Skip to main content

The role of care home fees in the public costs and distributional effects of potential reforms to care home funding for older people in England

  • Ruth Hancock (a1), Juliette Malley (a2), Raphael Wittenberg (a3), Marcello Morciano (a4), Linda Pickard (a5), Derek King (a6) and Adelina Comas-Herrera (a7)...

In England, Local Authorities (LAs) contribute to the care home fees of two-thirds of care home residents aged 65+ who pass a means test. LAs typically pay fees below those faced by residents excluded from state support. Most proposals for reform of the means test would increase the proportion of residents entitled to state support. If care homes receive the LA fee for more residents, they might increase fees for any remaining self-funders. Alternatively, the LA fee might have to rise. We use two linked simulation models to examine how alternative assumptions on post-reform fees affect projected public costs and financial gains to residents of three potential reforms to the means test. Raising the LA fee rate to maintain income per resident would increase the projected public cost of the reforms by between 22% and 72% in the base year. It would reduce the average gain to care home residents by between 8% and 12%. Raising post-reform fees for remaining self-funders or requiring pre-reform self-funders to meet the difference between the LA and self-funder fees, reduces the gains to residents by 28–37%. For one reform, residents in the highest income quintile would face losses if the self-funder fee rises.

Corresponding author
*Correspondence to: Ruth Hancock, Health Economics Group, Norwich Medical School, University of East Anglia, Norwich Research Park, Norwich NR4 7TJ, UK. Email:
Hide All
Barr N. (2010), ‘Long-term care: a suitable case for social insurance’, Social Policy and Administration, 44(4): 359374.
Brodsky J., Habib J., Hirschfeld M., Siegel B.Rockoff Y. (2003), ‘Choosing Overall LTC Strategies: a Conceptual Framework for Policy Development’, in WHO (ed.), Key Policy Issues in Long-Term Care, Geneva: World Health Organization, 245270.
Care Quality Commission (2010), ‘Statistics on Registered Providers’. Available at [28 April 2010].
Cohen J. W.Spector W. D. (1996), ‘The effect of Medicaid reimbursement on quality of care in nursing homes’, Journal of Health Economics, 15: 2348.
Colombo F., Llena-Nozai A., Mercier J.Frits T. (2011), Help Wanted? Providing and Paying for Long-Term Care, OECD: Health Policy Studies, OECD Publishing.
Comas-Herrera A., Wittenberg R.Pickard L. (2010), ‘The long road to universalism? Recent developments in the Financing of long-term care in England’, Social Policy and Administration, 44(4): 375391.
Comas-Herrera A., Wittenberg R.Pickard L. M. (2011a), ‘From Commission to Commission: Financing Long-Term Care in England’, in C. Courbage and J. Costa-Font (eds), Financing Long-Term Care in Europe: Institutions, markets and models, Basingstoke: Palgrave Macmillan.
Comas-Herrera A., Butterfield R., Fernandez J-L., Wittenberg R.Wiener J. M. (2011b), ‘Barriers and Opportunities for Private Long-Term Care Insurance in England: What Can We Learn from Other Countries?’, in J. Costa-Font and A. McGuire (eds), Edward Elgar Handbook of Health Policy, Cheltenham: Edward Elgar.
Commission on Funding Care and Support (CFCS) (2011), ‘Fairer Care Funding: the Report of the Commission on Funding Care and Support’. Available at [9 September 2011].
Community Care (2011), ‘One-fifth of social care providers expect to close next year’, 16 February, -next- [17 December 2011].
Department of Health (2003), ‘Fairer Charging Policies for Home Care and other Non-residential Social Services: guidance for Councils with Social Services Responsibilities’. Available at: [2 January 2011].
Department of Health (2010), ‘Charging for Residential Accommodation Guide’. Available at [1 January 2011].
Department for Work and Pensions (2010), ‘The Family Resources Survey United Kingdom, 2008–09’. Available at [9 September 2011].
Ettner S. L. (1993), ‘Do elderly Medicaid patients experience reduced access to nursing home care?’, Journal of Health Economics, 11: 259280.
Fernández J.-L., Forder J., Truckeschitz B., Rokosova M.McDaid D. (2009), How Can European States Design Efficient, Equitable and Sustainable Funding Systems for Long-term Care for Older People? Policy Brief 11, Copenhagen: World Health Organization, Europe.
Forder J., Fernandez J-L. (2011), ‘Length of Stay in Care Homes’, PSSRU discussion paper 2969, London: LSE.
Grabowski D. C. (2007), ‘Medicare and Medicaid: conflicting incentives for long-term care’, Millbank Quarterly, 85(4): 579610.
Hagenaars A., de Vos K.Zaidi M. A. (1994), Poverty Statistics in the Late 1980s: Research Based on Micro-data, Luxembourg: Office for Official Publications of the European Communities.
Hancock R., Hviid M. (2010), ‘Buyer power and price discrimination: the case of the UK care homes market’, CCP Working Paper 10–17, Norwich: University of East Anglia, Centre for Competition Policy.
Hancock R., Pudney S. (2010), ‘The distributional impact of reforms to disability benefits for older people in the UK’ ISER working paper 2010–35, Colchester: University of Essex, Institute for Social and Economic Research.
Hancock R., Comas-Herrera A., Wittenberg R.Pickard L. (2003), ‘Who will pay for long-term care in the UK? Projections linking macro- and micro-simulation models’, Fiscal Studies, 24(4): 387426.
Hancock R., Wittenberg R., Pickard L., Comas-Herrera A., Juarez-Garcia A., King D., Malley J. (2007a), ‘Paying for Long-term Care for Older People in the UK: Modelling the Costs and Distributional Effects of a Range of Options’, PSSRU Discussion Paper 2336/2, London: LSE.
Hancock R., Juarez-Garcia A., Comas-Herrera A., King D., Malley J., Pickard L.Wittenberg R. (2007b), ‘Winners and loser: assessing the distributional effects of long-term care funding regimes’, Social Policy and Society, 6(3): 379395.
Hancock R., Malley J., King D., Pickard L., Comas-Herrera A., Morciano M. (2010), ‘Paying for Long-Term Care: Potential Reforms to Funding Long-Term Care’, Memorandum by the MAP2030 Research Group (SC 55). In House of Commons Health Committee Report on Social Care. Third Report of Session 2009–10, Volume 2 (HC 22-2), London: the Stationery Office.
Harrington Meyer M. (2001), ‘Medicaid reimbursement rates and access to nursing homes: implications for gender, race and marital status’, Research on Aging, 23(5): 532551.
Her Majesty's Government (2009), Shaping the Future of Care Together, CM 7673. London: The Stationery Office.
Her Majesty's Government (2010), Building the National Care Service, CM784. London: The Stationery Office.
Her Majesty's Treasury (2008), Long-term public finance report: an analysis of fiscal sustainability, Annex A: illustrative long-term projections. London: TSO.
Keen J.Bell D. (2009), Identifying a Fairer System for Funding Adult Social Care, York: Joseph Rowntree Foundation.
King D., Malley J., Darton R., Comas-Herrera A. (2010), ‘Report for BUPA’. PSSRU Discussion Paper 2624, London: LSE.
Laing and Buisson (2011), Care of Elderly People, UK Market Survey 2010–11, 23rd edition, London: Laing and Buisson.
Machin S.Wilson J. (2004), ‘Minimum wages in a low-wage labour market: care homes in the UK’, The Economic Journal, 114: C102C109.
Mayhew L., Karlsson M.Rickayzen B. (2010), ‘The role of private finance in paying for long-term care’, Economic Journal, 120: F478F504.
Malley J., Hancock R., Murphy M., Adams J., Wittenberg R., Comas-Herrera A., Curry C., King D., James S., Morciano M.Pickard L (2011), ‘The effect of lengthening life expectancy on pension and long-term care expenditure in England, 2007 to 2032’, Health Statistics Quarterly, 52(Winter): 129.
Millers E. A., Mor V., Grabowski D. C.Gozalo P. L. (2009), ‘The devil's in the details: trading policy goals for complexity in Medicaid nursing home reimbursement’, Journal of Health Politics, Policy and Law, 34(1): 93135.
Netten A., Bebbington A., Darton R., Forder J., Miles K. (1998), ‘1996 Survey of Care Homes for Elderly People’, Final Report, PSSRU discussion paper 1423/2.
Netten A., Darton R., Curtis L. (2001), ‘Self-funded Admissions to Care Homes’. Department of Work and Pensions Research Report No. 159, Leeds: Corporate Document Services.
Netten A., Williams J.Darton R. (2005), ‘Care home closures in England: causes and implications’, Ageing and Society, 25: 319338.
Office of Fair Trading (2005), ‘Care Homes for Older People in the UK: a market study’. Available at [28 April 2010].
PricewaterhouseCoopers (2011), ‘Understanding Commissioners’ Behaviours: Commissioning in the Public Sector’, Report by Price Waterhouse Coopers for the Office of Fair Trading,
Rothgang H. (2002), ‘Long-Term Care in Germany: Projections on Public Long-Term Care Insurance Financing’, in H. Conrad and R. Lützeler (eds), Aging and Social Policy. A German–Japanese Comparison, Munich: Iudicium, 251275.
Royal Commission on Long Term Care (1999), With Respect to Old Age. Cm 4192. London: The Stationery Office.
Stapleton D., Protik A., Stone C. (2008), ‘Review of International Evidence on the Cost of Disability’, Department for Work and Pensions (DWP). Retrieved from [13 February 2012].
Scottish Government (2009), Free Personal and Nursing Care, Scotland, 2007–8. Edinburgh: Scottish Government Statistics. Available at [June 2011].
Southern Cross Health Care (2011), ‘Southern Cross Health Care Group PLC: Interim Results’. Available at: [July 2011].
Troyer J. L. (2002), ‘Cross-subsidization in nursing homes: explaining rate differentials among payer types’, Southern Economic Journal, 68(4): 750773.
Wanless D. (2006), Securing Good Care for Older People: Taking a Long-Term View, London: King's Fund.
Wittenberg R., Hancock R., Comas-Herrera A.Pickard L. (2002), ‘Demand for Long-Term Care in the UK: Projections of Long-Term Care for Older People in 2051’, in R. Brooks, S. Regan and P. Robinson (eds), A New Contract for Retirement: Modelling Policy Options to 2050, London: Institute for Public Policy Research.
Wittenberg R., Comas-Herrera A., King D., Malley J., Pickard L., Darton R. (2006), ‘Future Demand for Long-Term Care, 2002 to 2041: Projections of Demand for Long-Term Care for Older People in England’, PSSRU Discussion Paper 2330. London: LSE.
Wittenberg R., Pickard L., Malley J., King D., Comas-Herrera A., Darton R. (2008), ‘Future demand for social care, 2005 to 2041: projections of demand for social care for older people in England’, Report to the Strategy Unit (Cabinet Office) and the Department of Health. PSSRU Discussion Paper 2514. London: LSE.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Health Economics, Policy and Law
  • ISSN: 1744-1331
  • EISSN: 1744-134X
  • URL: /core/journals/health-economics-policy-and-law
Please enter your name
Please enter a valid email address
Who would you like to send this to? *


Altmetric attention score

Full text views

Total number of HTML views: 3
Total number of PDF views: 24 *
Loading metrics...

Abstract views

Total abstract views: 219 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 21st January 2018. This data will be updated every 24 hours.