Government plans to introduce a £75,000 cap on long-term care costs will be partly funded by increased employer National Insurance contributions as a result of the abolition of contracting-out.
On Monday, health secretary Jeremy Hunt told Parliament the new cap, which does not include accommodation or food costs, will be introduced in April 2017.
The asset threshold above which people do not receive means-tested help from the Government will also be increased from £23,250 to £123,000.
The Department of Health says the reforms – which will cost the Treasury an extra £1bn a year – will be partly funded by extending the freeze on the inheritance tax threshold at £325,000, or up to £650,000 for couples, by three years from 2015/16.
The rest of the money will come from the extra 3.4 per cent public and private sector employer NI contributions which will flow to the Treasury when contracting-out is scrapped.
Hunt said the proposals will “end unfairness” in the care system and encourage a long-term care insurance market to develop.