Feature

posted 15 Dec 2005 in Volume 11 Issue 1

Direct payments: An important part of financial planning for the elderly

Although direct payments are available to a wide range of qualifying adults, financial planner Geoff King considers this knotty issue with particular reference to direct payments for the elderly.

Direct payments were first introduced for certain individuals with care needs, as a way of giving them more control over their care within their own home.

First launched in 1997, they were specifically for adults of working age. It wasn’t until 2000 that the scheme was expanded and they became available to older people. In 2001 they became accessible to parents of disabled children following the implementation of the Carers and Disabled Children Act.

Unfortunately, it appears to have been the ‘best kept secret’ of some local authorities even though they have increasing targets set by the government for the number of people who they should have on direct payments.

The figures

In 2003-04, in England, an estimated 1.7 million people received services through their local council. Of these, 1.5 million received community-based services. Approximately two million new people make contact with their local social services department every year.

A breakdown of these ‘new people’ consists of around 660,000 new clients receiving an assessment of their needs and about 470,000 who had assessments or reviews completed and already had informal carers. Yet statistics show that only 17,300 adults aged 18 or above received direct payments¹.

Types of direct payments

There are two types of direct payments – one-off payments and ongoing payments for care services:

One-off payments can be used to provide single periods of respite care, equipment and, in some cases, adaptations to property, although those are usually on a small scale. The amount payable to the individual will be stated in a contract, along with what the money can be used for. Invoices are required by social services to prove that care or equipment has been purchased;
An ongoing direct payment is cash paid by a local authority directly to the person requiring care, following a care-needs assessment. This is used to arrange alternative care provided by, or organised by, the local authority itself. A separate bank account is required to receive the direct payment. The payments are made monthly in advance from social services. This will pay to recruit and pay the carer or carers. As with one-off payments, social services will require proof that the money has been used to pay for care by way of invoices and bank statements. Under The Community Care (Direct Payments) Act 1996 the local authority may request that money be paid back if it has not been used for the intended purpose.

How does a client become eligible for direct payments?

If, following a care-needs assessment by social services, it is determined that the individual qualifies for community care, then under the regulations introduced in April 2003, they must be offered direct payments by the authority. Currently, the only stipulation is that they have to be capable of understanding and consenting to the direct payments scheme, and able to manage their own care arrangements, with or without assistance. Individuals who are already receiving services via community care may request a switch to direct payments. As a matter of interest, the elderly are the largest single group of community care service users and, yet, those least likely to receive direct payments².

In my experience, this is where the system unfortunately appears to fall down. It is not always the case that the person requiring or already receiving care, receives any advice on, or is offered, direct payments. What has to be a major concern is, in some instances, a lack of knowledge on the subject by social-services assessment staff.

The reason behind the promotion of direct payments is so that the individual needing care has more control and choice as to where they receive care, providing, in many cases, a realistic alternative to residential care. This enables the care recipient to receive quality care and maintain their independence for as long as possible within there own environment. In short, the individual is in control. They are able to choose how, when and where they receive their care and from whom. Having said that, there is one restriction as to who can be employed as a carer. Individuals are not normally able to employ anyone who currently lives with them unless it is deemed as essential for their well-being.

A major concern has to be how many care-home residents are there today who received no or insufficient information on direct payments? Many had to leave the comfortable and familiar surroundings of their own home and move reluctantly. Some were forced to do so because their family couldn’t cope and move into a residential-care environment when all the while they could have been receiving adequate care at home, through the direct payments scheme. Equally as perturbing, how many couples could still be together without going through the emotional distress of being separated as their partner has to go into residential care?

How do direct payments work?

Once a care-needs assessment has been carried out, and the individual has agreed to take direct payments, it is their responsibility to organise their own care. There are two options available for them, one is to employ their own carer or carers or, organise care through a care agency. The latter may appear to be the easier option but it defeats the object. Due to the nature of the work and low wages, care agencies tend to suffer a high turnover of staff. This may prevent the person receiving care and the carer from being able to build up the kind of relationship and trust that is such an important part of receiving care at home. Also, when using a care agency, there is no guarantee of carer continuity, irrespective of whether or not they are still employed by the agency.

Organising and employing one’s own carer is not as daunting as it first appears. It is the thought of having to deal with income tax and national-insurance contributions that can, understandably, deter someone from taking up this option. The public need to be aware that there is help available.

There are organisations that assist with advertising for, and interviewing carers. They also, from a time-sheet system, offer a payroll service, calculating wages, income tax and national-insurance contributions. Interestingly, one service provider has gone one step further – by expanding its service through the use of technology. The provider has developed a system that gives extra security and peace of mind for the care recipient. The care recipient is given an electronic box, connected through the telephone system to the provider’s head office. The carer, on arrival, inserts a card into the box, which registers their arrival. If the carer does not arrive on time or cannot gain entry, an alarm is activated at head office, fifteen minutes after the arranged arrival time. Because the carer has to reinsert the card as they leave the house this system is also used to record hours worked, and calculate wages etc. The provider also offers an additional service by being the carer’s legal employer. This obviously takes the onus and responsibility away from the person receiving care.

Justifiably, service providers charge a fee for their services. This is covered in the amount of direct payment paid to the care recipient.

How much is paid as a direct payment?

The amount will vary. It will depend, of course, on the number of hours of care that are required. This will be determined by the social worker, following the care-needs assessment. Actual levels of payment are a rather complex feature of direct payments. This is due to, as with many local-authority services, a lack of consistency between authorities. Because there is no set criteria for councils, they have a relatively free hand provided they work within the guidance of the Community Care, Services for Carers and Children’s Services (Direct Payments Guidance).

It is because of this that local authorities are allowed to set their own hourly rate. The hourly rate set by the authority, however, has to be at such a level as to enable the person to purchase a service that meets their assessed needs. This is somewhat confusing. One authority I know of pays a total hourly rate of £11.50 for someone who wants to employ his or her own carer. For some reason, though, they restrict them from paying any more than £6.50 per hour to the carer. In contrast, a neighbouring authority’s hourly rate is £13.00 per hour, with no restriction on the hourly rate for carers. For a case I dealt with through this authority the carers were paid £8.00 per hour. Obviously, it is easier to recruit reliable, quality personal carers for £8.00 per hour than £6.50. The difference between the total hourly rate the council pay and the hourly rate paid to the carer goes towards funding the carer’s sick pay, holiday pay, employers NI, charge of service provider as well as other legitimate related costs, such as the carer’s ongoing training.

Once the council has determined how many hours of care are required per week, it will then decide whether or not direct payments are a feasible option and whether they fall within the council’s budget. As a guide, local authorities will usually cap direct payments at their standard funding levels for residential-based care. It is important to be aware that this funding restriction is only related to care for the elderly. For someone below the age of 65, councils will normally fund much higher amounts to maintain the person in their own home. But in each case the account should really be needs led.

Is there anything to pay?

Under section 17 of the Health and Social Services and Social Security Adjudications Act (HASSASSA) Act 1983, social-services departments of local authorities can charge for services they provide to help maintain someone in their own home. Direct payments are means-tested much the same as other non-residential and residential services provided by local authorities. By charging service users, the government expects local authorities to raise up to nine per cent of the cost of providing non-residential social services. Under guidance issued by the Department of Health, Local Authority Circular LAC (2001) 32, Fairer Charging Policies for Home Care and Other Non-residential Social Services, amended September 2003, no one is expected to pay more than they can afford towards their care.

For a personal contribution to be calculated, a financial assessment has to be undertaken. This will include all details of expenditure, income and assets, although the home is excluded. You may not be surprised to learn that personal contribution rates vary from council to council; in fact, not all councils ask for a contribution, but they are all entitled to. Because personal contributions vary from area to area it is impossible to quote actual personal contribution rates in this article.

What does the future hold?

In April 2004, Stephen Ladyman, Parliamentary Under Secretary of State, Minister for Community, Department of Health, announced a new vision for adult social care. He asked for views on his vision and an online survey was hosted by the Social Care Institute for Excellence (SCIE) website.

Following further consultation, a Green Paper was issued in March 2005 entitled, ‘Independence, Well-being and Choice’. It is to become a White Paper in December 2005. It outlines the proposed changes as to how adult care should be provided in the community, and also recommends ways that care can be expanded in the community, for example, through technology. It also encourages the use of direct payments and questions why the number of users are so low.

The content of the paper is far too extensive to cover here, but the message is clear: it wants people to remain independent and have choice and control of how and where they receive care (the full Green Paper is available on the Department of Health website).

What will have become apparent is what appears to be a total turnaround as to where care is expected to be given and received. We seem to have come full circle, from when care was provided in the community by family members, to hospital care in elderly people’s wards, to the care-home boom. Now the present government want to go back to encouraging care in the community. Where next?

So how do direct payments fit into financial planning for the elderly?

Usually, the options available for an elderly person living alone and needing care are limited. They either have to struggle on in their own home, frequently with an inadequate amount of care provided by social services or a member of the family, or they accept they will make an inevitable move into a residential care environment.

Even though they may already have had a financial assessment for social-services care at home, it would not have taken into account the value of their home. On moving into a care home, this would change, and they would have a new assessment carried out. This time the house value would be included. If this is the main asset, as it very often is, it would usually have to be sold and, in the majority of cases, the proceeds used to pay for care.

This is where direct payments fit into financial planning (or estate protection) for the elderly. If advice had been provided on the direct payments scheme, and due to their care needs the older person qualified, they may be able to remain in their own home much longer and possibly never need residential care. Even if they had to make a personal contribution towards their care at home the main asset would still be preserved, therefore maintaining as much of the estate as possible for their beneficiaries.

I appreciate that in many cases the individual may, eventually, have to go into residential care, but if direct payments enables them to stay in their own home for an extra six months, then it is six months less care-home fees they have to pay. That could be tens of thousands in some areas.

Unfortunately, regarding the public receiving advice from financial advisers, and it forming part of the financial-advice process for the elderly, I would say very few advisers, even some of the ones calling themselves long-term care specialists, know anything about direct payments. Call me an industry cynic, but maybe it’s because providing advice on direct payments does not pay commission…

Direct payments are complex, but they have to be seen as a major way forward to providing care in an environment that most people prefer – their own home. Therefore it is up to professionals like ourselves, who have a genuine interest in the welfare and well being of the elderly, to be able to provide them with the advice they deserve.

References:

Community Care Statistics 2003-04; Referrals, Assessments and Packages of Care for Adults, Department of Health 2004
Department of Health, ‘Guide to receiving Direct Payments from your local council’

Geoff King is a financial planner with Shepherd Independent Financial Advisers Limited where he specialises in asset preservation. He can be contacted by e-mail at gk@shepherd4advice.co.uk. (Shepherd Independent Financial Advisers Limited are appointed representatives of Sesame Ltd, which is authorised and regulated by the Financial Services Authority.)