Vulnerable old and disabled people will see cuts to vital care services and higher charges, council chiefs say.
The annual budget survey by the Association of Directors of Adult Social Services shows councils expect to spend £21.4bn this year in England.
While this is a rise from £20.8bn last year, the cost of inflation combined with growing demand means this will not be enough, ADASS said.
The warning comes as ministers prepare to unveil plans to reform the system.
A green paper on social care is expected to be published in the coming months.
Vulnerable facing ‘bleak future’
ADASS said it was desperately needed given the pressures on councils – local government has seen cuts in the amount of funding it gets from central government over the past decade.
It surveyed all 152 councils in England.
Three-quarters said they would be cutting the amount of care they provided, while nearly half said they would be introducing higher charges – people are expected to contribute to the cost of care where they can.
It means more people are likely to be pushed into the private market.
Currently only a fifth of those needing care get help from councils.
The ADASS report showed that councils were also concerned about the impact on the care firms they pay to provide these services.
Nearly one in three had seen home care services close or cease trading in the past six months, while slightly more had seen residential and nursing homes go under.
Analysis: By Alison Holt, social affairs correspondent
The stresses and the strains faced by a care system under pressure usually play out quietly in the lives of people who are older and disabled – but the consequences can be no less devastating.
If, as this survey of local authority directors of adult care suggests, councils end up supporting fewer people, it will mean only those with the very highest needs get help.
For many that will mean they have to reach a crisis, whether it is a fall which takes them to hospital or the illness of a husband and wife unable to cope any more with caring for their partner. It is hard to underestimate the human cost of that.
The government has acknowledged the pressures on the system and promised reform – something other governments have failed to do.
Most experts agree the biggest challenge will be sorting out the money needed to pay for care – with the NHS also under pressure, the fear is that the less visible crisis in social care will be overlooked again.
ADASS president Glen Garrod said the findings were of “serious concern” and described the care market as “fragile”.
Caroline Abrahams, of Age UK, said it was a “disgrace” that there were people who were not getting the support they needed for daily essentials like “getting dressed, going to the toilet, taking their medication or preparing their food”.
“Unless policy makers are willing to invest in care, hundreds of thousands of older people face a bleak future, living without their needs being met,” she added.
A Department of Health and Social Care spokeswoman said plans would be set out soon to create a “diverse, vibrant and stable market”.
She also pointed out that extra money had been found in recent years to relieve some of the pressures, but conceded the system was “under pressure”.