Probe into care home fees

A major inquiry into the fees charged by residential care homes is announced today. The Office of Fair Trading (OFT) will mount the investigation into the £9billion industry after complaints from the Consumers' Association.

More than half a million people live in care homes, but there have long been suggestions that some are being exploited by unscrupulous operators.

Sources revealed the OFT will look at:

But the OFT's investigation will stop short of examining one of the most controversial issues surrounding longterm residential care - the claim that private residents are forced to subsidise places for elderly people placed by local councils.

About 40 per cent of the 500,000 elderly people in care have to pay their own fees privately, often wiping out their life savings. Local authorities tend to pay less for their care-home places because they can negotiate bulk discounts.

The Consumers' Association - backed by 28 charities including Age Concern England and the Alzheimer's Society - believes that private residents end up plugging the gaps in funding left by these deals.

But the OFT investigation will not tackle the issue because the watchdog claims to have dealt with it in a previous probe, concluding that the practice of councils paying low prices for care-home places was only likely to amount to an abuse in "exceptional circumstances".

One of the key concerns over care-home charging is that relatives may often choose a home in a hurry and

once their parent has settled in, they may be reluctant to move them - but once they are committed, prices may change. The OFT is concerned that older people are particularly vulnerable to unreasonable and unexpected price rises.

A 1998 OFT report found that care-home brochures "frequently did not provide potential residents with adequate information about the level of fees and, specifically, what they included, what factors affected the fees and what charges were made for extras".

Latest figures from health analyst Laing & Buisson show that elderly people are paying an average of nearly ?24,000 a year in nursing home fees. This is five times the average mortgage repayment - and enough to repay a loan of ?310,000 over 25 years.

The NHS pays for nursing care, but the rest of the nonmedical care is means-tested by local authorities, which means most old people have to use the proceeds from the sale of their house to pay for care.

Earlier this month health ministers revealed that thousands of people wrongly forced to pay for long-term nursing care are in line for a share of ?180million compensation.

Almost 13,000 people claim they may have been wrongly denied free long-term care following a ruling that health authorities had caused " hardship and injustice" by misrepresenting the rules, based on poorly-drafted Department of Health guidance.