The Care Quality Commission’s annual "State of health care and adult social care" report, published at the end of October last year, is bleak in its outlook and this bodes ill for older people who are going to need social care services in the coming years, especially those who will have to rely on publicly funded services. It bodes ill too for those who are trying to provide these services.
CQC’s report says inequalities in access to adult social care are deepening due to the cost of living crisis, staff shortages and squeezed council budgets, and nothing has happened to change that in the four months since the report was published. The regulator says council funding for care is not keeping up with need, with requests for care per 100,000 population up 4.9% from 2017-18 to 2021-22, while the numbers receiving care as a result had fallen by 2.2%. CQC says a quarter of providers surveyed in July 2023 had considered quitting the sector over the past year, as council funding failed to keep pace with their rising food, energy and staffing costs.
In the wake of the report, various bodies have called for remedial action, but none will be taken because government appears to like things as they are. Let’s look at it from the government perspective: A reformed social care system which worked well would undoubtedly take pressure of the NHS, freeing-up beds and cutting down waiting times for acute care and paradoxically putting more pressure on the NHS budget as the number of high-cost acute interventions increased. As things are, most people have to pay for their social care, which suits government just fine; older people receiving social care services make up a tiny part of the electorate and can be safely ignored; just don’t get the vast bulk of pensioners off-side. When the pressure on publicly funded services approaches levels where media scandals aren’t too far away, a judicious injection of public funds will bail-out the local authorities and plaster over the worst of the cracks.
The viewpoint of older people who need social care is very different: those who self-fund (most of them) find themselves paying more than they’d wish to because overall capacity is shrinking and the more modest care facilities have no vacancies. Added to that is that some providers are charging higher fees to self-funders to make up for the inadequate fees paid by local authorities for state funded residents.
This latter group, those who are unable to pay for adult social care, are increasingly lucky if they receive any care services at all, and if they do, it’s likely to be too little, too late. Having no political clout, these people simply have to get by as best they can.
And the provider perspective? The CQC report says care home profitability is at historic lows, and with council-funded care being less profitable than the private market, a greater proportion of fees had come from private sources in the past year. This can leave people in less affluent areas, who are more dependent on state services, going without care. And we’re not just talking about elderly people; specialist services for people with learning disabilities and autistic people, including supported living, saw a sharp fall in their profit margins from 2021-23, driven by rising staff costs.
Many care providers, along with the investors who back them, have taken the safer, pragmatic option of focusing solely on the self-pay market and by and large, it seems to be working for them (although they are not immune to recruitment challenges, escalating staffing costs and upward pressure on operating costs in the round). But for many care providers with a high proportion of publicly funded clientele, the situation is becoming increasingly untenable.
Most will already be operating at close to optimum efficiency, short of compromising quality of care, and with government committed to continuing a policy of drip feeding the sector and preferring fine words to real reform, some must be asking “What more can we do?” Well, one option which some providers are yet to take up is to become more tax efficient by restructuring contracts with local authorities and Integrated Care Boards to enable recovery of VAT paid by providers on operating costs associated with providing publicly funded care services. Restructuring for VAT recovery can be complex, and some local authorities have yet to begin working with care providers on this, but in this climate of uncertainty and escalating costs, contract restructuring for VAT recovery is fast becoming more of an imperative than a ‘nice to have’.
For more than 15 years, Kieran Lynch & Co have been supporting care providers through VAT recovery. Over that period managing director Jock Waugh and his team have returned more than £100 million in net benefits to the sector.
With years of experience in VAT recovery under the Kingscrest ruling and Contract Restructuring, Kieran Lynch’s expertise is on the restructuring of welfare services to allow care providers the opportunity to improve their trading positions by being VAT efficient.
Thinking about restructuring for VAT recovery? Phone Kieran Lynch on 0114 262 2127 or contact us here.