How to Pay for Elderly Care

Unlike everyday healthcare, social care isn’t free. Regardless of National Insurance contributions, nobody is automatically entitled to free care unless they meet specific criteria.

There are however funding options that could lessen the financial burden. Accessing and arranging this funding can be a complicated business so it’s essential to research all the options to determine whether you’ll have to contribute nothing, a little or the full amount.

Here we explain the different routes available and where to go for more support and advice.

The Means Test

Once the care needs assessment has taken place, a financial assessment will be carried out by your local authority to ascertain how much funding, if any, you’ll need to contribute.

This means test will take the following into consideration:

  • Regular income including pensions, benefits and earnings
  • Capital including cash savings, investments, land, property* and business assets

*The family home won’t be included in certain scenarios, including if only home care is required. 

The outcome will then be matched to current government thresholds to determine the level of funding support. As a general guide these are:

  • Capital assets worth less than £14,250 = care fully funded by the local authority.
  • Capital assets worth more than £23,250 = care self-funded by the individual and/or their family.
  • Capital assets worth between £14,250 and £23,250 = partial funding by the local authority.

Do note that as each set of personal circumstances is unique, there will be exceptions to the above in some cases. Find out more here.

Local Authority Funding

If the financial assessment finds that you or your relative are entitled to local authority funding, this will take the form of a personal budget.

Similar to a personal health budget (see NHS-funded care below), a personal budget is the amount of money the local authority contributes to meet specific needs based on an individual care plan. 

A personal budget may not be enough to pay for all recommended services. In these cases, the shortfall will need to be made up by the individual getting care.

How to use a personal budget

Once a personal budget amount has been set, it can be spent using one of three methods:

  1. Managed account: this popular choice means the local authority looks after the money, makes care arrangements and pays the providers’ fees. 
  2. Third-party account: similar to a managed account, a third-party broker oversees the budget. This is often the care provider. 
  3. Direct payments: the person receiving care is given the money and can spend it however they choose to meet agreed needs in a care plan. Paid into a dedicated bank account, this option maximises flexibility and independence. Extra work is involved here when sourcing help, but direct payments provide valuable freedom of choice, and Holm is able to help you with this.

Regardless of how you receive financial support, it can be used to fund care either inside or outside the home. 

With direct payments, you can also choose your provider. A caveat here is that using funds to employ a carer comes with legal responsibilities. Your loved one will become an employer and will need to manage tax, minimum wage levels, sickness and holiday pay, and liability insurance for the carer. 

There are two ways round this admin challenge: use a care agency who’ll deal with all the paperwork or head to Holm where all registered carers are self-employed. Not only will these independent carers manage their own finances, you can also be reassured that they’re receiving a better wage than an agency worker.

If your local authority establishes that your family isn’t eligible for a personal budget, they should still help with the decision-making process about what care to arrange.  You can also request a reassessment at a later date as needs evolve.

elderly woman and private carer in Manchester
photo of an elderly woman and her private carer from Holm Care

NHS-Funded Care

Separate from the social care offered by local authorities, NHS-funded care is based entirely on a person’s health needs.

NHS Continuing Healthcare is a fully-funded healthcare package for anyone assessed as having a ‘primary health need’ which involves a complex medical condition and ongoing care requirements. 

Eligibility for this fully-funded care should be determined before a local authority care needs assessment is carried out. Omit to do this and you could end up paying for care that you’d otherwise receive for free.

How to apply for NHS funding

Speak to the relevant GP, clinical commissioning group (CCG) or social worker about arranging an NHS continuing healthcare assessment. And be aware that not everyone with a long-term condition or disability is eligible.

Usually carried out by a multidisciplinary team made up of medical and social care experts, this assessment covers areas such as mobility, nutrition, continence, breathing, cognition and communication.

For each potential issue, a priority rating is given from low to severe from which a recommendation is made. This takes place at a meeting which you’re entitled to attend, allowing your views to be taken into consideration.

Once the evidence has been assessed, the suggested decision will be passed to the local CCG for final sign-off.

What happens next?

If you’re classed as not eligible for a full continuing care package, you may still qualify for NHS-funded nursing care. This means the NHS will pay for the nursing component of nursing home fees. You also have the right to appeal. Otherwise, the next step is to request a local authority care assessment (see section 2).

If the decision triggers a fully-funded NHS package, then care can be given at home, in a care home or a hospice. All costs associated with personal and health care will be covered. The level of support will be reviewed after three months to ensure it’s fit for purpose, and then again at least every year.

Funds will be managed within a personal health budget which aims to give greater choice over selecting the most appropriate service to meet unique needs. As with social care personal budgets, these can be managed either by the NHS, a third party or personally via direct payments.

Self-Funded Care

For those who don’t qualify for any financial support, any in-home or residential care will need to be self-funded.

Although average residential care home costs in the north-west are the lowest in the UK at £511 a week, with nursing and dementia care costing even more, it’s still a major financial commitment. And one without a definite end date.

If capital assets are above the £23,250 threshold, there are several options to make sure that savings go as far as possible for as long as possible:

Immediate needs annuity

This specialist annuity will provide a regular income, guaranteed for life, in exchange for an upfront lump sum. Tax-free if paid directly to the care provider, an immediate needs annuity is specially designed to cover the shortfall between income and care costs.

Downsizing the home

If home care is required, then downsizing to a smaller property can free up the cash needed to pay for this support. It also gives the opportunity to live in more suitable premises such as sheltered housing or a retirement village.

Equity release

For those whose wealth is tied up with their homes, equity release offers the opportunity to free up some of that cash to pay for care. This approach allows part of the value of a home to be spent now rather than only after the sale of the house. 

Available to those over 55 who no longer have a mortgage and whose property is worth over £70,000, going down this route requires specialist guidance from a financial advisor.

Gaining a regular income from savings investments

For those able to tap into savings to pay for care, investing this pot of cash wisely is vital to a successful long-term strategy. For what can be a risky approach with no guaranteed income, professional financial advice is recommended.

Deferred payments

A deferred payment scheme can be arranged with the local authority as a way to delay paying for care costs. Instead, the council will use the value of the person’s home as security and pay the fees. Repayments only need to be made when the house is sold or the owner dies, making it an option worth considering to free up funds quickly without selling the home.

This legally binding agreement accrues interest and admin costs over time. And keep in mind that an unoccupied property will still need maintaining, incurring further costs.

A note of caution: deprivation of assets

Deprivation of assets is the intentional reduction of money, property or income. 

In the context of care, it applies to transferring assets from the person needing support to family or friends. This is done to influence the outcome of a financial assessment, with the hope that local authority funding will be more likely. For example, a homeowner passing their house onto their children so its value isn’t taken into consideration.

But if the local authority determines this to be a deliberate act to avoid paying fees, they’ll treat the case as if the capital was still there. And then the fees will have to be paid anyway. 

They can also lawfully claim back cash if any financial gifts are found to be made within six months of someone entering care.

And it’s not just property that applies here. Giving away a lump sum, transferring property title deeds, gambling and buying expensive possessions such as cars or jewellery can all count.

Self-funded but still free

There are some helpful home adaptations that anyone can receive for free from their local council, regardless of financial means. Following a needs assessment, equipment such as grab rails, ramps, dropped kerbs and outdoor lights can be paid for up to a value of £1,000.

We hope this article has helped you understand the different ways in which you can pay for elderly homecare. Please feel free to contact us if you would like further advice from our elderly homecare experts.

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