The Government is set to announce a £75,000 cap on the costs people pay for long-term care and an increase in the means-tested threshold from £23,250 to £123,000.
Health Secretary Jeremy Hunt is expected to announce the plans for social care reform in a statement to the House of Commons today.
Hunt is also expected to set out the reform will be part-funded by freezing the inheritance tax threshold at £325,000 for individuals and £650,000 for couples for three years from 2015.
In the Autumn Statement in December Chancellor George Osborne set out that the inheritance tax threshold would increase by 1 per cent from £325,000 to £329,000 in 2015/16.
The long-term care reform will also be funded by the state pension reforms announced last month, which will see the Government raise over £6bn through scrapping contracting out.
The introduction of the cap follows a report into the future of long-term care in July 2011, led by economist Andrew Dilnot. The Dilnot Commission called for a cap on individuals’ lifetime contributions to social care costs of between £25,000 and £50,000, with £35,000 the recommended figure.
Dilnot also suggested increasing the means-tested threshold to £100,000.
Saga director general Ros Altmann says the Government has adopted the £100,000 recommended means-test level, but chosen a higher LTC cap of £61,000 in Dilnot 2011 terms. She says the £75,000 cap and the £123,000 mean test represent what the Government’s new social care model will be based on after adjusting for inflation and once the system is introduced in 2017.
The £75,000 cap excludes so-called “hotel costs” such as food and accommodation. But the Financial Times reports the Government is set to bring in a separate annual £12,000 ceiling on hotel costs, with the Government paying if costs go above the ceiling.
Dilnot told Money Marketing in January 2012 he would be satisfied with a cap of between £50,000 and £60,000 but warned against it being set much higher.
He said: “Going significantly beyond £50,000 in 2011 prices would begin to make the cap significantly less effective and it would stop having the effects we saw as most important like risk pooling.”