Fair cost of care and market sustainability

As part of the People at the Heart of Care: adult social care reform white paper, local authorities were required to complete a Fair Cost of Care exercise to arrive at a shared understanding with providers of the local cost of providing care.

Our Market Sustainability Plan sets out our assessment of the local care market and our plan to increase the lowest fee rates.

Our Fair Cost of Care reports for care at home and residential care explain how the cost of care exercises were carried out and the calculated lower quartile, median and upper quartile costs in the local area for the following care categories:

  • 65+ care homes
    • standard residential care
    • residential care for enhanced needs
    • standard nursing care
    • nursing care for enhanced needs
  • 18+ domiciliary care

The Department of Health and Social Care (DHSC) consider the median cost of care across the market to be the 'Fair Cost' and has provided additional funding for 2022/23 and 2023/24 to move towards this fair cost where local authorities are paying below this rate.

We will give due regard to the outcomes and data obtained from the Fair Cost of Care exercise for future competitive tender processes and fee setting. The outcome of the cost of care exercise is not intended to be a replacement for the fee-setting element of local authority commissioning processes or individual contract negotiation. The Fair Cost of Care guidance states that: ‘as many local authorities move towards paying the fair cost of care, it is expected that actual fee rates paid may differ due to such factors as rurality, personalisation of care, quality of provision and wider market circumstances.

Please note, the Fair Cost of Care exercise is separate from the local authority’s fee uplift process.

Common questions about the Fair Cost of Care exercise are in this FAQ document created jointly by Care and Health Improvement Programme (CHIP - jointly delivered through ADASS and LGA) and the Care Provider Alliance (CPA), in consultation with DHSC. 

Market Sustainability and Fair Cost of Care Fund

The government guidance states that, in total, the fund amounts to £1.36 billion. In 2022 to 2023, £162 million will be allocated. A further £600 million will be made available in each of 2023 to 2024 and 2024 to 2025.

The 2022 to 2023 allocation has been prioritised for care at home, aligned to the national policy directive of supporting people to live independently at home for as long as possible and to help address the particular local workforce challenges and enable timely hospital discharges.

The Local Government Finance Settlement for 2023 to 2024 confirmed the funding allocation from the Market Sustainability and Improvement Funding Grant which will continue to be prioritised for care at home rates and will also include fee increases for standard fee rates for residential care.