How should we pay for care? Dilnot on a diet Prof Julien Forder
Distinct feeling of déjà vu… • Reform attempts: – Royal Commission on Long-term care (1999) – King’s Fund Wanless Review (2006): – Green Paper: Shaping the Future of Care Together (2009) – White Paper: Building the National Care Service (2010)
• And now Funding (Dilnot) Commission…
What are the challenges? • (1) Increased future cost of care – Demographics: ageing population – Unit costs
• (2) .. But also a range of poor outcomes under the current means-tested funding system… … hence the Dilnot proposals.
(1) Dealing with cost pressures...
Projected cost of older people’s social care
(2) .. Poor outcomes: The problems to be addressed.. • Unmet need/lost outcomes – Affordability and quality
• • • •
• Needs test • Means test
Under-insurance/excessive risk exposure Means-test has perverse incentives Incentive for fraud (divesting of assets) (Un)fairness – Prudence penalised – Too pro-poor?
• Complexity • Cost: cheap!
Funding Commission (Dilnot) proposals: Capped risk model • How does it work? – Free care for those with accumulated care costs above threshold (e.g. £35,000) • Housing/accommodation costs not included • Will pay out at council’s ‘usual rate’ for care
– Means-tested support for those under the threshold • Upper capital limit raised to £100,000 • … but not lower capital limit (which is the limit that protects remaining assets)
What happens… • …. after reaching the cap: – Self-payers: • Will see a significant reduction in what they pay for care from that point
– People supported by councils: • Will already have part (or all) of their charges paid by the council, so benefit is smaller for these people
• The cost… (if implemented in 2014/15)
Costs of Capped Risk option
2017/18 Extra cost: ÂŁ1.9bn
Which problems does the Capped Risk model tackle? • Unmet need/lost outcomes – Affordability and quality
• • • •
• Needs test • Means test
Under-insurance/excessive risk exposure Means-test has perverse incentives Incentive for fraud (divesting of assets) (Un)fairness – Prudence penalised – Too pro-poor?
• Complexity • Cost: cheap!
Which problems does the Capped Risk model tackle? • Unmet need/lost outcomes – Affordability
• • • •
• Needs test • Means test
Under-insurance/excessive risk exposure Means-test has perverse incentives Incentive for fraud (divesting of assets) (Un)fairness – Prudence penalised – Too pro-poor?
• Complexity • Cost: Expensive: More taxes, extra funds mostly to the rich
Funding gap
2025 gap Current: £3.8bn Dilnot: £7.3bn
Options to reduce funding gap • (1) Dilnot on a diet? – Do not raise upper capital limit • But does not save much: £100m
– Set a higher cap e.g. £50,000 or £70,000? • Saves money, but still more expensive than current system
– Change capital rules under the means-test e.g. bring in person’s home for non-res care – Restrict access to only the extremely frail/impaired – Reduce support e.g. hours of home care per week
Capped risk model at higher caps‌
Options to reduce funding gap • (1) Dilnot on a diet? – Do not raise upper capital limit • But does not save much: £100m
– Set a higher cap e.g. £50,000 or £70,000? • Saves money, but still more expensive than current system
– Change capital rules under the means-test e.g. bring in person’s home for non-res care – Restrict access to only the extremely frail/impaired – Reduce support e.g. hours of home care per week
Options to reduce funding gap (cont.) • (2) More Government funding
– General taxation e.g. Income tax or National Insurance increase • Political challenges
– Inheritance tax – ‘Earmarked tax’: a specific care duty • Charged on income or wealth? • Age-specific? • Politics: ‘death tax’
• (3) Encourage private solutions to reduce demand (on public purse)
• Provide incentives for people to buy private long-term care insurance • Can work e.g. in France - if done in partnership
Options to reduce funding gap (cont.) • (4) ‘Raid’ other public spending budgets – Other services e.g. the NHS – Benefits • Disability benefits (AA and DLA) £5.8bn • Winter fuel allowance
• (5) Improve use of care funding – Improving how well the care, health and housing sectors work together – Improve preventative measures (where these work) • E.g. rehabilitation, use of technology
• So‌ Will this be third (or perhaps fourth) time lucky for reform attempts?