A social care cap must sit alongside reform to the entire system

The government delivering on its commitment to overhaul England’s failing social care system was one of the biggest tests it faced even before the pandemic. Now that Covid-19 has brutally exposed flaws in the current system, reform has become even more urgent. The sector is dangerously underfunded and understaffed. Many vulnerable people do not get the help they need. Many who do have to pay punitive sums from their own pockets.

Leaks and briefings about planned reforms are now increasingly frequent – perhaps a promising sign of action ahead. Often mentioned is a possible social care cap that would set a maximum amount that any individual would have to pay towards their care in their lifetime.

The answer to social care’s problems?

First proposed by Sir Andrew Dilnot in 2011 as an answer to the same dilemmas facing the Cameron government, it would offer certainty and security, and protect those of us unfortunate enough to have very significant care needs from catastrophic costs.

A cap of this kind is actually already lying dormant on the statute books, having been passed as part of the Care Act 2014 but then never implemented. Although a cap would be welcome, in isolation it would not be enough to fully resolve the situation.

The cap is frequently, and misleadingly, described as a “funding solution”. In fact, despite the benefits for individuals facing high costs, it would fail to raise any extra money overall and actually cost the system more, as the state would be meeting the care costs of many more people who would only start to pay once they have spent up to the cap. Without an accompanying revenue-raising mechanism (such as tax), it leaves wide open the tricky question of how to get more money into this underfunded sector.

It also critically matters exactly what the cap covers. For example, would only personal care costs count? In such a scenario, whatever you paid towards getting washed, dressed, fed or toileted would be capped at the maximum, beyond which it would be free. But hiring someone to put the bins out or accompany you to a lunch club – wider “social care” – would not be covered. For someone who needs little personal care but does need help going out and about, a cap like this would not protect them from high care costs.

Then there’s the question about what happens to the existing “floor”. At the moment, if you have means below £14,250, care is paid for subject to a needs test. If you have means up to £23,250, you may be eligible for some public funding on a sliding scale. Raising the floor might protect people with moderate means more directly than a cap.

There is also the very significant question of where the cap is set. Proposals have ranged from Dilnot’s £35,000 to the £100,000 eventually included as a Conservative election pledge in 2017. Some of these figures are high enough that they may well feel catastrophic depending on an individual’s means.

The recurring hope in Whitehall and Westminster, ever since a cap was legislated for in 2014, has been that the financial services industry would step in and offer insurance policies so that people could protect themselves up to the cap. But insuring against such an uncertain risk so far into the future simply isn’t attractive either to companies or people.

Lessons from elsewhere

Germany tried something similar, putting concerted effort into encouraging people to take up individual insurance policies. Despite heavy subsidy, demand was sluggish, with only 4% of the population taking it up. Those who did buy the insurance tended to be people on course for very high costs. With few others to spread the risk, the initiative became unsustainable and was largely abandoned.

Others have suggested that individuals could be encouraged to prepare for future costs via a pensions-style savings scheme. It is not clear why people would be more willing to save in this way for costs they may never incur, nor what would happen if someone is unable or unwilling to build up a pot of money for this purpose. Such an approach would not spread risk across society and, with higher earners better able to save more to buy care, the potential for exacerbating inequality is great.

Japan has taken a slightly different path. Individuals pay a fixed percentage of their care costs but only up to a monthly cap, which applies to all care in all settings. Designing the cap on a monthly basis is clearer and more helpful to people planning their finances than lifetime costs.

It is likely that some form of cap will fit in a package of social care reform and, if carefully designed and accompanied by mechanisms to raise revenue fairly, this could be very welcome. But funding and catastrophic costs are only part of the social care problem. A cap needs to sit alongside comprehensive reform to the entire delivery system, to ensure we have a social care sector that’s sustainable, equitable and fit for the future.

This blog was originally published in Prospect on 7 September and is reproduced with permission.