Many people, quite naturally, want to make provision for their old age and not be a burden on their families.
If their health deteriorates, most hope to remain independent in their own homes for as long as possible. If their condition is more serious and they have to go into a residential or a nursing home, many want to be able to fund the fees without running down their financial assets or, even worse, selling their own home.
Long-term care insurance came about so people could meet these aspirations by insuring against the risks associated with the cost of care.
Recent developments, though, have confused the picture. You may have read about plans to introduce free nursing care in the UK from October and in Scotland proposals will be put forward by the end of August to introduce free personal care there.
This has given rise to the fiction that “free care” for the elderly is just around the corner, certainly in Scotland, so why not in the rest of the UK? It is understandable that people may get this impression but it is not true.
At this time you can play a key role by giving your clients the facts so that they can separate myth from reality.
Understanding the facts will help your clients make their own judgment about how much they want to rely on the state and how much they wish to make their own provision for care costs – which are far from free.
Below are a number of key questions which your clients may be asking you.
What long-term care costs will I currently have to pay?
The cost of care is made up of three elements:
The cost of nursing care – tasks that should be undertaken, supervised or delegated by a registered nurse such as changing a dressing.
The cost of personal care – tasks that do not have to involve a registered nurse but can be undertaken by a care assistant, such as washing, bathing and skin care.
The cost of accommodation if you cannot be cared for in your own home or the cost of help with domiciliary tasks in your own home.
Nursing care is currently free, unless it is provided in a nursing home. All other costs will usually have to be met from your own resources.
But didn't a royal commission recommend that the state should fund the costs of both nursing and personal care?
The Government waited almost a year and a half before reacting to the royal commission's recommendations. When it did respond last summer, it firmly rejected the idea of paying for personal care. To change its mind on this, the Government would have to do a major U-turn.
Still, the Government did agree to pay for nursing care, didn't it?
It said it would introduce free nursing care in a nursing home by October this year but we are still waiting for clarification about how exactly “nursing care” will be defined. It may well exclude care for those with Alzheimer's, for example.
What about the position for people who need care in their own homes? Will that be free?
Nursing care provided by the NHS in a person's own home is already free.
A consultation paper about charging for personal and domiciliary care services, issued early in 2001, pointed out that policies differ from one local authority to another.
In some authorities, these care services are free at the moment but in others people have to pay for them. The paper proposes that only the least well-off should receive these services free after an appropriate means test.
The state will foot the bill for personal care in Scotland won't it?
Not necessarily. The Scottish Executive has set up a working party to draw up proposals to offer free nursing and personal care but it is unclear what form they will take – or what will result from them.
Some estimates put the additional cost of the free personal care proposals in Scotland at £110m a year. Even if free nursing and personal care is introduced in Scotland, you will still have to pay accommodation costs if you cannot be cared for in your own home, unless you qualify for help from your local authority after a means test.
But with the main political parties behind it, surely the money will be found?
Some politicians think not. The Scottish Labour Party had originally planned a seven-month review on personal care but it was forced into these proposals by its coalition partners, the LibDems, who threatened to join the Opposition parties in forcing this commitment through.
John Swinney, the leader of the Scottish Nationalists, is sceptical. The day after the vote in late January, he was quoted in The Times as saying: “Labour will draw up proposals certainly, but these could be too expensive, unworkable – you name it, they'll find a way out of it.”
Assuming that free personal care is eventually introduced in Scotland, won't that mean it will be introduced in the rest of the UK too?
Tony Blair told Parliament in February that to do so would cost an additional £1.2bn a year and it would be a misuse of precious resources. He said the money would be better spent elsewhere within the NHS.
How much can longterm care cost?
The average cost of a nursing home in the UK is £19,604 a year but can be up to £25,000. Even in Scotland, the state does not intend to pick up the bill for the cost of accommodation.
Typically, this represents over half the total cost of a nursing home. For someone in a residential care home, where there is unlikely to be any nursing care, the cost of accommodation is a much higher proportion of the total bill.
So long-term care insurance still has a part to play?
The Government has strongly indicated so. Early last year it set up a Treasury working party to take things forward. This has resulted in plans to introduce benchmarked Government-approved standards for long-term care insurance products. The Government has now issued a consultation paper calling for long-term care insurance to be regulated by the FSA. Both initiatives are designed to help people buy with confidence.
If, at some future date, the state does decide to offer more help than it does at the moment, isn't there a danger that I will be overinsured?
No. The better plans give you the flexibility to reduce your cover if you feel overinsured, either because state benefits have gone up or for any other reason. You should be able to ask for a refund of part of your single premium or, if you pay monthly, a reduction in your regular premium.
While the issue of “free care” is still unresolved, it cannot be used as an excuse for lack of action. The forced sale of 40,000 homes a year to fund care costs is fact not fiction. That gives you 40,000 good reasons to make sure your clients are protected from long-term care costs.