Social insurance a possibility

Continuing care costs are rising, and people are starting to ask
how care can be funded in the future Philip Whiteley reports.

Huge disparities in the amounts individuals have to pay for
continuing care are helping push the issue of social insurance on
to the political agenda.

Most people moving in to residential care have to face a strict
means test, while NHS services remain free. Nursing home places are
still available on the NHS, and the February guidance on continuing
care preserved the right of health authorities to refer
directly.

But few people know of this facility, and there is a financial
incentive for health authorities to refer to social services when a
client falls outside their remit under the new local
agreements.

Tim Evans, co-author of a recent report by the Independent
Healthcare Association on paying for long-term care, argued that
alternatives to using general taxation will have to be found,
regardless of who is in power.

Ease of moving private capital meant that increasing the upper
rates of tax would not necessarily bring in more money for the
exchequer.

‘That’s why there’s an emerging consensus,’ he said. ‘There
might be different predictions on the degree of impact of an ageing
population, but no one is saying “no, it doesn’t matter”.’

Evans recommends social insurance, and similar ideas were put
forward in evidence to the House of Commons health select
committee, which will shortly publish its report. In another
suggested formula for spreading the cost, leaked government
proposals suggested residents pay for accommodation only (News, 26
October).

The Independent Health-care Association’s model involves a
system of individually managed ‘welfare accounts’. They would be
compulsory, with individuals contributing out of earnings.

The government would top up in times of sickness or
unemployment. Evans said it would be unlikely that any government
would top up to the same level. Therefore, he acknowledged, there
would not be ‘complete and total equality.

‘But equity in terms of the state ensuring minimum standards – I
think that’s possible.’

Further research has been carried out by Edward Richards of the
independent consultancy London Economics. He drew a distinction
between a redistributive system, such as in Germany, in which
today’s contributions help pay for the current elderly population;
and a ‘funded’ system, which operates like a conventional insurance
scheme.

The latter would tie contributions more closely to benefits
received, but would have the obvious disadvantage of taking 30
years or so to make a difference.

A problem with all schemes is the question of credibility. Sir
William Beveridge’s National Insurance scheme, after all, was
supposed to cover an individual’s needs ‘to the grave’, so those
who contributed all their lives and who now lose their home and
savings to pay for residential care feel deceived.

Richards told a recent conference organised by the Institute for
Public Policy Research: ‘On too many occasions politicians have
raided the pot for short-term spending needs. Why should men or
women in their 20s today believe that a new social insurance scheme
would realise adequate cover for them in the distant future?’

Contributions would probably have to be ring-fenced, but there
would be the concern that they may run short. Projections of what
may be a necessary premium is a difficult task: as well as the
usual actuarial variables, there is the question of supply of
carers.

London Economics has produced a model which estimates that the
number of informal carers will rise only modestly, and that the
cost of long-term care will at least double by 2031.

It warns that the arithmetic could become much less favourable
if today’s younger generation proves less inclined to care.Home
care: Paying National Insurance throughout your working life should
entitle you to care if you need it