Making Ends Meet

Understanding cost and supply

Overview

It is important for local authorities to know the unit costs of services and to keep track of how those costs are made up and what causes them to change. This will help you to be sure you are paying the right price for the right services and to plan ahead for your expenditure. Separate modules have been developed in the Making Ends Meet toolkit for Finance Management and Commissioning and this issue is tackled in much greater detail in these modules. You need to be aware that specialist independent sector services can charge a very high price if they have near monopoly position in the market. To help you tackle this look at the scenario in the commissioning module "The specialist independent sector services that you use charge very high prices because of their near-monopoly position in the market."

Unit costs

Estimating the costs of in-house services provided to individual users have proved difficult for some councils. This is truer of home care than residential care. Despite guidance from CIPFA, there are several problems:

there is uncertainty about how to treat and apportion commissioning, care management and other overhead costs to in-house services.
cost and finance information are often held on separate databases from user and activity data, and even if cost data are held on a person-basis, it can be very difficult to relate user to activity to cost data on a person-basis.
in some councils the costs of in-house services are recorded on a service- rather than a person-basis, making ready linkages between user, activity and cost data impossible.
in calculating costs some councils they use "average" or "notional" costs, which do not reflect the real costs of providing care to individual users.
in other councils, where in-house services are not charged for, it is apparently problematic to keep track of services delivered and their associated costs.

Self funders

In managing the market and budgets it is important for authorities to understand about people who self fund their placements in care homes. Annual surveys on all residents, state- or self-funded, in residential care and nursing homes are a good way of keeping track of this situation and being able to estimate how quickly individual self-funders will approach the council for support, and how much that will cost the authority.

If an authority is to minimise cost increases precipitated by self funders it needs to

regularly monitor the ratio between self funders and council funded. This shows the degree of subsidy in any one home. If this balance shifts it will affect council expenditure and provider profit.
collect as much information as it can about the number of self funders likely to move to council funding
monitor the implications and numbers of those payments deferred awaiting the proceeds of a house sale
provide care management and advice to those who have the potential to self fund to help them remain in the community and make them aware of what will happen when their resources run out
provide information about what the local authority is prepared to pay for when self funding ends

Top ups

There is an issue on "ceilings" for placements in the independent sector and about setting a quality standard which the authority recognises and will pay for. Anything beyond this then becomes a "top-up"

Recent Joint Reviews have found that some authorities are using top ups as an inappropriate way of managing costs. Individuals are sometimes expected to make up shortfalls in LA funding to meet the cost of their residential care, some by as much as 50%. This is legitimate but poor practice and should be avoided

There is currently no guidance on how this should be managed by local authorities in relation to residential care. However the Department of Health in its policy guidance document on Carers and Disabled Children Act 2000 - Vouchers for Short term breaks states the following on Topping-up

"In some cases the holder of a voucher may wish to receive extra services additional to, or more expensive than, those which the voucher will meet. The regulations allow a third party to top-up the value of the vouchers if they wish the voucher holder to receive additional services from a provider. The third party is defined as someone other than the service user, the parent-carer or the council."

For example, for holders of a time voucher, this might be if they wanted the cared-for person to have a higher standard of room than an authority would normally purchase in a residential facility, or possibly because a money voucher was nearly but not quite exhausted. Topping-up is not possible where the provider is a local authority. Top-up payments may be made direct to the provider.