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We've reported today on Age UK's research showing a £500m increase in the funding gap for older people's social care in the past year. The news story gave no indication as to how they reached this figure so I thought I'd do it in a blog post. Forgive the Q&A format for those who find that irritating

What is the basis for the £500m figure?

It is the gap between how much councils needed to spend on older people's social care in England in 2011-12 to maintain services at the same level as in 2010-11, and the amount that they actually did spend. In this case, between £7.8bn for spend required and £7.3bn for spend delivered. (All of the comparisons below between 2010-11 and 2011-12 show changes in real terms i.e. inflation has been taken account of the equation by basing all figures on 2011 prices).

How was the £7.8bn figure reached?

This was based on research carried out for Age UK by the Personal Social Services Research Unit at the London School of Economics, specifically Julien Forder and Jose-Luis Fernandez who are recognised experts on adult social care economics.
The £7.8bn figure is split into two parts: service costs (£7.0bn) and care management (£0.8bn). Forder and Fernandez calculated that service costs needed to rise from £6.8bn to £7bn from 2010-11 to 2011-12 to keep pace with rising demand/need for care due to demographic change. With a nod to the very tight financial environment that councils are in, they calculated that this could be achieved while massively cutting spend on care management, by 27%, from £1.1bn to £0.8bn. We'll return to this cut later.

How was the £7.3bn figure reached?

This is a bit more complicated. Government figures (from the Department for Communities and Local Government) show councils spent £7.645bn on older people's social care in 2010-11 and are on course to spend £6.961bn in 2011-12. The latter figure excludes the £648m transferred to councils from primary care trusts to spend on adult social care, as mandated by the Department of Health. Age UK has assumed that all of this money has gone on adult social care and been allocated between clients aged over 65 and under 65 in line with existing spending patterns. This mean 51% has gone on older people, boosting council spending on the group by £330m, which, when added to £6.961bn gives you the £7.3bn figure.

Has Age UK overestimated the decrease in spending on older people's social care?

It quite possibly has. I would be very surprised if the £648m transferred from PCTs has been spent as Age UK assumes. This funding is intended to be used to support services at the boundary between health and adult social care that help keep people out of hospital or enable them quicker discharge from hospital. Spending on these services - reablement, falls prevention, intermediate care etc - is concentrated on older people to a greater extent than adult social care as a whole. Therefore you would assume that more than 51% of the £648m has gone on older people.

Moreover, the NHS was allocated £150m in addition to spend on reablement services. We have no idea how this money is being spent. But it is a fair assumption that most of it is going on social care for older people. Also, a further £150m was allocated to PCTs in January to spend in conjunction with local authorities in a very similar way to the £648m figure.

All of these point to Age UK overstating the decrease in funding on older people's social care, so the £7.3bn figure could be, say, £7.5bn.

Has Age UK overestimated the increase in the funding gap?

No, not necessarily. The £7.8bn target spend figure is based on the assumption of a 27% cut in care management costs for older people from 2010-11 to 2011-12. While care management has been cut back, a reduction of this magnitude is highly unlikely. A more modest decrease in care management costs, from £1.1bn to £1bn, would leave a target spend for 2011-12 of £8bn. Were actual spending to be £7.5bn, you'd still be left with a £500m increase in the funding gap.

The £8bn and £7.5bn figures are totally notional. They are just designed to explore the assumptions used by Age UK and to suggest that any risks in these may cancel each other out.

(Blog updated 3.45 16 Jan 2012)

Lots about care funding in the news today so it's worth trying to unpick what's going on. Here are the main lines in descending order of importance:-

• The government is considering imposing a cap of between £50,000 and £60,000 on people's lifetime care costs, with the state picking up the bill above this point, reports The Daily Telegraph. This is significantly above the £35,000 cap proposed by the Dilnot commission last year and hence quite a bit cheaper for the public purse.
  
• Cross-party talks on forging a solution on care funding are due to start tomorrow, reports the BBC, the first such talks since the acrimonious breakdown of discussions before the 2010 election over Tory allegations of Labour plans for a "death tax" to fund care.
• Three-quarters of people support a cap on lifetime care costs as proposed by Dilnot, an Age UK survey has found, reports The Daily Mail.

The latter is hardly a surprise: who would not want more rather than less help from the state?

As for cross-party talks, who knows? Labour's current position on care funding is unclear and expecting health secretary Andrew Lansley and care services minister Paul Burstow to come together with Labour's Andy Burnham and Liz Kendall on social care when they are at daggers drawn on the government's NHS reforms may be asking too much. But let's be optimistic.

The idea of a £50,000-£60,000 cap is more worrying. Andrew Dilnot (left) was not theological about having a £35,000 cap but instead proposed a range of £25,000 to £50,000. However, he said that £35,000 was "fair and realistic" and that anything above £50,000 would not be fair, on the basis that people with lower levels of wealth may not receive adequate protection from the risks of needing social care.

A £60,000 cap would cut down the bill to the Treasury of implementing Dilnot from £1.7bn a year to about £1bn a year.

However, it would mean the reforms would fail a key test: namely, protecting people from the risk of high levels of care costs in older age.

£60,000 is a considerable sum (and it's worth noting that the cap excludes living costs in residential care, which would be additional to the £60,000); a cap of this level would make people far less likely to save or take out products to insure themselves against future care costs (another key goal of the Dilnot package), meaning that a market in such products would fail to emerge; and while making little difference to wealthy families, would hit those with moderate levels of wealth (for whom the difference between £35,000 and £60,000 is most significant).

(Updated bit) The DH has now distanced itself from the £50,000 to £60,000 figure in a statement to this Guardian story. The story also provides a useful link (see emerging findings on this page) to the source of the story: a paper in November by one of the groups feeding into the government's engagement process to shape the forthcoming White Paper on care reform. 

Contrary to what I have said above, this group, which was looking at the role of financial services in the care system, suggested that a cap of this level could stimulate people to save for their care and encourage the financial services sector to develop suitable products to enable them to do so. However, it's also clear that this figure was also given with a nod to making care funding reform more affordable for the public purse.

The group, which included civil servants and representatives from the social care and financial services sectors, also said more analysis was needed on the impact of different levels of cap. Hopefully, this is being done now and the results of this - rather than efforts to keep the overall bill to the state down - which shapes the White Paper.

Another day, another report on integration for the government, this time from the NHS Future Forum (the advisory body set up to inject common sense into the government's NHS reforms).

The proposals are pretty similar to those put out in last week's report from think-tanks the King's Fund and the Nuffield Trust: strong support for social care and the NHS to be measured against the same performance indicators, for pooling budgets and commissioning and for building services around patients' needs.

Notably, for professionals, there is a call for every person with long-term conditions to have a named care co-ordinator, who could be a social worker.

The government has, largely, accepted the proposals.

However, the question is, will this work where other initiatives to do the same over previous decades have not? 

Social care academic Bob Hudson thinks not, in a powerful piece for The Guardian today, in which he argues that the whole issue is being looked at from an NHS perspective (with adult social care seen as the "handmaiden" to the health service), weakening its potential impact.

More significantly, he says the agenda amounts to yet more exhortation for health and social care organisations to integrate - precisely the approach that has failed for 40 years, he says.

Also, he notes the big tension in the government's NHS reforms between competition for business between providers and integration of care pathways for patients.

Not an easy square to circle, he says.

I fear we may be revisiting this topic with another mountain of reports in years to come.

(Added 13 January: Just spotted this blog post from social worker and psychotherapist Claudia Megele about the government's integration plans, which raises important concerns about the compatibility of these with other government actions, such as the injection of greater competition into healthcare through the Health and Social Care Bill).

Over a million pensioners are facing Christmas alone, according to Dying Matters, the coalition dedicated to designed to improve attitudes to dying and death. Today it is launching a campaign asking people to look out for and call in on older neighbours and relatives who are on their own, particularly those who have been unwell or bereaved in the past year.

Is care funding being delayed until 2025? That's what the Telegraph and the Mail are reporting today, the latter in quite high-pitched terms ("Families betrayed over care funding reform").

Andrew Dilnot, who produced a report for the government on funding reform earlier this year, said he envisaged his proposals - or something like them - could be implemented in 2015, following government legislation (to recap Dilnot's central proposal was a cap on lifetime care costs for service users of £35,000).

There have been rumblings ever since the report was published that the Treasury has got cold feet because of the estimated bill of £1.7bn a year to implement Dilnot. However, the government is committed to some reform of the funding system, whether Dilnot, Dilnot lite or something else altogether, through a White Paper next year followed by legislation. If the implementation of this was to be delayed until 2025 that would be a very serious matter.

But are the Telegraph and Mail right to make this claim? The story originates from a briefing given by health secretary Andrew Lansley to journalists yesterday, attended by, among others Jeremy Hughes, chief executive of Alzheimer's Society. Hughes has been advising ministers on the shape of the White Paper.

A - if not the - key piece of evidence for the 2025 claim is this quote from Hughes (taken from the Mail story):

"One of our pieces of work was looking at what would it take over time to develop insurance schemes that would be marketable and would actually deliver results,' he said. "For all those factors to be in place, we thought 2025 was a realistic timescale."

Now, this seems to be a reference to the development of a market in insurance products to enable people to cover the costs of care that the state will not pick up the bill for (i.e. the £35,000). This, of course, is a matter for the private sector, not the government. So it is not a comment on when the government might implement funding reform. Indeed, the development of a private sector market in insurance is necessarily consequent on the government setting up a new funding system.

Don't get me wrong, there is a real danger that Dilnot - or indeed any substantial reform of care funding - will get kicked into the long grass or shelved, and what we will be left with is some tinkering. But the timetable for government action, whether big or small, is likely to be far swifter than what is implied by today's stories.