Nothing personal

Free
personal care would only account for a small part of the necessary level of
funding to bring long-term care services in the UK up to scratch. A point that the government has so far
missed, say Richard Brooks, Sue Regan and Peter Robinson of the Institute for
Public Policy Research.

Long-term
care policy has burned with a slow fuse since Labour came to power in 1997. The
government has come under sustained criticism for its decision not to introduce
free personal care as recommended by the Royal Commission on Long Term Care for
the Elderly it set up to consider funding in this area. Any hopes that the
argument would die away were dashed by the Scottish executive’s exercise of its
devolved power to disagree with Westminster. As a result, different policies
are likely to run parallel in different parts of the UK, guaranteeing the
persistence of debate for the foreseeable future.

Before the royal commission’s report there
was no funding-based motivation to distinguish between nursing and personal
care, but in the new environment this boundary has assumed some importance. The
distinction between nursing and personal care is a high-profile issue
throughout the caring professions, and the government’s definition of nursing
care in particular has been strongly resisted by nursing professionals
represented by the Royal College of Nursing. Care practice is changing so that
staff who are not themselves registered nurses are increasingly being trained
to take on tasks previously performed by registered nurses, and this trend is
likely to develop. Because of the government’s definition, individuals may have
to pay for what is effectively nursing health care, unless it is actually
delivered by a registered nurse.

This generates questions over fairness and
practical problems in the delivery of care. Nurses will, in effect, become
gatekeepers to free as opposed to means-tested care. This may create perverse
incentives for them to perform tasks which could be more efficiently carried
out by a less highly qualified care worker. In many cases it will not be
possible to draw a line between "pure" nursing and "pure"
personal care.

Campaigners such as Age Concern and Help the
Aged have mobilised around the demand for free personal care, questioning the
logic of establishing a royal commission, only to ignore its key
recommendation. The commission’s argument was that personal care should be
exempted from means testing on the basis of considerations of equity and
efficiency.

The efficiency argument is that the cost of
personal care is very high to the individual, while the risk is uncontrollable
and private insurance markets do not adequately ameliorate the problem. The
equity argument often highlights the contrast between individuals who have
cancer or heart disease and those who suffer from Alzheimer’s. In the first
case medical expenses are fully met by the state, while in the case of
dementia, payment for the large amounts of personal care required by the
individual is shared on the basis of a means test. The royal commission’s
argument was that personal care is health care, and should be funded as such.

A key priority for government must be to
ensure that the settlement it arrives at is perceived to be fair. Centre left
think tank the Institute for Public Policy Research has carried out research
into people’s attitudes towards the means-testing of long-term care.¹
It found that there is often an understanding that means-testing does take
place, and many people spontaneously indicate their belief that many others
have to sell their homes to finance long-term care. This is almost always
perceived to be unreasonable. When these themes are developed, attitudes become
more difficult to decipher. Many people accept that it is reasonable for the
individual to contribute towards their costs. At the same time people do
question the rationale behind charging for one form of health care and not
another, and few distinguish between the different elements of care (nursing,
personal, hotel costs) which have become a feature of the debate.

The question remains whether it is possible
to design an alternative settlement that would better meet the key objectives
any system of long-term care should be measured against, namely to provide
everyone with a high standard of care which is appropriate to their need, to
design a funding system which is fair and seen to be fair, to ensure that
policy choices do not set up unsustainable future costs, and to design a system
which is clearly understood and publicly supported.

Making personal care free to the individual
on the basis of need addresses the fairness and equity objective. It is not
fair to maintain the current distinction between nursing care needs and
personal care needs: both are forms of health care.

The equity arguments in favour of providing free
personal care are strong, but would not necessarily be conclusive if they
generated unacceptable affordability problems. New modelling work on the
additional cost of making personal care free puts it at around 0.2 to 0.45 per
cent of gross domestic product by 2050. This is significant, but in no sense
strictly unaffordable. Making reforms to the tax and national insurance
framework – such as aligning the upper limit on NI contributions to the higher
rate of income tax – would generate revenue to pay for free personal care and
would be fiscally progressive. We believe the funds should be found from
outside of the existing health budget.

But the really significant driver of both
public and total costs is the long-term trend in the unit costs of care, largely
labour costs. Indeed, much of the argument about the costs of long-term care
has therefore missed the point: long-term care policy will not really decide
the costs.

Large increases in the unit costs of
long-term care would represent a serious challenge to policy makers, regardless
of whether or not personal care was funded by the government and free to the
individual. For there are concerns that at least some of any increased funding
for long-term care is already being absorbed by care homes raising their fees
in an effort to restore operating margins. It is widely perceived that these
were reduced to dangerously low levels in the 1990s as a result of the squeeze
on public funding for care, one consequence of this being a reduction in supply
as some providers stopped operating.

We should view this issue alongside that of
the low wages paid to many care workers. It is possible that the whole cost
base of the sector is unsustainably low and that increased funding will be
required simply to ensure that an adequate supply of provision is maintained.
These funding questions appear far more serious in magnitude than those
relating to whether or not to make personal care free. And they will remain
serious regardless of where the boundaries are drawn in terms of the public and
private funding of different forms of care.

Another issue arises from the possibility of
demand inducement. New demand for personal care as a result of making it free
to the individual is usually discussed as a possible negative consequence.
However, some of this new demand may be welcome. Carers, particularly spouse
carers, are often themselves frail and in need of improved support services. If
they are able to substitute some of their care for formal help then this may
both improve their own quality of life and potentially extend their ability to
provide care to their partner at home.

Also, removing this funding boundary would be
consistent with the goal of improving clarity. It will make it easier for
individuals to understand the system and their own responsibilities, and it
will become easier for government to make the political case for its long-term
care settlement. Making personal care free would also be a popular policy,
because fairness arguments are intuitively appreciated by many people. If
personal care were free then government could make a clear case for its
long-term care policy: the state will meet older people’s health care costs,
regardless of where such care is delivered, regardless of the cause of need,
and regardless of who delivers the care. Current policy cannot be defended like
this.

Richard
Brooks is research fellow in economics at the Institute for Public Policy
Research, Sue Regan is head of social policy at the IPPR and Peter Robinson is
senior economist at IPPR.

References

¹ R Brooks, S Regan, A New
Contract for Retirement, Institute for Public Policy Research, Central
Books, 2002, available from 0845 458 9911

Websites

Institute
for Public Policy Research at www.ippr.org.uk