Social Care Reform.

The Government have announced their much heralded reforms to the funding of social care. In doing so they have announced their intention to implement some of the recommendations from the ‘Dilnot Commission’ . The Commission was initially set  up several years ago to examine the way in which long term social care is funded.

The proposals, which Health secretary Jeremy Hunt hails as a “fully funded solution” provide a number of major reforms to the current rules regarding social care.

      -   Firstly, there is to be a cap of £75000 on the costs that people pay for care with the government stepping in to pay anything above this figure.

      -   Secondly, the means tested threshold for receiving support which currently stands at £23,250 is set to rise to £123,000.

      -   Thirdly, there is to be a cap on what is known as “hotel costs” (accommodation and board in a care home) at £12,000 a year.

What do the changes mean?

At first sight it appears that the changes are very significant. However closer inspection reveals that the reforms will not benefit as many people as first thought. The devil, as always, is in the detail. 

Currently about half of the people who require care will spend around £20,000. The vast majority of the population will not require sufficient levels of care to benefit from the cap. It is estimated that perhaps only 1 in 10 incur care fees of more than £100,000. The proposed cap will simply not come into play for the majority of those needing care. 

To complicate matters further the government will not simply step in and pay any care costs incurred over the £75,000 cap. The amount that counts towards the cap will be based upon what the local authority estimates it would spend on care, not the amount actually spent. Many care homes charge substantially more than a local authority might deem necessary. Some residents may find that they are paying well in excess of £75000 but that they are some way off reaching the cap on expenditure. 

The increase  in the means tested threshold is clearly substantial. The current asset limit of just over £23000 means that even those with modest life savings are unable to access financial support. Under the new arrangements individuals with assets worth less than £123,000 will be entitled to some degree of financial assistance with care needs (although it will be on a sliding scale with full support limited to those who have assets of less than  £14,250). It has to be remembered that  the average single person currently requiring care has a house worth £160,000. Many of those owning property and needing care may still need to access the equity in their property in order to fund that care.

The £12,000 cap for "hotel costs" provides some degree of certainty for those planning their expenditure. However the £75,000 cap does not include this element. Those in residential care over a long period may incur substantial sums for their accommodation.

Responses to the proposals have been mixed. Andrew Dilnot, the economist who led the commission recommended a cap of between £25,000 and £50,000; he commented that the government's decision to increase the cap far beyond his recommendations was “not perfect”. He went on to state “it is higher than I would have wanted. I regret that, but I recognise that the public finances are in a particularly tricky state.” Charities have called for early publication of, and clarity in relation to, the criteria for local authority needs assessments. 

The fact that the changes are not due to come into force until after the next general election has led some commentators to suggest that this is another attempt to push the problem down the road for someone else to deal with.

The Government clearly envisages that the cap and the asset limits will not be an issue for most individuals requiring care. By publishing the proposals 4 years before they are due to come into force they hope that the insurance and finance industries will be able to offer funding packages based upon the figures provided. The idea is that individuals will be able to plan for the fact that they may need care and access policies that cover those costs.

The reality may, of course, be very different.

There is an entirely natural reluctance for those of us in good health to admit that we may one day need help and support with daily activities. Many believe, erroneously, that social care in England is fully state funded from tax or N.I contributions. Some feel the burden of funding care should fall entirely on the taxpayer. Others believe that those with assets should be prepared to fund their needs. The financial and credit crisis has made us all a little more suspicious of financial packages that promise to protect us. Many may continue to feel more secure with savings and property. For those needing care in the next 5 or 10 years it may be too late to make effective provision.

Funding comfortable, dignified and good quality care requires us to plan at an early stage for the reality of a longer life. If the announcement of these proposals has opened a debate about care and its funding then this is to be welcomed. The danger may lie in the assumption that these proposals are the final destination rather than the first step.