Healthcare Management Solutions (HCMS) has called on George Osborne to address how care homes are funded by local authorities as the National Living Wage drives up costs but fees fail to rise to compensate.
“The Chancellor has to intervene in resolving the problem that the government created when it introduced the National Living Wage,” demands Tony Stein, chief executive, Healthcare Management Solutions (pictured above), a consultant to the social care industry.
“The care sector, although not unique in being affected, is peculiar in not having the traditional avenue of being able to set prices to cover rising costs open to it. Approximately 60% of elderly and physically disabled care home residents are funded by government agencies who also dictate the fee paid.
“The NHS and Local Authorities are struggling financially and although several LA’s have agreed to increase fees to meet the NLW the reality is that the number of placements will reduce to balance the books,” Mr Stein predicts.
HMS offers the practical solution to the funding crisis of changing care homes’ tax status. This would shift some of the burden of rising costs to the Treasury rather than local authorities.
“I’m hoping that the Chancellor takes the opportunity to look at the VAT treatment of care services. If the government moved the delivery of care home services from an “Exempt status” (so denying operators to recover input tax) to a “zero-rated” status this would allow the recovery of input tax. This would put about 5% directly back to operators to pay for staff cost increases. This in turn takes the pressure off Local Authorities to find the funding and gives them more to spend on increasing the number of clients funded. A win-win,” Mr Stein explains.
Kevin Groombridge, executive chairman, Healthcare Management Solutions, draws attention to another idea that has until now been ignored by Government. “I would like the Chancellor to consider, once again, the use of insurance products to fund long term care (LTC). If there was encouragement through the tax system and perhaps some Government support to add to individual pots then people could fund their own care or that of family members in a planned way and not have the worry that the money will run out,” he proposes.