Our Q&A explores what the government’s new proposals for elderly care could mean for you
The government has decided to ditch most of the recommendations for funding long-term care made by its adviser, the distinguished economist Andrew Dilnot. Instead, its progress report on social care funding reform proposes that people whose money is tied up in illiquid assets such as property should borrow from the government, repaying the money from their estates after they die. Here we explore what this means for you:
What is social care?
It is the care and support services that help frail and disabled people remain active, safe and independent for as long as possible. This might include helping someone bathe and preparing cooked meals. Support services can be provided in someone’s home, in a community centre or in a care home.
The costs are either paid for by individuals or on a means-tested basis by local authorities in the form of specific services or cash payments that enable people to make their own care and support arrangements.
What are the typical costs of care?
They vary enormously depending on the needs of the individual and where they live.
So why do we need any change from this system?
The number of older people, who make up the largest group of social care users, is growing rapidly: the number over the age of 85 has risen by two thirds since 2004. But local authority budgets have either been frozen or cut, demand far outstrips supply, and many people who need help with paying for care are getting inadequate support.
Older people are also subject to a postcode lottery when it comes to care funding: each council makes its own decisions about the criteria for qualifying for help. This means that two people with identical care needs in neighbouring towns may get very different support. AgeUK estimates that currently there are 800,000 older people who need care but do not receive it from the state, and that this will increase to 1 million by 2014.
What did Dilnot suggest?
That the government set a cap on an individual’s contribution towards care costs over his or her lifetime, with the government meeting any costs above the cap. Dilnot suggested a range for the cap of between £25,000 and £50,000, but thought £35,000 the most appropriate and fair figure.
In addition, he said people should pay towards their living costs such as food and accommodation, but this should be capped at £7,000 to £10,000 a year. Dilnot said that the means-test upper limit should be raised to £100,000 from the current £23,250, allowing people to keep more of the assets they have built up over the years.
He also recommended that people should be able to defer the cost of care: this is the only aspect that the government has adopted in the white paper.
Did experts think this could work?
In part. Stephen Burke, director of United for All Ages and the Good Care Guide, was critical of the complexity of Dlinot’s proposals and the fact that they would help wealthy people protect their assets, while those with more moderate savings would still face footing the cost of their care.
AgeUK was more enthusiastic, and says a pilot for the scheme involving 8,500 people had worked well.
So what has the government proposed?
Health secretary Andrew Lansley said that while a cap on costs and an extended means test was the “right basis” for change, he could not fully commit to it. This means that Dilnot’s proposals would have cost the Treasury too much – estimated at £1.7bn a year and rising every year by the Dilnot review.
The Department of Health said: “It is the government’s intention to base a new funding model on the principles if a way to pay for it can be found. However, whilst it is the right thing to do, given the size of the structural deficit and the economic situation the country faces, the government is unable to commit to introducing a new system at this stage. Funding reform needs to be considered alongside other priorities and the right place to do this is at the next spending review. Decisions will be taken then.”
So, despite Dilnot saying last year that he would be astonished if his recommendations were kicked into the long grass, the government has decided to pursue just one of the recommendations for the time being. The surviving recommendation is that payment for residential care costs should be deferred for anyone who is unable to pay without selling their home. The aim is to implement this from April 2015.
How would this work?
The funding paper says: “People that cannot afford reasonable residential care charges without selling their home will have the choice to defer the fees until they are ready to sell.” There is no decision yet on what “reasonable” might mean. This type of scheme is already offered in some, but not, all local authorities.
Will interest be charged on the loan?
Yes – the paper does not suggest an interest rate, but says that the scheme should run on a cost-neutral basis. This means local authorities should be able to charge sufficient interest to cover their costs. Currently local authorities cannot charge interest, making it harder for them to offer deferred payment.
What happens if my care costs exceed the value of my home?
The local authority will cover the cost of the outstanding bill. So if your home is worth £100,000 and your care costs come to £150,000 by the time you die, the local authority will pay £50,000 towards the bill.
But if your home’s value exceeds that of your care fees, the difference will go into your estate for the benefit of your nearest and dearest.
To stop the postcode lottery described above, the government proposes introducing a national minimum eligibility threshold – a level of need at which people become eligible for care and support – from April 2015 to help bring greater clarity to the system. It also promises to improve the information available to people who have care needs.
Will the amount people have to pay back be capped?
No – the government has discounted introducing any cap at the moment, but says it will consider one set at a higher level than that proposed by Dilnot. It also wants to look at the contributions people are expected to make to their general living costs after reaching the cap.
It will consider whether those who gain most from the cap should be asked to meet the cost of reform: one way to do this would be to implement a voluntary scheme which people could opt in or out of. Wealthy people – who would benefit from the cap – could opt in and be charged, while those who wouldn’t benefit because their assets were too low in value could remain outside the scheme and not incur charges.
Will the deferred payment loan cover food and accommodation as well as nursing costs?
Are there alternatives?
Yes – there are specialist products designed to help people pay for long-term care, but these are often complicated and expensive so it’s vital to get advice. Good sources of information include the Money Advice Service, Paying for Care, and AgeUK. If you prefer to speak to someone in person you can find a specialist adviser through the Society of Later Life Advisers.
Insurance policies are available to pay for immediate-needs care and pre-funded care. But pre-funded policies are not popular, not least because you may never need to claim on them and so lose your money. Immediate-needs care annuities are more commonly used by families wanting a hedge against part or all of the cost of care fees should their older relatives live longer than their capital. Two companies – Partnership and Axa – dominate this market.