Independence pays: a cost and resource analysis of direct payments in two local authorities

Abstract

Although there is an increasing amount of literature on direct payments (DP), to date there have been few studies which have examined in any detail the costs and resources associated with them. This paper presents findings from a two year study conducted in two Welsh local authorities that jointly fund an Independent Living Support (ILS) scheme. The main study was not designed to provide definitive cost comparisons with conventional services, however, cost and resource implications of DP were considered and an analysis to determine comparative costs between DP and traditional services was undertaken. The study notes the difficulty in identifying the true cost of DP and reasonable comparators with traditional services. A set of four case studies are presented comparing actual costs of DP and in‐house and independent sector services in the two local authorities studied. The comparison of costs and resources, which did not include significant costs for traditional local authority services but included the cost of the DP support scheme, found that DP was cheaper than traditional in‐house service provision and relatively cost neutral when compared with independent sector provision. User satisfaction, however, was significantly greater with DP than traditional service delivery methods. The paper also examines factors which can potentially influence the cost of DP. The study suggests that DP represent a substantial improvement over traditional arrangements from a cost–benefit perspective. There is strong evidence to suggest that greater ‘opportunity cost’ savings can be anticipated when DP schemes become more fully integrated into policy, practice and procedures.

Keywords:

• direct payments
• community care
• disability
• cost

Acknowledgements

The authors would like to thank the Wales Office of Research and Development in Health and Social Care, the participating authorities, organizations and, most of all, the users who supported this project, and Patrick McDonagh for his editorial support.

Notes

1. One couple (C3) were interviewed together. Both are DP users.

2. LA2 did not provide in‐house care.

3. Cost associated with ILS obtained from senior ILS personnel.

4. Agency rates at the time of the study ranged from £6.00–£8.00 per hour in LA1 and £6.50–£9.50 per hour in LA2. The extra costs of evening and weekend enhancements for LA2 were estimated at daytime rate +7.4%, in line with the DP rate for evenings and weekends. For LA1 users receiving assistance at evenings and weekends the costs are likely to be lower than agency equivalents, due to the enhanced rates charged by agencies and not incorporated in the following cost estimates.

5. Some of these users will also be receiving ILF funding

6. The sources of LA rates were LA officers.

7. User costs and pay rates were obtained from the DP users.

8. Since conducting the original study a follow‐up on rates in LA1 was done for 2005, which were: DP rate of £8.50; independent sector cost range of £8.77 to £14.48, with the median being £11.48; in‐house home care of approximately £20.00. These figures suggest that the cost benefits of DP over IS and in‐house provision have increased since the original study, when the differential between DP and the lowest rate IS in example 1, the scenario where DP was most costly, had reduced from £2283 to £961.78.