To Dilnot – or not to Dilnot?
by Andy Hopper, Independent Financial Adviser and Long-Term Care specialist, Manning and Company
That is the question facing the government right now. The findings of the 2011 Dilnot Commission report into adult social care funding in England are the subject of both political discussion and news headlines at the moment.
There are potentially serious financial implications for care home owners if it is adopted by the Government as presented. The key thing is – how much of it will the Government implement – and how will they pay for it?
The likely initial costs to the Treasury of all of Dilnot’s recommendations is a minimum of £1.7 billion per annum – a conservative estimate, with over £2 billion more likely, rising annually thereafter. So, cost is a likely barrier to implementation – and probably the main reason why the health secretary Andrew Lansley MP referred to the report’s findings, when first published, as a ‘basis for engagement’.
Most of the cost to the Treasury will go on the recommended uplift in the amount people can retain as their personal wealth before they become responsible for their own care costs. Currently it’s £23,250: Dilnot’s recommendation is for it to rise to £100,000.
However – and this is important for care home owners – the report also suggests capping care costs to £35,000 for life for the care element, and up to £10,000 per annum for the residential element. The balance of the costs of care will have to be met somehow… and care home owners could find themselves in the position of having to fund the difference.
Here’s an example. A person in care with a nursing need would expect to pay a total of £36,000 per annum using the UK national average of nursing home fees. Over a 3 year period, the total costs of that person’s care and nursing would total £108,000, assuming no annual rises. Under the Dilnot scheme, the maximum payable in this scenario would be £65,000. That’s a reduction in care/nursing fee income of £43,000 over 3 years, or £14,300 per year. For a nursing home with a certain number of self-funding residents, the financial consequences are potentially monumental.
Returning to the question I asked at the start of this blog – how much of this will the Government implement? And what exactly did the health secretary mean by “a basis for engagement”? Well, this last week has seen the publication of the Care and Support White Paper, and the draft Care and Support Bill. While it expressed the right sentiments, it’s very much a holding action for now – a gesture that says: ‘Yes we’re looking at this and working hard, but the issue is devilishly difficult – so it’s going to take a while yet to establish what we’re actually going to do and how it will be paid for”. We’ll have to wait for the next spending review to find out.
But importantly and significantly, the government has agreed – in principle at least – to the Dilnot principle of capped funding. The levels proposed in the Dilnot report seem unfeasibly low, hence higher figures are now being discussed. But whatever the final level, a cap is a cap – and thus care home owners would be well advised to keep this important issue very much on their radar.