New report says changes to fees may lead to an increase in the cost of LTC insurance
The latest review of the long term care (LTC) market from healthcare analyst Laing & Buisson reports a number of significant changes, which could lead to an increase in the cost of LTC insurance.
The review found that the number of private care home closures has increased in tandem with moves by local authorities and NHS Trusts to reduce their provision, with capacity declining by 12,600 to 535,900.
At the same time, occupancy rates in private care homes increased by between 2%-3% with nursing home occupancy averaging around 90%. This has sparked concerns that the constriction of available places, and the tight budgets imposed by local authorities on homes with State-funded occupants, could force up LTC prices.
The report said: 'Many local authorities are now under pressure to revise their baseline fee rates. There is a growing number of 'hotspots' where acute capacity shortages are forcing fees upwards. Private payers have been less resistant to cost-driven fee increases. As a result, the gap between State-paid and privately-paid fees is believed to be widening and the degree of cross subsidation of State-funded residents by privately paying residents has been increasing.'
In addition, the survey notes the risk of market turbulence from the introduction of 'free nursing care' from October 2001, which could both stimulate demand and encourage care homes to increase fees.
Sandy Johnstone, retirement and protection strategy manager at Norwich Union, said: 'The impact of the bill on LTC policies could be two-fold. On the downside, if the public acquires the misconception that there is no need to make provision for their future care they may not take out LTC, which would be a mistake. The money people receive will still be a small part of what the individual pays if they are a self-funder. However, if the message is explained properly, LTC planning could expand to quite a degree. And if costs do rise, most people who buy LTC do so on an index price basis, so a small increase may not have that much effect.'
