Hundreds of England’s care homes could be closed and care rationed because the government has “seriously underestimated” the costs of a shake-up, experts are warning.
Widespread closures would leave hundreds of thousands of elderly and vulnerable residents homeless.
Those in the southeast, the east and the southwest would be hardest hit, according to a new study.
Under a package of social care reforms announced in September, ministers are aiming to make care fees fairer between private and state fee payers.
At the moment, residents who self-fund all their care pay up to 40 per cent more on average than those eligible for state support, for whom their local authority arranges care, and care homes charge councils lower rates.
The government says it wants to end this “persistent unfairness” by allowing private payers to ask their local authority to arrange their care, starting next October, and to increase the fees that councils pay to make the care market sustainable.
It argues the reforms will protect people needing to go into a care home from unpredictable costs.
Ministers have allocated £378m a year to compensate councils for the new “fair cost of care”.
But analysis by healthcare market company LaingBuisson for the County Councils Network says the government “seriously underestimated” the costs of its proposals by at least £854m a year.
The shortfall could lead to widespread closures and a shortage of beds, and trigger a deterioration in the quality of care between local authority and private placements, the study warns.
Care England, the main organisation representing providers of the roughly 13,368 homes in England, says the funding allocation could lead to “catastrophic financial failure”.
And council chiefs, who are already facing severe financial pressures, say they would be unable to make up for the shortfall without cutting services or imposing significant council tax rises.
The new study calculates care providers would lose £560m a year – a loss of 3.8 per cent of revenue. Care homes in all but one region in England would be hit, the report says, but the largest losses would be in the southeast, east, and southwest, as they have the largest proportion of private fee payers.
From next month, National Insurance contributions are being increased by 1.25 per cent to fund the new health and social care levy, although it will not be ringfenced for councils until 2025.
Martin Green, chief executive of Care England and chair of the Care Provider Alliance, said the report showed the annual cost to councils after the changes would be at least three times current government funding allocations,
He added: “If not immediately revised, this could lead to catastrophic financial failure to be experienced by providers, leading to home closures, and an inability to invest in services for some of the most vulnerable members of society now and into the future.”
Martin Tett, adult social care spokesperson for the County Councils Network, said: “There is a clear consensus from those that work in adult social care that the government’s Fair Cost for Care proposals are laudable – we all support the principle of making the system fairer. But the government has seriously underestimated the costs of its proposals.”
He said the proposals could result in widespread care home closures and a rationing of care, adding: “Councils will be left between a rock and a hard place – either by raising council tax to excessive levels and cutting local services, or by seeing widespread care home closures in their areas.”
The government’s own modelling is different from that of LaingBuisson.
A Department of Health and Social Care spokesperson said: “Our wide-ranging and ambitious reform of the adult social care system will protect people from unpredictable costs, offers outstanding quality and will be accessible to those who need it.
“We recognise that the type of genuinely transformational change set out in our White Paper, People at the Heart of Care, cannot be accomplished overnight so we are providing £1.36bn over the next three years to support local authorities to make significant progress towards paying providers a fair rate of care.
“This includes £162m in 2022-23, followed by £600m in each of the following two years.
“As part of our gradual implementation, we will review our approach ahead of allocating money for 2023-24, working closely with local authorities and providers to monitor market changes, and determine appropriate grant conditions, guidance, and distribution mechanisms.”
