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Treasury balks at Dilnot plan to cap LTC cost

Andrew Dilnot’s proposal for a cap for long-term care costs is set to be backed by Labour as reports suggest the Treasury may look to sideline the reforms.

The Dilnot Commission is expected to recommend an upper limit on long-term care costs of between £35,000 and £50,000 as part of a package of reforms designed to draw the insurance industry into the LTC market. Any care fees above this cap would be paid for by the state.

The cap on costs is only likely to apply to the cost of care, not the associated costs of residential care, which can be around half the total costs.

Dilnot hopes the insurance industry will offer products to cover costs up to the cap plus potential accommodation costs.

The commission, due to rep-ort on July 4, is also expected to propose an increase in the level of assets that people can retain and still qualify for means-tes-ted support. The current level is £23,250 but is likely to increase to around £100,000.

However, reports at the weekend suggested the plans have caused a split within the coalition Government, with the Treasury balking at the £2bn to £3bn estimated annual cost of the reforms.

Speaking at the Institute for Public Policy Research last week, Labour Shadow Health Secretary John Healey said capping “potentially catastrophic” costs could encourage new entrants to join the LTC market.

He also suggested that a Nest-like public/private sector partnership could form part of a future care funding solution.

He said: “In practice, the provision of long-term care insurance tends to fail. The last UK provider of long-term care insurance left the market in 2010.

“One of the reasons for this market failure is the potential for catastrophic costs to escalate, inflating the cost of insurance so that it is unaffordable for most people. Capping the liability could tackle this barrier.

“While the choice of financing models will be an important decision for Dilnot, we need also to be open to new partnerships and ways of shaping people’s choices, just as we have done with the new national employment savings trust for pensions that combines state sponsorship with private administration.”

Nine organisations, including the Association of British Insurers and Age UK, have written an open letter to Prime Minister David Cameron calling for the Dilnot proposals to be implemented.

The letter says: “The current system is complicated, expensive and underfunded. It causes hardship and anxiety for those in need. Too often, the long-term care question has been placed on the too difficult pile. We all agree that continuing to do nothing is not the answer. It would be catastrophic if the commission’s report resulted in no action.”

Partnership director of corporate affairs Jim Boyd says the Government will face an “unpal-atable decision” when Dilnot reports next week.
He says: “The Government is in quite an awkward position. The messages coming from Number 10 suggest there is a desire to slow down a lot of this reform because it is clogging up the legislative system.

Policymakers are already on the back foot following the poor communication of health reforms and the recovery of the economy remains fragile.
“If you throw into that an unpalatable decision to be made on long-term care, which will inevitably aggravate a lot of people and which could cost a huge amount of money, you have got to wonder about the appetite for grasping this.

“So while the industry will fully support Dilnot’s proposals, the fear that they will be kicked into the political long grass will always be there.”

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Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Julian Stevens 6th July 2011 at 10:35 am

    Generally speaking, private sector solutions to national problems are the most cost effective. So, if the above proposals are likely to cost more than allowing tax relief on premiums to insurance products, then clearly consideration of the latter option should be given at least as much weight.

    Something has to be done and it can’t cost nothing, so the option likely to incur the lowest cost to the Treasury should surely be the favoured one.

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