Spending on older people's social care in England has fallen by half a billion pounds, according to a new report.
The charity Age UK - combining Age Concern and Help the Aged - said that, in order to maintain the same levels of service before the coalition came to power in 2010, the Government needed to increase its spending to £7.8 billion.
Councils have only budgeted £7.3 billion in the face of substantial reductions in central government funding, the report, Care In Crisis 2012, says.
Age UK said the combined impact of growing demand for services and a £341 million reduction in older people's social care budgets this financial year was equivalent to a 4.5% cut and created a £500 million shortfall.
Charity director Michelle Mitchell said: "Our new figures show a funding gap clearly exists, that it currently stands at £500 million, and that it is growing bigger all the time.
"We need urgent government action now, otherwise the gap will simply get worse.
"Behind these figures are real older people struggling to cope without the support they need, compromising their dignity and safety on a daily basis.
"Social care is not a nice to have extra - it is the support that helps older people get out of bed, feed themselves, have a wash, live a life that is more than just an existence.
"We urge all parties to engage openly and constructively in the cross-party talks on care to reach a settlement on this issue that guarantees both reform of the legal structure and, most importantly, the funding to make it work.
"The government must not shirk its responsibility to lead the essential reform of the social care system."
This funding gap comes after several years of stagnating and then decreasing social care spending.
Since 2004 the number of people aged over 85, and most likely to need care and support, has increased by more than 250,000, according to the charity.
Age UK projects that, by next year (2012/13), the government will need to spend £1 billion more than this year just to stop things getting any worse.
The charity has launched a Care In Crisis petition calling on the Government to reform the care system for older and disabled people so "that everyone gets the care they need to live with respect and dignity".
It aims to collect 100,000 signatures and will deliver them to the government ahead of the planned White Paper on the future of long-term care.
Minister for Care Services Paul Burstow said: "We agree with Age UK that the social care system is broken and needs to change. The system must become more joined up with health and more focused on helping people maintain their independence for as long as possible.
"We will be publishing our plans for overhauling the system this Spring.
"We are investing more money in social care. At the spending review, we committed an extra £7.2 billion over four years to support social care.
"Local councils are responsible for decisions on how much to spend on social care. The government has provided enough for councils to maintain the current levels of access and eligibility if they work hard and smart, and invest in new ways of working like telecare and reablement."
A spokeswoman for Saga said the company called upon the government to address the issue.
Director General Dr Ros Altmann said: "For those needing care now and their families, this crisis is of grave importance.
"The Government, recognising the current system is wholly inadequate and underfunded, has claimed it is putting billions more into care.
"However, as long as the money assigned to care is not ring-fenced, and as long as local councils are under financial pressure, it will be impossible to ensure that the money is actually spent on the care that is so urgently needed.
"This important money allocated for care must be protected against being raided to shore up day-to-day council spending.
"Policy makers need to stop denying the care crisis and confront the serious reality. We need to ensure protection of the money assigned to care and appropriate distribution of it if we are to avoid seeing any more money washed and wasted away on lesser priorities.
"We cannot expect people to plan for their care needs in future if the government is unable to get its own plans right."
Labour shadow minister for care Liz Kendall said the report showed evidence of a "growing crisis": "Despite the government's claims, services are being cut, not protected, charges for home help and residential care are increasing, and even more families are falling through the net altogether.
"We must tackle the immediate care crisis and develop a fairer and more effective system for the future.
"Labour is determined to play our part in ensuring the cross party talks, currently underway, achieve these vital goals."