29 May 2012

The social care system will require more public funds if it is to both stop vulnerable older people from falling through the net and lend support to all those who face very high, unpredictable care costs.

However, much of that money can be sourced from the £140 billion of state funding that is already spent on older people, according to a new report from the health care think tank Nuffield Trust. The report comes ahead of the White Paper and draft Bill on social care reform.

In Reforming social care: options for funding, the Trust’s Chief Economist Anita Charlesworth and Senior Fellow Ruth Thorlby examine two objectives that were at the heart of the proposals made by the Commission on Funding of Care and Support (led by Professor Andrew Dilnot).

The first was to provide more support for the many people – often on very low incomes – who no longer receive publicly-funded care because of stricter eligibility criteria. The second tried to address the unfairness of a system in which ten per cent of the population can be liable for unpredictable lifetime care costs of over £100,000.

It is clear that to meet the needs of an ageing population and tackle the perceived unfairness in the current system, both individuals and the Government will need to spend more on social care Nuffield Trust Chief Economist Anita Charlesworth

The Dilnot report, which proposed a lifetime cap on individual contributions, argues that people need a degree of certainty in order to make more preparations for their old age, and help encourage the development of a market for insurance products that cover unpredictable high costs.

However it has been widely reported that the Government has baulked at the cost of reform. Estimates are of an additional £3.6 billion to public spending on social care annually by 2025/26.

The Nuffield Trust’s report outlines several recommendations for how to bridge this funding gap.  All include the principle that costs should be shared between the individual and society, but with the unpredictable high care costs beyond a specified individual 'cap' being funded by the state.

The recommendations are:

  • Use part of the £1.5 billion NHS under-spend generated in 2011/12. The Department of Health should consider using part of this under-spend on social care to protect and extend eligibility and also support more preventative work. Both would benefit patients and carers and deliver efficiency gains for health and social care.
  • Review the balance of spending across health, social care and welfare payments. The Government should consider shifting some of the health budget towards social care and also use some of the money spent on welfare benefits used by better off older people, such as the winter fuel allowances. The advantage being that it creates a larger pool of shared public money to pay for care services.
  • Introduce a lifetime cap as proposed by Dilnot, but at a higher level. Raising the cap from £35,000 to £50,000 would free up as much as £600 million annually (with a further £300 million raised if the proposed contribution towards living costs were set at £10,000 rather than £7,000). Such ‘savings’ could then be used to provide most state-funded help for people with moderate needs (as opposed to just substantial and critical needs).
  • If the increased costs of social care cannot be met from the £140 billion that is already spent annually by the state on older people, then some form of higher taxation may be needed. But this should be targeted at better-off sections of the older age group, in the interests of intergenerational fairness.

Commenting on the paper’s launch, author Anita Charlesworth said:

“The social care system is looking increasingly unsustainable. There is growing support for the principle of sharing costs between individuals and the state. But it is clear that to meet the needs of an ageing population and tackle the perceived unfairness in the current system, both individuals and the Government will need to spend more on social care.

“The Government spends some £140 billion a year on older people through the health, social care and welfare budgets. If you were starting with a blank sheet of paper, is this the best balance of spending to ensure quality of life, dignity and respect in older age?

“For instance, would people support shifting some of the money that goes on health and on benefits for better-off older people to fund a fairer, higher quality social care system?

"Or should older people with wealth be asked to contribute more to the social care budget from higher taxes? All of these are key questions that need to be addressed by the Government ahead of the publication of the draft Bill."

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