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Following the UK Government’s announcement in September about reforming adult social care in England – and the introduction of UK-wide 1.25 percent Health and Social Care Levy from April 2022 – it has now published a policy paper explaining the workings of the new charging reform.

On 7 September 2021, the government set out its new plan for adult social care reform in England. This included a lifetime cap on the amount anyone in England will need to spend on their personal care, alongside a more generous means-test for local authority financial support.

Now, the government’s latest paper confirms key outstanding policy details from the initial announcement, including the standard level at which ‘daily living costs’ will initially be set.

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The publication of this document also marks the start of a period of co-production of the statutory guidance with the sector, building on draft regulations and guidance published in 2015, and followed by a public consultation in the new year. It is intended that the regulations and final guidance will be published in spring 2022.

The new charging reforms

From October 2023, the government will introduce a new £86,000 cap on the amount anyone in England will need to spend on their personal care over their lifetime. This will apply to everyone universally, including both new entrants to the social care system and existing users, without exemption.

Costs accrued before October 2023 will not count towards the cap.

In addition, the upper capital limit (UCL) – the point at which people become eligible to receive some financial support from their local authority – will rise to £100,000 from the current £23,250. As a result, people with less than £100,000 of chargeable assets will never contribute more than 20 percent of these assets per year.

The UCL of £100,000 will apply universally, irrespective of the circumstances or setting in which an individual receives care. The lower capital limit (LCL) – the threshold below which people will not have to pay anything for their care from their assets – will increase to £20,000 from £14,250.

To allow people receiving means-tested support to keep more of their own income, the government will unfreeze the Minimum Income Guarantee (MIG) for those receiving care in their own homes and Personal Expenses Allowance (PEA) for care home residents, so that from April 2022 they will both rise in line with inflation.

The cap will not cover the daily living costs (DLCs) for people in care homes, and people will remain responsible for their daily living costs throughout their care journey, including after they reach the cap. These costs will be set at a national, notional amount of £200 per week.

DLCs are a notional amount to reflect that a proportion of residential care fees are not directly linked to personal care, like rent, food and utility bills, and would have had to be paid wherever someone lives. The £200 level is £30 less than a proposal set out in 2015.

Extended means test

The local authority means test for financial support will continue to work in the same way as it does currently. It determines what someone can afford to contribute towards the costs of their care based on the amount of assets and income a person has

However, to help more people with the costs of their care and support, alongside the cap, the reforms are also increasing the point at which a person is eligible for local authority means-tested support. From October 2023, the UCL will rise to £100,000 from the current £23,250 and the LCL will increase to £20,000 from £14,250.

The points below detail how a local authority applies the charging rules to determine a person’s contribution.

  1. Assets above the upper capital limit (£100,000 from October 2023) – People will fund their own care and will not receive local authority support.
  2. Between the capital limits – People will be charged what they can afford from income plus a means-tested ‘tariff’ contribution from assets. The tariff is calculated as follows: for every £250 of capital between the lower and upper limit, an income of £1 a week is assumed, and this will be payable towards the cost of care.
  3. Below the lower capital limit (£20,000 from October 2023) – People will no longer contribute from their assets and only what they can afford from their income.

How people progress towards the cap

For each person with eligible needs, the local authority must provide either a personal budget, where the local authority is going to meet the person’s needs, or an independent personal budget (IPB), where the individual arranges their own care.

The personal budget will set out the cost to the local authority of the care they have arranged, whereas the IPB sets out what it would have cost the local authority to meet the person’s needs.

The person’s personal budget or IPB will be used to calculate the amount that will count towards the cap. For individuals who receive financial support for their care costs from their local authority, it is the amount that the individual contributes towards these costs that will count towards the cap, subject to Parliamentary approval.

Everyone will have a care account, which will be maintained by the local authority and will keep track of their progress towards the cap. Local authorities will provide regular care account statements, and engage early with the person once they are close to approaching the cap to discuss how their needs will be met.

Further detail on care account statements will be set out in the government’s consultation.

What does and does not count towards the cap

Care and support costs that count towards the cap are the costs of any provision that helps meet eligible needs as defined under the Care Act 2014.

Daily living costs

Under the capped system, everyone will remain responsible for their daily living costs (DLCs), such as rent, food and utility bills, and this will apply equally to those in a care home as to those in their own home. People will remain responsible for their DLCs throughout their care journey, including after they reach the cap.

Top-ups

Those receiving care themselves, or a third party such as a relative, may choose to make additional payments for a preferred choice of accommodation or care arrangement, for example, secure a premium room or furnishings. Government therefore intends to change the regulations to enable everyone receiving local authority financial support to fund such top-ups for their own care.

These top-up payments, on top of the cost specified in someone’s personal budget or IPB, will not count towards the cap and will still be payable by the person once the cap has been reached.

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