Jane Ashcroft (JA), CEO, Anchor, Joan Elliott (JE), General Manager, Bupa UK Care Services, Matthew Proctor (MP), Chief Financial Officer, Avery Healthcare, and John Ransford (JR), Non-Executive Director, HC-One, assess the current social care funding climate and discuss a way towards a sustainable future.
CHP: What is your assessment of the current local authority fee climate? Have you seen any fee increases as a result of the Government’s release of additional funding?
JR: The fundamental problem that underpins all we speak about today is insufficient finance in the system. Everyone knows that. There have been two recent highly influential reports from the National Audit Office and the CMA which reaffirm this. I know that the Government knows it but the problem is: what do you do about it? All paths at the moment lead to the Green Paper but the sector is underfunded and my view is it’s unsustainable, certainly in terms of support for people from the public purse. The problem is that we in the provider sector keep making it work. There’s a lot of ingenuity, there’s a lot of effectiveness, there’s genuine care and we keep making it work. When the NHS screams for more money by and large they get it. When the social care sector is underfunded, we get on with it.
We have seen some increases in fees. LAs, and to some extent CCGs, understand the position but simply have limited finances. Money coming from the social care surcharge for the whole service has helped, but it has not solved the problem. You have to look at the base and you have to look at the low fee level we are providing care for. In some places you can get a double-digit fee increase but when you look at the demand we have got, the greater care needs of people and increased staffing costs, etc, the situation has not improved at all.
JE: There’s just not enough money in the system. We welcome the social care precept and the Better Care Fund but they are too short term. The sector needs to see funding for the longer term. We are starting to see some reduction in capacity in the market and I think that will accelerate because there will come a point where people will say: ‘no more, we just can’t continue to look after residents funded by the public sector at the level of fees that we are getting’. We are seeing costs increasing with the National Living Wage, which we support, but just to keep pace with that would take a couple of percentage point increases alone. Pockets of LAs are passing fee rises through but it’s very fragmented and I don’t see a big step up in fees as a result of funding injections. I think the situation is getting worse.
MP: Part of the problem, is this vision that it is better to be cared for at home, which it is, if it can work. But this does not address the loneliness issue. So many people would have a better lifestyle if they realised how care homes can provide them with companionship. A lot of the money has been coming through but I don’t think care homes are seeing much of it. It’s getting sucked into the Living Wage cost that councils are trying to cover and the domiciliary care area as LAs are fighting to keep people at home. It’s about us as an industry trying to get people to understand how care homes really work and making them realise how lovely the majority of care homes are to live in. It’s about changing attitudes in local government regarding keeping people at home as long as they can.
JA: I have seen a change. I think a couple of years ago there was a strong broad position of dom care good and care homes bad. I find that commissioners are now aware of the impact of good quality care and the cost effectiveness of care homes because so many people are living with such high levels of care needs. Where there are significant demand pressures local authorities are doing what they can to reflect increases in costs. There’s also the increasing expectations of the levels of care that people need and the lifestyle offer. As we have all moved into the private pay market and we have looked at the people who can afford the true cost of care, their expectations around a type of hotel offer, the food and level of activities, has meant the difference between public funded and private funded is becoming more extreme. There’s a base line around safety of care that we can’t go near which is driving some of the closures and some of the rethinking but some of the contrast between the expectation and what you can deliver for £550 a week is now being exposed.
JE: You can take an LA fee and it maybe covers the cost of care but it gives you nothing left to invest in the home and over time it leaves you at the point where you are not able to deliver the service you want to deliver.
JR: A relatively good level of care for the price that we provide is less than a night in a Travelodge. That is just logistically impossible.
CHP: How big is the funding gap between the true cost of care and what LAs provide and how does that vary across the country?
JA: If you look at the fees paid by different LAs, you can’t correlate them to workforce costs and land costs or anything because it’s all driven by LA affordability rather than any kind of market driver. We have all been involved in exercises to look at the true cost of care but we can never start from this point, we always have to look at affordability issues. The hardest job in the world must be to be a Director of Adult Care Services. There are some areas where the workforce is more plentiful and land is cheaper that pay better fees and there are LAs where we know that land costs and build costs and workforce costs are higher and their fees are lower. It’s really helpful when someone like the CMA comes in that has a really different perspective. A consumer focus look at the service is helpful but it does come back to the fact that somebody, somewhere has got to put more money into the system.
JR: The only taxation solution so far has been an increase in council tax. The principle for us that is really important is council tax is differential. It benefits those areas with higher tax properties which tend to be the better off areas and tend to be where most people live who can afford their own care under the current system. It proportionately disadvantages those areas where there is a lot of people who need public support. It might be the start of a solution but it’s not a full solution. We have to have a general taxation solution as a full solution which all governments have backed off from. Until that is faced we won’t solve this problem.
CHP: Could the answer be having a flat cost of care that is nationally agreed or is this something that has to be tackled at a local level?
MP: It probably would need to be regionalised but there are minimum levels. We do a lot of cost of care calculations and they do come out as similar for most regions, except around the M25 and the South. There’s got to be some sort of approach where there is a minimum. There’s a difference of quite a few hundred pounds a week between the private and LA rate. It is making a lot of residents question whether they are funding LA fee payers. When we did the annual private fee increase this year we had the most complaints ever with people saying: ‘this isn’t fair because I am having to fund less fortunate people because the LA just doesn’t have the money’. There is an interesting debate which the residents themselves are now challenging.
JE: I have a slightly different perspective, I think the cross-subsidisation debate is a bit more nuanced. It’s important to explain that self-funders are paying the appropriate fee so the real issue is that LAs are paying fees that don’t cover the full cost of care.
CHP: What is your split between private fee and LA fee payers?
JR: Over three-quarters of our residents are supported by the state in the form of LAs or CCGs. I don’t think you can have a flat national fee but I think there is a way through there. Partnerships, working together with the commissioner to commission places on a longer term basis where you can be assured of cost models and recruitment, is also a way forward for providers like us where most of the people we look after are supported by the public purse. We want to do that. We think that maybe the balance is wrong between private and public.
If you look at a longer-term period, assess the needs of the people in that area, look at what we can provide, ask the LA to agree a rate to take say a dozen of our beds so we can staff that up to a certain degree and know that there is a commitment there, I think that provides more certainty for the system, and probably a cost advantage over the current spot purchases.
JA: That certainty is probably the key thing for the sector. We know that there is a lot of potential to bring private money to the sector to help leverage the public purse. If you look broadly across retirement villages and extra care, there is a lot of interest but if you want to invest you want some certainty about how it is going to work. From a business and home level some certainty of income does enable certainty of pricing if you got certainty of demand. We went through a phase when there were really big block contracts. About a third of our residents are funded by the public purse, a third are private pay and a third have a degree of support and have top-up. We have got some long-term contracts that we are still in such as 25-year PFIs. That’s a very difficult model because nobody can look that far forward. LAs know their demographics on a three- to five-year horizon but it’s very difficult for us to plan as a businesses where there is always another Green Paper around the corner.
JR: Since the advent of spending reviews, there is certainty of LA finance for a longer period. It might be an awful sum, but at least you know what it is. I sometimes think the LA system is based on the LA procurement system. If you are looking to build roads you buy your tarmac off whoever will give you the cheapest. Care is not like that. You can’t use the tarmac system to price – you have to come to a much closer partnership arrangement.
CHP: In terms of your new developments, have you now shifted towards a privately funded model, Matthew?
MP: Largely, yes. We prefer to call it ‘private preferred’ as a policy. We do still want to take LA residents because part of our offering is about being part of the local community. We don’t take many, however. Since we began developing our own buildings we have focused more on the self-funder so that we can offer more services and maintain quality. We are probably looking at taking 10-15% LA in our new builds. We have started to do more contracts and have given floors to LAs or CCGs in a couple of our buildings because it is helpful for us to have certainty of income. It’s also helpful for CCGs to know what kind of resource they can draw on in terms of beds.
CHP: The recent Which? care quality survey seemed to indicate a relationship between the level of exposure to the LA market and the quality of care operators are able to provide. Do you agree that a higher LA intake makes it more difficult to achieve good care quality?
MP: it’s an interesting point. There isn’t a direct correlation currently but that has to happen eventually. Everyone in this room wants to deliver the best care they possibly can. The problem we have is it is unsustainable for those providers more exposed to the LA market. They are just not able to invest in the building so it starts to deteriorate. We have been perhaps too successful in making the current situation work.
JR: The last local authority where I was director of social services – North Yorkshire County Council – came very high in the Which? survey but they only have two homes. We look after over 350 homes so we have to be very careful of comparing like with like. We all want to be better but we have got to accept that there is a cost to it. Our biggest cost is people and people cost a lot of money.
JA: My first Outstanding home was in Peckham. It was the first Outstanding home anyone had in London and it was predominantly LA fee payers. Our second Outstanding was in West Byfleet and is our biggest home with 117 rooms and was full of private payers so what’s the correlation? I think it’s over simplistic. The correlation between those two services was brilliant managers. Local markets are very different. There are markets where the private market is very difficult. There’s not a lot of private payers in the North East. That’s one of the things that make it very difficult when we talk to policy makers because we haven’t got really easy soundbites that say these are the absolutes. Everything you look at gets you into a degree of complexity. So how do we have a voice when our messages touch so many aspects of people’s lives? It’s about later life and dementia and housing equity and whether people have earned through their life and have earned free care. We sit right in the middle of lots of really difficult social policy and public attitude issues.
JE: Most home managers will deliver great services but we need a level of funding to staff the homes and that’s where the two agendas come together. With the best manager in the world, if there’s not enough income that’s when you will start to see beds come out of the market but the home manager is a huge determinant in terms of quality of service.
CHP: How is the current fee climate affecting Bupa?
JE: We have to close homes where we have not seem enough income. As workforce costs continue to accelerate, a lack of supply in the market, particularly in terms of nurses, will be critical.
MP: The CQC are very variable in terms of their quality reviews which is a bit unhelpful because they should be accelerating the decommissioning of some homes which are not fit for purpose and should be shut. They need to get tough with some of the homes who are not able to maintain quality.
JA: I would stick up slightly for the CQC. They do now have a better degree of consistency and they have stepped up the enforcement action. We all want the bad provision to be taken out of the market.
CHP: In terms of the Green Paper, what are the potential solutions to the current funding situation?
JR: This Green Paper marks 50 years of these sorts of initiatives and none of them have solved the fundamental problems. These are the underfunding of the sector combined with growing demand. If you have healthcare needs, it’s free at the point of need but if you have social care needs, it’s very expensive at the point of need. Unless you address those two problems, you can’t move on successfully. It is an opportunity but unless it looks at the fundamentals rather than the marginal issues, I don’t think it will help us greatly.
JE: From our point of view as an insurance and social care provider we don’t think insurance contributions will work. It’s been tried before and it’s quite difficult to assess the liability for anybody and people often think social care is free. There needs to be some sort of compulsory partnership between the individual and the state. We have got to be clear about individual responsibility towards funding later life care.
JA: We have been trying to make sure that the housing element is picked up. My understanding of what the founders of the welfare state were trying to do was trying to provide a safety net for people and where we have ended up is with a very different definition of a safety net. The people who are buying into our retirement villages where this on site care is available are really interesting people to talk to because they are people anticipating care needs. They are people who can deliver equity from their properties to fund their care but want to know what they are going to get in return that protects that. If the Green Paper can think about some of those broader issues such as where we set the safety net and how other public policy areas can contribute, we have got to engage with it.
MP: One of the areas we are starting to look at is auto enrolment for pensions, which links people with their personal obligation to provide for themselves in the future. This could be looked at for care with people being aware of the need to provide a minimum safety net for their future.
JA: Damian Green made a statement last week about people over 40 paying an extra 2p on national insurance. I have spoken to people from Japan about their system which kicks in at the age of 40. There’s some logic there. Discussing those kind of things is helpful but there has to be a degree of compulsion, otherwise you are not pooling risk because the only people taking it out are the ones who actually need it.
MP: I would much rather it was personalised so people know they have a pot and they can add to it if they want to. The problem at the moment is that LAs have this big budget and it just disappears because the administration is massive.
JR: I think there is a public stomach for specific taxes for services that meet need. Some sort of rescheduling of national insurance might do it. There’s got to be some sort of direct taxation link for us all.
JA: It’s about the transition. It’s going to take a long time. Whatever we have to do there’s going to have to be a period through which we get there.
JR: There is another argument though. We spend £130bn on the NHS. You could solve the social care problem we have been talking about with an additional £2bn a year. If we can use our resources differently through better prevention, it doesn’t have to be about extra costs for the Exchequer.
JA: The other issue with people having to pay at the point of delivery I really struggle with is why people have to pay for dementia care. That is just ageism. We are so much clearer than we were 20 years ago that dementia is a clinical issue and that, in terms of public debate, has the potential to trigger a different way of thinking. There’s some genuine interest from senior people in how dementia impacts society but it’s a really thorny issue.
JR: So many good ideas worthy of further examination have been ruined by political ineptitude. The free at the point of need will have to go. We will all have to make a personal contribution, the state will have to make a contribution, because the state’s contributions are our contributions. It will be a collective insurance model.
JA: It will be transparent and it will be a shared responsibility. It isn’t transparent at the moment. It is incumbent on us to help policymakers, decision makers and the public to have a more balanced view of the sector. One thing that has improved is that there is a more positive perspective around care homes than there has been in the past. We work really well together as a sector which we didn’t do in the past. If you can get people over the threshold they are generally impressed with what they see.
CHP: Are you optimistic that funding is beginning to go in the right direction?
MP: It’s early days but we have not seen extra funding come through yet this year. We have seen some increases of between 2 and 5%. We have still seen the odd CCG saying we are cutting your fee. Four Seasons have been the perfect case study of why LA fees are not enough.
JR: I am optimistic but the things we have been talking about are really at the margins. They help a very broken machine stagger along. If we want to deliver on the sort of vision we have been talking about here, it needs something much more fundamental and the Green Paper will hopefully be a way of achieving that.
JE: What we have seen so far doesn’t amount to sustainable. It has been marginal.
JA: The public interest in this sector is growing and when this is such as loud issue that politicians have to listen, they will listen. The quality of the service we are delivering has gone up. Ageing is the biggest issue. It’s not Brexit.