Who will pay for your care when you’re old?
Government would like individuals to finance as much of their own social care, in home and residential, as possible. But with care homes costing anything from £30,000 to £75,000 a year, few can cover that for long. It is widely agreed that having to sell family homes to meet care costs is unfair. The flawed 2011 Dilnot Commission’s first recommendation was “capping the lifetime contribution to adult social care costs that any individual needs to make at between £25,000 and £50,000. We think that £35,000 is an appropriate and fair figure.” But this excluded the “hotel” costs of residential care. The Dilnot recommendation 5 stated “People should contribute a standard amount to cover their general living costs, such as food and accommodation, in residential care. We believe a figure in the range of £7,000 to £10,000 a year is appropriate.” This was wholly unrealistic, being only about 10% of market rates. The government would pick up the tab thereafter. Their report makes no mention of international comparisons in general nor France in particular. Their report was first accepted and then rejected. No Green Paper or political consensus has since emerged.
Schools, the NHS, prisons and other public services claim to be underfunded but none lay as strong a claim as adult care. Between 2010 and 2013 adult care spending fell by 10% although by 2019 that shortfall had dropped by half (not allowing for inflation or increased demand, of course). Due to ring-fencing, the 34% of local authorities’ spending on public services in 2009/10 had risen to 41% in 2017/18, 40% of that on working-age adults, and 60% on the elderly.
Little, if any, thought has been given to how elderly care could be delivered more cost effectively. Home carers spend as much time (usually unpaid) driving between clients as they do with them. Even though dual worker households have increased, “the number of unpaid carers in England appears to have increased from 4.9 million in 2001 to 5.4 million in 2011” and probably more since. Yet informal carers’ allowances amounted (in 2018) to a maximum of £1.77 per hour. England spends more per capita on adult care than France and yet it has proportionately fewer aged over 80. The private and voluntary sector picks up 33% of the tab, more than France, Germany, Japan, Spain or Italy. [1]
“Germany’s long-term care system is delivered primarily through public health insurance. While mandatory for all working people, individuals can opt out of the government programme and take private health insurance instead. Germany’s long-term health insurance is designed to cover only basic needs and not the full cost of care. Users are expected to pay some of the costs – particularly for institutional accommodation – through private funds, private insurance schemes or, if required, means-tested welfare payments.” [2]
The French Allocation Personnalisée d’Autonomie (APA) mandatory state insurance “covers between 0 and 90% of the cost of a person’s home care package with residential care paid for from their own contributions (often using private insurance). The requirement for high levels of co-payment from those with the highest incomes has resulted in [France having] the largest private insurance market of [France, Germany, Japan, Italy, and Spain].” [3] According to the OECD, “in 2010, the equivalent of 15 per cent of the population aged over 40 years had private LTC [Long Term Care] coverage, compared to about 5 per cent in the United States…Indemnity policies are the prominent model of private coverage arrangements in France, under which an individual typically pays annual premiums in exchange for a determined future stream of income (rente) once the individuals is deemed to have become dependent.” Yet the UK has none at all beyond private health insurance covering post-hospital care as part of the treatment.
Clearly the whole UK population cannot afford private care insurance but the private option should be considered, just as in health insurance, for those who want security, prompt availability and premium care. One way or another, general provision has to come from taxes however they are labelled.
There have been talks about creating this market but the main concern is that the general population, being unaware of their financial risk, will not buy policies, i.e. there is no demand. But people often do not realise their demand for a product until it is actually put before them and they see it working. Research almost always concludes that there is “no demand” for any new category. There was no demand for television before there was television. We found no demand for cream liqueurs when my company researched it in the 1970s. We launched Baileys anyway and it is now the largest liqueur brand in the world.
That said, the Government should incentivise private insurance because individuals, or their families, should be responsible for themselves, and because it saves the state money when they are. What does the government need to do to help a UK version of the French model thrive? Corporate care home operators would obviously like to have more, if they can do so at a profit, and local authorities would like the corresponding reduction.
A few suggestions:
Insurers need to cap their risk. Those able and willing to do so, should be able to build insurance “pots” covering, say, 6 years of residential or home care or the cash equivalent (about £300,000). Thereafter the local authority would assess, with the individual’s consent, the appropriate care package and extent, if any, of co-payments. One would expect those to be graded according to affordability. In other countries, individuals are expected to cover their accommodation whilst government covers nursing and other care costs. In France “for home care, recipients in the highest income bracket are required to pay 90% co-payment, while those in the lowest bracket are not required to share costs.” [4]
One option would be to have individuals start paying the insurance premia when they reach state pension age, i.e. when they stop paying national insurance. Joining earlier or later should be possible but, obviously, at a lower or higher annual cost. Assuming residential care is not required until the pensioner is in his or her late 80s, the “pot” would build up over 20 years or so. With less than one third [5] of those aged 65 or more needing residential home care at some stage, premia should be widely affordable. According to the 2011 England and Wales census, the number of residents in care homes remained steady at about 290K over the previous ten years despite an 11% increase in that age-group’s population. This was probably due to finance cuts hiding pent-up demand.
Given the low level of need for residential care, home-care only packages should be available as an alternative up to, say, £100,000 (Dilnot + inflation).
The pots should be held by not-for-profit charity subsidiaries of the insurers to allay objections to privatisation. The insurers should accept this “doing something for nothing” as it would not cost them anything but would increase the numbers seeking entry to their care homes.
The premia by individuals would therefore be tax deductible charitable donations. HMRC would need to bend their rule against personally benefiting from charitable donations. This already applies to donations to hospice charities.
Finally, these policies (and health policies too come to that) should not pay Insurance Premium Tax which, in 2015, was doubled from 6% to 12%. It is daft to penalise people for acting responsibly and saving the state money. The tax on insurance is three times that on gambling.
In summary, I propose the same kind of two-tier, private and state, funding for care as exists already in France and for health and education in the UK. Private insurance reduces the cost of state provision and provides choice for those who can afford it. These proposals should not be confused with just having mandatory care “insurance” operated by the state. As HM Treasury would not agree to hypothecation, universal mandatory contributions would simply become general taxation as National Insurance is.
[1] Incisive Health, “An international comparison of long-term care funding and outcomes: insights for the social care green paper”, 2018, p.47
[2] Ibid, p.7.
[3] Ibid, p.39.
[4] Ibid, p.7.
[5] 291K (3%) of the 65+ population was in residential care at the last census. With life expectancy 85+ and average long term stay of 2 years, then those who make it to 65 have a 30% chance of needing residential care at some point.