The importance of Andrew Dilnot’s proposals for long term care funding should not be underestimated.
For the last 20 years all Governments have failed to grasp this particularly thorny and controversial policy area, being content to leave resolution to a future administration.
The demographic window in which a clear decision about future social care health funding can be made is fast closing and underscores why Dilnot’s proposals are so important.
Recent figures from the Office of National Statistics show that in 2010, over 16 per cent (8.6 million) of our population were aged over 65. But by 2030 the number of over 65s are expected to increase by 50 per cent, with the most significant increase among over 70s – the age group most likely to need care.
Another way of looking at this issue, is that there are now around 400,000 elderly people in residential care. Indepdent healthcare consultancy Laing and Buisson predicts this will increase to 750,000 in 2031 and more than triple in 2081 to 1.5m.
Direct taxation (e.g. using those of working age to pay for the needs of those no longer working) will become less viable as the rapid increase of the over 70s sector will be matched by a significant and sharp decline among people of working age –from today’s ratio of 5.3 people working for every person aged 70 down to just 3.7.
The first question must be who will be the winners and who will be the losers.
From my perspective the real winners will be those people who have assets (including property) in England up to £100,000, who will now fall below the threshold when they are required to fund their own care. The previous threshold of £23,250 was, in my opinion, far too low.
Also those people who would otherwise exceeded the proposed cap of £35,000 on their social care who now find that these costs are met by the Government. As our average policyholder lives for four years and 12 per cent live for 8 years or more, we expect our policyholders to benefit from this.
Despite these changes the average life expectancy in care is just over four years and most people will continue to fund their social care fees.
Also we must not forget that Dilnot is not intending that the cap for social care should cover ‘hotel costs’ e.g. the costs of board and lodging.
These are typically two thirds of the cost of care. The cost of a typical quality care home in the South of England is nearly £50,000. To cover these ‘hotel’ costs would incentivize people to select the most expensive care homes, trigger care home fees inflation and provide a subsidy to high end quality care homes. At the same time it would exhaust the Chancellor’s resources rapidy.
It can be argued that the losers will be Government which has to find an extra £2bn to fund these proposals, although it can be argued that these costs will be saved from the NHS budget which has an obvious interface with social care.
Dilnot’s belief that his proposals will amount to no more than one 400th extra of GDP may not find a sympathetic response from the Chancellor who is increasingly dominant in the management of Government policy and who is wrestling with a fragile economy.
What are the practical considerations resulting from these proposals?
People going into care now must not delay taking appropriate financial advice.
Failure to do so – and in turn failure to purchase an appropriate financial product to meet the costs of care – may leave them exposed to potentially losing significant amounts of capital and income.
In 2009, of the 53,000 self payers who entered residential care only 7,000 received appropriate financial advice.
Currently 25 per cent of self-funders run out of money and fall back on the state. This is traumatic and distressing for an older person, who in extreme cases are forced to move home.
At the earliest many commentators do not think that Government will introduce legislation before 2014.
Also we must remember that proposals will inevitably undergo reform following negotiation with Government and the risk that they may well be lost in the long grass – given reports in the papers from a cabinet minster that they will be ‘strangled at birth’ by the Chancellor.
This would be a tragedy as we believe that Dilnot’s proposals are extremely well argued and measured. More importantly we believe there is now an appetite among the public and generally among politicians to agree a settlement, which we have not seen previously.
Chris Horlick is managing director of care at Partnership