Health officials have stopped sending patients to the homes involved after discovering they were demanding money from patients even though their full costs should have been covered by the National Health Service.

It is understood five homes in Leeds have been charging the top-ups and are now facing the threat of action by Government inspectors.

Last night the charging – uncovered after inquiries by the Liberal Democrats – was branded "nothing short of scandalous" as an MP said it demonstrated the urgent need to overhaul the entire care system.

Greg Mulholland, MP for Leeds North West and the Liberal Democrat spokesman on older people, said: "Elderly residents in nursing homes are often among the most vulnerable people in our society. The fact that nursing homes in the city have been wrongly charging some residents top-up fees is nothing short of scandalous.

"Nursing home residents expect to be treated professionally and with dignity, as do their families who entrust them to the care of these professionals."

Leeds Primary Care Trust said the charging of top-up fees had come to light after new guidelines were issued by the Government last October, prompting the trust to write to the city's 60 nursing homes asking them to own up if they were charging. It is understood 38 patients have been affected.

A trust spokesman said: "Where this is the case we are contacting the patients concerned, and their families, to reimburse any extra fees they have paid. This will be backdated to October 1, 2007, when the new guidance was issued.

"Where top-up fees have been charged, we are working with the homes concerned to agree a future contractual position."

A spokeswoman said the trust had stopped sending new patients to the homes concerned – which have not been named – until new contracts are drawn up.

Although care homes can legally charge patients top-up fees even if their place is funded by the local authority, nursing homes – which have round-the- clock nursing facilities and generally take patients with more serious health complaints – are not allowed to do the same when places are funded by the NHS, unless for services totally unconnected to health care.

Charities and care experts admit the charging system is confusing, and it is unclear whether the homes involved knew they were acting wrongly or were simply not aware of the regulations.

Last night the Commission for Social Care Inspection said if regulations had been breached it could take any action against the homes involved.

The policy officer for Help the Aged, Lizzie McLellan, said: "Our concern is probably it's happening more than we think it is. The rules should be clarified, but also if people are aware how the charging system works they know to challenge it."

The managing director of NHFA Care Fees Advice, Philip Spiers, added: "The whole aim of continuing care is they should be fully funding it. I'm pleased the trust has taken the action."

The Department of Health said: "They should not be charging any extra fees."