Care Home Fee Inflation

Year Published: 2022

As care home fee inflation increases, Genevieve Powrie considers the shortfall in funding and the issues that it could cause for residents.

 

Care residents face many financial challenges, including extremely high fees, top up fees, limited choice in available homes, shortage of staff to care for them, and a large price discrepancy between socially funded placements and private placements. Not to mention all the restrictions brought in during the Covid pandemic.

 

However, one pressing new problem is the soaring cost of care. According to the Knight Frank 2021 UK Care Homes Trading Performance Review, average weekly fees in 2021 increased by 6.7%. The region with the highest increase was the East of England, up by 11.7% on the previous year.

 

We act as professional attorneys for a number of individuals, some of whom are living in residential care homes. Every year, usually around February, we receive letters from the various homes notifying us of the planned increased care fees in April. One nursing home in which one of our clients resides in the North West has recently notified us of a 14.04% fee increase from last year’s weekly rate. They have cited increased heating and utilities costs, large insurance increases and higher wages as the reason behind the uplift. We are currently challenging this as unreasonable, but do accept that a higher than usual increase will be needed in light of all of these genuine pressures. The last thing we would want is for the home to close, as it can be dangerously stressful for an elderly resident to move. Our client celebrated her 100th birthday in January and is very well settled. Therefore, it will be a matter of looking at the figures in detail to establish how much of an increase is reasonable and discussing this with the home until we reach agreement.

 

Our client has lived in this home since 2013 and is privately funded. The fees there have increased by an average of 5% every year since she was admitted. This is not unusual for the care sector, which has historically seen increases significantly above the Retail Prices Index (RPI) rate. From 2013 to 2020, the RPI rate was an average of 2.59% per annum*. In 2021, RPI increased by 4.5%, whereas the care sector increased by 6.7%.

 

As private care becomes less affordable for more and more people, the challenge moves to local authorities, who need to step up and pay for individuals whose savings have been used up and can no longer afford to pay for their own care.  It remains to be seen whether the new Social Care Levy will be able to meet the shortfall in funding which currently exists and looks set to become worse.

 

On a positive note, it is possible to buy an insurance policy which can meet any shortfall in care funding for life, and which will assume an inflationary increase each year of 3% or even 5% above RPI. The premiums are expensive, but at least this option can give some certainty and security in times of apparently runaway inflation.

*Office for National Statistics

 

For more information about any aspect of the legalities around care, contact Genevieve Powrie on 01625 442146 or [email protected] 

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