From 2020 the state will make a bigger contribution to long-term care in England – but it's not that simple...
The Care Act 2014 implements a pledge by the Government to cap the cost of paying for long-term care in England. Even those who have the resources to pay will get their care paid for once they have spent a certain amount on it themselves. But just how much is that "certain amount"?
How much do I have to pay for care until the state helps out?
The cap has been set at £72,000. But that does not mean that once you have spent £72,000 the state will pay the rest. Most people will have to spend around twice that on care home fees before the cap is reached.
Here is how the Department for Health told Saga Magazine it would work if you go into a care home from 2020 and you have money in the bank – say £300,000 – and can pay your own fees.
More than four out of ten people in care homes do – they are called "self-funders".
You find a care home you like that costs £720 a week. You comfort yourself by working out that after 100 weeks – just under two years – you will have spent £72,000 so then it will be free. Sadly it will not.
Are there hidden costs?
First, the cap is not reached when you have spent £72,000. The cap represents the amount of care you could buy at the rate your local authority would pay.
Let's say in your area the local council is prepared to pay only up to £650 a week for a care home, so it would take 111 weeks to reach £72,000, by which time you would have paid £79,920.
Even then, the cap will not have been reached because it covers only care costs – not the cost of board and lodging in the home.
The Government is expected to fix the national figure for board and lodging at £12,000 a year, which is £230 a week. Deducting that from £650 leaves just £420 a week as the cost of the care that the council will pay for.
It is that amount which counts towards the cap and it will take 172 weeks – three years and four months – before you have paid £72,000. By then, your total fees will have cost you £123,840, partly on board and lodging, but also because your home charges you more for care than the local authority is prepared to pay.
What happens when I reach the cap?
Even when you reach the cap, the whole of your care home fees will not be paid. The state will pay only the £420 a week local authority cost of care, leaving you to find the balance of £300 a week.
Those official figures may paint too rosy a picture. Someone paying the average cost of a care home in England – which is £537 a week – would need to pay the fees for more than five years and spend more than £150,000 before the cap was reached.
The average stay in a care home is two and a half years, so most people who fund themselves will not live long enough to see the benefit of the cap.
The Institute of Actuaries estimates that only one in eight women and one in 12 men who go into a care home at the typical age of 85 will benefit from the cap.
The Savings Trap
Want to know how much it will really cost? Check out the care calculator.
Protecting your home
Another big promise made by the Government was put like this in September 2013: "a universal deferred payments scheme... will mean that people do not have to sell their homes in their lifetime to pay for residential care." But that promise is not quite what it seems, either.
Every council is supposed to offer a deferred payment scheme. If you have an empty house or flat, then its value is counted as part of your resources but you do not have to sell it.
The bill will tick up while you are alive; when you die, your property will be sold and the bill paid.
Some councils still try to avoid offering this scheme. But a 30-year-old law imposes a duty on councils to provide care and even if you refuse to pay for it, the council has to give you a care home place and can then take the money for the fees from your estate after you die.
The deferred payment scheme
All councils in England must provide a deferred payment scheme by law. But the right to it is far from universal.
Regulations set out when a council can or must offer a scheme and also when it can or must refuse access to one. For example, the value of your property will normally have to be sufficient to cover the anticipated cost of the care. So those with a cheaper property or an equity release scheme already in place may not be accepted.
Previously no interest was charged on the deferred payment until after the person in the care home died. But since April 2015, interest is charged on the debt. In England, the amount of interest the local authority can charge is limited by a government-approved standard rate (currently 2.15%).
The House of Commons Library estimates that could add several thousand pounds to the amount due to be paid after death. And any interest payments due will not count towards the cap.
If a deferment scheme is refused, the fallback protection is no longer available and there is no procedure for the council to collect the money from the person’s estate. Instead, those who refuse to pay will be taken to the county court where they will face extra costs and ultimately the court could order their home to be sold – another promise broken.
The changes to the Care Act 2014 apply only to England. The rules are different in Scotland, Wales and Northern Ireland. In Scotland some changes to paying for the cost of nursing care in later life began in April 2015.
* This article first appeared in the July 2014 edition of Saga Magazine and was updated on 27 June 2016.