New Study Reveals Local Authority’s Affect On Care Homes

Research published by the University of East Anglia at the end of last year revealed news that local authorities may be driving up the cost of residential care home fees for privately funded service users.

Arriving alongside the recent VAT increase, the news that local authorities could also be to blame for increasing the cost of care home fees was revealed in a research paper published by the ESRC Centre for Competition Policy.

Professor Ruth Hancock and Professor Morten Hviid have outlined that due to the ongoing public sector funding and budget cuts, Adult Social Services have been forced to trim band funding and make every penny go that extra mile. This, of course, has had an effect on the Health and Social Care economy where more and more independent care home providers are having to counter balance the reduction in funding by raising private fees. This is what Prof Hviid has to say:

“Local authorities purchase care home places on behalf of a large group of people based on a means test of their income and capital assets. People excluded by the means test are self-funding. The more the price is increased for a privately funded place, the more buyers will drop out of the private market as less people cant afford the higher price,”

said Prof Hviid, professor of law at the University of East Anglia

“An important lesson from the care home market is that where the public sector purchases alongside private buyers, urging the public sector to its buying power may lead to unintended consequences for the price that private purchasers pay,” added Prof Hviid.

“Under the current means tests for residential care, local authorities can use their buyer power without destabilising the care home market too much. But if the system is reformed so that more people are entitled to some public support with their care home fees, local authorities may have to pay fees which are closer to the market rate. That will cost them more. The Dilnot Commission – which is considering reforms to the care funding system – needs to recognise this,” said Prof Hancock, professor of Economics of Health and Wealthfare at UEA.

Although it is unclear what the new government has in store for the UK’s Health and Social Care sector, economists are predicting a shift in the oncoming years.

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