New Care Act 2014 – Cap on Care Costs
The Care Act 2014 is new legislation which comes into force from April 2015. The new Act makes significant changes to the laws governing Local Authorities obligations to provide care for the disabled, elderly and ill adults and their carers, through Social Services.
It is important to note that none of the new changes will have any effect on the way in which eligibility for NHS Continuing Healthcare Funding is assessed. That remains the same. If your relative is eligible for NHS Continuing Healthcare Funding, all of their care costs will continue to be paid by the NHS, including the new so called “daily living costs”.
There are however significant changes being introduced from April 2016 in relation to the Means Testing rules formerly set out in the Charging for Residential Accommodation Guide (April 2012). These rules will be replaced by the Care and Support (Charging and Assessment of Resources) Regulations and guidance.
Essentially there are two main financial changes. Firstly, the Capital limits are being increased. Whereas under the current rules, if your relative has more than £23,250 in Capital they have to pay the costs of their care in full until their Capital falls below that threshold, from April 2016 it is proposed that the Capital threshold is increased to £118,000 (if a house is included in the calculation) and £27,000 if there is no house included in the calculation. The lower limit will also increase from £14,250 to £17,000.
The Tariff Rules will continue to apply in the same way, which means that if your relative has between £17,000 and £118,000 in Capital, they will be required to contribute £1 per week to the cost of their care for every £250 in Capital they have between the limits. For example, if your relative has £117,000 in Capital, they would be required to contribute £400 a week to their care costs (£100,000 difference between their Capital of £117,000 and the lower threshold of £17,000, divided by £250). In this example that means that your relative would still contribute £20,800 to the costs of their care annually. However, this contribution would in part be taken into consideration when calculating the second important change being introduced, which is a Cap on Care Costs.
Cap on Care Costs
Under the new Act, it is proposed that from April 2016, there will be a maximum cap on the costs any individual pays towards their care costs (subject of course to them being assessed as having Social Care needs which need to be met in the first place). The proposed cap on care costs is £72,000.
However, the £72,000 cap will only be reached in relation to Social Care costs, after the deduction of Daily Living Costs. These are essential the costs of food and accommodation, sometimes called the “bed and breakfast costs” and are proposed to be set at £12,000 a year.
So for example, if your relative is paying £25,000 a year for their Care, only £13,000 a year would count towards the cap, because £12,000 a year would be deducted for Daily Living Costs. It would therefore be almost 5 ½ years before your relative reached the £72,000 cap, at £13,000 a year. Even when the cap was reached, your relative would still have to pay £12,000 a year towards their Daily Living Costs (as long as their Capital was still above the threshold limits), but they would be saving £13,000 a year after the cap was reached. As you can see, in this example, your relative would actually have paid £137,500 in Care Costs, at £25,000 a year over 5 ½ years, before they reached the £72,000 cap.
However, this is still an improvement on the current situation where there is no cap in place.
It should be noted that all the figures used to illustrate the effect of the proposed changes are based on current information (as at January 2015) and could be subject to further change.
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