providers, the vast majority in the independent sector, operate 11,300 homes for older people, accommodating around 410,000 residents. In 2016, self-funders constituted 41% of that total and local authority financed residents 49%; the remaining 10% of places were paid for by the NHS, their occupants having been assessed as needing nursing care. Based on predicted population growth in the over 85 age group, demand for residential care is expected to grow substantially over the coming years.
In 2016, the average weekly cost for the self-funders was £846 while local authorities paid on average only £621 per resident (about a quarter of those adding top-ups from their own or their relatives resources). CMA thought about addressing this anomaly directly but decided against making the specific recommendation that it should be ended. This was partly, it admits, because any equalisation scheme would cost a lot — an additional £200 to £300 million a year, it is estimated.
But there is a second reason — that such a change could cause the market to split, with care homes that are able to concentrate on self-funded residents ceasing to serve publicly-funded residents altogether. This seems somewhat disingenuous as that divide has already opened up in many areas, limiting the range of homes in which local authorities can make placements. So there is injustice to both self-funders, who are being nakedly overcharged through the practice of cross-subsidy, and local authority clients, whose right to a choice of where to live may be severely restricted.
The CMA puts its trust, however, in its wider recommendations which would increase local authority paid fees to a sustainable level, an essential prerequisite of future investment confidence, but how can such sustainability be achieved?
Shaping local markets
The central proposal on this vexed issue is for the creation of an independent body charged with monitoring whether local authorities are meeting their care delivery obligations, making a judgment as to the relationship of commissioning and procurement to a financially healthy sector, and assessing the quality of plans for future provision. The new body would achieve these tough objectives by using “the necessary technical and policy expertise” to provide “guidance, information and co-ordination” and working to “evidence-based funding principles”. These processes would depend on a combination of “enhanced planning at local level” and “greater assurance at national level about future funding levels”. Both of those, in the current financial climate, are pretty ambitious asks.
In a sense much of what the CMA is calling for, at least locally, should already exist. Local authorities have had a formal duty of “market shaping” since the passage of the Care Act 2014, section 5 of which sets out their duty “to facilitate a diverse, sustainable high-quality market for their whole local population … and to promote efficient and effective operation of the adult care and support market as a whole”. The CMA is clearly not satisfied that market shaping is working, at least not everywhere.
In reaching this conclusion, it reviewed 20 market position statements, which are the published reports on local market shaping, and found that none of them contained usable estimates of the additional capacity required to meet projected local need. In fairness to the local authorities, CMA acknowledges that it has very few actual powers for intervening in the shaping of the market and almost no tools for incentivising operators to invest. It might have added that the successive tightening of eligibility criteria during a period of austerity has taken large numbers of needy people out of the range of being helped; a demand projection made, say, a decade ago would now be way wide of the mark.
What the CMA report also doesn’t say is that any local authority which undertook assertive market shaping would soon earn the ire of existing or potential providers, particularly if the incentives offered appeared to be favouring their rivals. Some care home providers are very big beasts, able to bring serious influence to bear on local authorities of which they disapprove. Whether the proposed independent central body would have sufficient muscle to counter such rude commercial pressures is far from clear.
The Government’s response
Certainly, the Government’s response to the CMA report, which came out in March 2018, was somewhat ambivalent on these matters. It opened by claiming that it “welcomes the CMA’s comprehensive market study”, but within a couple of paragraphs it was already adopting a more cautious tone. It stated that the forthcoming Green Paper “will include looking at many of the issues identified”, and that the report “has provided an important evidence base and recommendations for improvement that will feed into the Green Paper”.
As a further delaying tactic — the authors did not know at that stage that the publication of Green Paper has itself been put back by several months — the response then suggested that the CMA might like to undertake a complementary study of domiciliary care.
Specifically on the care market’s capacity, the issue over which the CMA was particularly exercised, the Government response says that it accepts the capacity planning recommendations “in principle”, agrees that “it is important that structures and accountabilities are in place”, and goes on to repeat the CMA’s arguments on market shaping, cost pressures and investor confidence. But it then deflates the case for change by claiming that “there is a well-established national role in assessing national funding requirements as part of Spending Reviews”, before finally acknowledging that “at this stage we are not convinced the function described by the CMA sits best independently at a national level”.
There is much more in the CMA report including sections on better consumer protection and information, complaints and other feedback, the fairer operation of top-ups, funded nursing care, and continuing healthcare. But all of these recommendations if implemented are relatively marginal compared with the central challenge of managing the social care market efficiently or saving it from collapse.
Questions for care home managers
Is your local authority making full use of its Care Act powers to manage the care home market in your area effectively?
Do you think that a new national independent body would be able to make a useful contribution to capacity planning for the care home market?
Do you have a clear enough idea of future demand from both self-funders and council aided users to ensure your home’s continued viability?