Long-term care: who pays?

older people sitting outside at a care home around a tableRuth Pyatt, of Birketts, explores social care costs and who pays for long-term care.  

On 7 December last year, the government announced that they had scrapped their plans to place a cap on what an individual would be required to spend on their own social care costs. The cap had originally been planned to be set at £72,000 for those over 65, and was due to come into effect in 2020. 

A green paper setting out the government's proposals for social care reform will be published by the summer of 2018, but it appears that the funding system that we currently have for social care and healthcare will be with us until at least 2020. 

Under the current system, who pays for what, when it comes to long-term care?

This depends on:

  • The health, mobility and level of support required by the person in need of care, which determines whether the need is a healthcare or social care need.
  • What funding the person in receipt of care might be entitled to.
  • Where the need is a social care need, the value of the savings, assets and income of the person in need of care.

The first basic rule is that healthcare is funded by the NHS

If someone in need of care is assessed as having a disability or severe and complex medical needs that mean the individual has healthcare needs, rather than social care needs, they could qualify for NHS continuing healthcare (CHC). CHC is a non-means-tested, ongoing package of healthcare that is arranged and funded by the NHS and can be received at home, in a nursing home or in a hospice.

If the person in need of care doesn’t qualify for CHC, the NHS may still be responsible for some healthcare needs. The NHS is responsible for funding certain types of healthcare equipment and aftercare for people previously detained under certain sections of the Mental Health Act. 

In addition, if someone is a resident of a care home that is registered to provide nursing care and they do not qualify for NHS CHC, but have been assessed as needing care from a registered nurse, the NHS will make payment directly to the care home to fund care from registered nurses.

The second basic rule is that, in the first instance, social care is paid for by the individual needing care

Anyone can ask the local authority to carry out a care needs assessment. If the local authority decides that an individual needs support that it can provide, they have a legal duty to provide or arrange the services that the individual needs.

Although some local authorities will fund some services for the elderly (such as meals, transport, home modifications and equipment to help with the tasks of daily living) irrespective of an individual’s financial situation, most services are means-tested and the local authority will carry out a financial assessment to determine who should meet the cost of social care. 

Means-testing

In England, if an individual has capital in excess of £23,250 (including the value of any home), they will have to pay for their own care. (The thresholds for Northern Ireland are the same but are higher in Scotland; there is a more generous system in Wales.)

If an individual's capital is below £14,250, they will be entitled to the maximum level of support, but they will still have to contribute all income in excess of £24.90, which can be retained for personal expenses. 

If an individual has between £14,250 and £23,250, there will be some local authority funding available, but the individual will be expected to contribute all income in excess of the personal expenses allowance, and a capital tariff of £1 per week for every £250 or part thereof between the upper and lower limits.

Local authorities can’t generally assess joint resources of couples – they can only look at the individual's capital and income. Jointly-owned assets are divided equally, with the exception of land and buildings, where the local authority will look at who has beneficial interest. 

Notional capital and income

An important factor to note is that a local authority is permitted to take account of notional capital and notional income. Notional capital would include capital disposed of (which includes making a gift, including by executing a deed of variation), a transfer into trust, unusually high spending, gambling, and using savings to buy assets which are excluded from means-testing (such as jewellery, vehicles and investment bonds with life insurance) to avoid having to use it to pay for care (deliberate deprivation).

Notional income might be where the individual had a personal pension plan and was of qualifying age, but had not purchased an annuity or arranged to draw down. If someone is assessed as having notional capital or notional income and they do not pay the contribution that the local authority expects the individual to make, the individual will end up owing the local authority money and the local authority has the power to pursue the debt. 

In addition, if a third party has received capital in a transaction that is deemed to have deliberately deprived an individual of capital, the third party may be liable to pay the local authority the difference between what the individual would have been required to contribute at the time of their financial assessment and what they actually contributed towards the cost of their care.

Local authority funding

For those who do qualify for local authority funding, an individual may ask the local authority to arrange care services, receive direct payments from the local authority and arrange care for themselves, or ask someone else to manage the budget and organise care services on their behalf.

If the local authority is contributing to the cost of care, and the costs of the care services chosen exceed the combined amount that the local authority is willing to provide, together with the capital and/or income that the individual is required to contribute, the local authority will allow a third party to top-up fees, as long as the third party is capable of doing so over the long term. However, an individual whose capital has fallen below the upper threshold (currently £23,250) can’t top up their fees from their own funds.

It should be noted that if an individual receives care in their own home, the value of the home is not included in the calculation of capital available to pay fees. If the individual needs to move in to residential care, the value of the home may be disregarded if the home is also lived in by a partner, child or a relative who is disabled or over the age of 60. 

If the capital value of the home is included in the calculation of capital available to pay fees, then the local authority can assist with care costs for the first 12 weeks of care (known as the 12-week disregard) and may offer a deferred payment agreement (under which the local authority will put a legal charge on the property, so that they can reclaim what the individual owes in fees they have paid at a later stage, when the house is sold). 

It’s sometimes possible to rent out the home while a deferred payment agreement is in place and use the rent towards the payment of care costs. If a deferred payment agreement is entered, the individual will be permitted to retain income above the personal expenses allowance (the disposable income allowance) to pay for additional costs of retaining the home. For some, equity release might offer an alternative to a deferred payment agreement.

About the author

Ruth Pyatt is a senior associate in the wills and advisory team at Birketts, and is a director of Solicitors for the Elderly.

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