Care and Support: funding options for long-term care

The future funding of adult social care is of huge importance given the ageing population, and there are a variety of solutions being put forward as the green paper looms. By Mark Ivory

Making its case for fundamental reform of social care funding earlier this year, the government did not mince its words. In 20 years’ time it expected a £6bn funding shortfall even if services remained in the same parlous state as they are now.

“The existing care and support system is not sustainable because of the massive challenge that changing demographics represent for our society,” the government said in its Care, Support, Independence consultation document.

The document, which marked the start of an “engagement process” with the public, is intended to stimulate debate about the need for a better funding settlement for social care and how this might be paid for. It will feed into a green paper, expected next spring, setting out a rescue plan.

The current means-tested system is widely seen to have failed. Tight eligibility criteria shut needy people out of services and low income earners with few assets are forced to pay. But if means-testing as we now have it is so despised, what is to replace it when so many hold the apparently contradictory belief that public money should be spent on those who need it most?

Open mind

Health secretary Alan Johnson has both insisted that means-testing will continue in some form and hinted that funding arrangements should be more centralised. But the government also claims to have an open mind until it knows the outcome of the engagement process, which it hopes will cast light on what the balance of financial responsibility should be between the family, the individual and the state.

Two years ago, Sir Derek Wanless’s report Securing Good Care for Older People set out no fewer than six funding options for social care including new, improved means-testing, free personal care of the kind already adopted in Scotland, and social insurance based on entitlements. He expressed a preference, however, for a “partnership model” which would give a basic, minimum level of care to everybody, put an end to means-testing, and allow people to finance more sophisticated care packages with matching funding up to an agreed amount from the government.

For many commentators, free personal care, as recommended by the Royal Commission on Long Term Care for the Elderly in 1999, is a huge lost opportunity. It has been consistently dismissed by government for reasons of cost and its failure to target resources on the poor. In the plus column, though, like the partnership model, it is rooted in a concept of universal entitlement which would bring social care into line with health and encourage buy-in from the mainstream as well as the marginalised.

Universal principles

Caroline Glendinning, professor of social policy at the University of York, says that in most developed countries access to social care is based on universal principles and is equally available to poorer and better off people. “A particular model may not meet all of your care costs above the basic minimum, but there are various ways of dealing with the shortfall,” she says.

She looked in detail at the lessons from overseas and found that the common denominator in changing systems for the better was strong leadership from central government. This ensured that the new arrangements were both affordable and equitable, providing nationally consistent access to services or specific funding for a given level of assessed need.

“Central government needs to take responsibility for ending the postcode lottery and that means organising the system in a better way,” says Glendinning. “One solution is a central funding allocation system for the whole country, leaving local authorities responsible for assessments.”

During her research she was particularly struck by the role of social insurance in countries like Germany, the Netherlands and Japan. For example, Germany’s introduction of long-term care insurance in 1994 halved the numbers of older people dependent on means-tested social assistance and liberated them from the indifferent quality that usually taints services aimed exclusively at the poor. She says that social insurance – or at least earmarked funding from taxation – is the solution to the UK’s problems.

Tax money

Jon Glasby, professor of health and social care at the University of Birmingham, says the extra money social care urgently requires should be raised from taxation, ending what he considers to be the artificial distinction between health and social care, and creating the universal, socially inclusive service we have a right to expect as citizens.

He says it is time for a Beveridge report for the 21st century. “There’s a technical discussion to be had about funding models, but my worry is that we get into that before answering the prior questions about citizenship and what we have a right to expect from a 21st century service. We’re still working with 1940s assumptions without acknowledging that the world has changed.”

In a policy paper, Who Cares? published by Birmingham University’s Health Services Management Centre, Glasby calls for self-directed support to be the centrepiece of the new settlement for long-term care. A key component of the personalisation revolution now under way in social care, self-directed support would include a national resource allocation system as a guarantee of consistency and equity, and personal budgets which would be the same for a given level of need whatever the care setting.

“The self-directed support model is a transparent way of delivering equity by giving equal resource to equal need,” Glasby says. “The advantage of the model is that it is compatible with all funding contexts, whether care is free at the point of delivery, means-tested or based on partnership, or paid for by social or private insurance.”

Private insurance has been mooted as an alternative to compulsory social insurance as a means of pooling the highly variable levels of risk individuals have of needing long-term care later in life. But, as Wanless pointed out, the market for private insurance of this kind remains very small and people are reluctant to think that they may require long-term care in the future.

“I’m particularly nervous about private insurance,” Glasby adds, “because of the lessons from the pensions and mortgage mis-selling scandals. There are real difficulties with their complexity.”

A private option that may hold more promise, even during the credit crunch, is the equity tied up in people’s own houses. Equity release schemes, in which home owners take out a loan secured against their property, appeal to the thousands of “asset rich, income poor” older people who scrape by on a meagre pension but live in their own home. The Department of Communities and Local Government recently put the value of private housing equity at £480bn and the Department of Health has just produced a report, Rainy Days & Silver Linings, promoting the use of equity release.

Equity release

“Equity release schemes definitely aren’t a solution to the looming £6bn funding gap,” says Jeremy Porteus, national programme lead for CSIP Networks at the DH. “But we do need to ask what leverage there is in the marketplace during the credit crunch to release equity to pay for adaptations and improvements to people’s properties, or to pay for aspects of long-term care.”

The drawback is that it excludes non-homeowners and the potential market among older people is likely to be limited by low or plummeting property values. Wanless referred to a Which? report finding that equity release schemes were “expensive, inflexible and leave people with little or no equity in their home”. Rainy Days & Silver Linings itself shows that only 1% of equity release schemes are used to fund future care needs, adding that “deep suspicion of equity release products remains”.

But it also suggests that this suspicion is misplaced. “Some people got their fingers burned in terms of the repayment arrangements for earlier products, but there’s been considerable product development over the past 15 years and better regulation too,” Porteus says.

Whatever the options put forward by the green paper, a question mark continues to hang over funding reform. Glendinning says: “My worry about the green paper is that the whole issue could be buried by the general election. The issue is even more acute than it was after the Royal Commission, yet the political and economic context isn’t helpful in terms of doing anything about it.”

This article is published in the 9 October issue of Community Care magazine under the heading Model answers

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