Social Care is shaken up
Gordon Brown sets his sights on the social care market
The social care market is worth around £15bn per annum, of which £9.7bn is spent on caring for the physically disabled or the elderly. Gordon Brown has pledged to reform the whole social care system. The main focus needs to be on the elderly, where a funding crisis looms.
Over the next two decades, as baby boomers get greyer and everyone lives longer, the number of over 85 year olds is forecast to double and the proportion of the population over 65 will reach a quarter of the total.
This is going to cause a shake up in both funding and provision. The press has focused on the implications for funding, and it looks like the government is thinking about some quite radical ideas. We commend them.
In this article we are going to focus on the market for provision and make some Credo predictions.
The Adult Social Care Market today
Of the £9.7bn spent on caring for the elderly and physically disabled, about £5.7bn is spent on residential care (in a care home) and £4.0bn is spent on non-residential provision (mostly in your own home). See the chart below.
Today, the residential care market is mostly outsourced and providers have been through two decades of consolidation and efficiency savings. We predict that, aside from steady growth in the number of beds, this market will remain stable and relatively low margin.
The real shake up is going to happen in non-residential care.
Changes to the market for non-residential care – Credo’s five predictions
The December 2007 White Paper, “Putting People First. A shared vision and commitment to the transformation of Adult Social Care”, and the consultation announced on 14th May, focus on “choice, dignity and independence”. This means that people will have a say in how their social care is provided through individual budgets, and a greater scope for care in their own homes.
Against this background, here are our 5 predictions:
- Any extra funding from the public purse will go into the non-residential care market. This will drag along a material portion of privately-funded expenditure as well. Why do we say this? In our view social policy, an improvement in provision and an increasingly independent ageing population will mean more people will want to be cared for in their own home. Interestingly, one segment that may be an exception to this is the relatively well off, where American style ‘holiday campuses’ for the elderly are proving increasingly popular in the UK.
- The market will face increased regulation, monitoring and protection. We are already beginning to see this in markets such Foster Care. Regulation drives up cost and drives out ‘Mom and Pop’ providers. This in turn will accelerate the next two predictions.
- Outsourcing will increase significantly. Compared to residential care the market is very immature in terms of outsourcing. The government will push this agenda to improve value for money and service. The cost of regulation and consequences of mistakes will deter many Local Authorities from in-house provision
- The supply side will consolidate rapidly, as has happened in the residential market. Today the market is highly fragmented with over 25,000 suppliers and the top 10 players accounting for less than 25% of the market. The cost of regulation, the increasing complexity and cost of bidding, and a requirement to invest in technology and service design will transform the providers.
- The market will start to innovate. Unlike the residential market, technology should play a key role in reducing the cost of provision. This is likely to include monitoring and communication technologies, home management technologies and even interactive forms of entertainment and education piped to the home.
