Cap on care costs: MPs back reduction in benefit for less wealthy

MPs have backed a government amendment to change the cap on care costs in a way that would reduce its benefit for less wealthy people facing “catastrophic costs”.

The change to the Care Act 2014 would mean that only client contributions to care costs will count towards the £86,000 cap for those receiving means-tested support from their council.

As the act currently stands, the whole cost of meeting the person’s eligible needs – including what the council pays but discounting a sum for care home living costs – would count.

The Care Act amendment, which MPs added to the Health and Care Bill last night, would mean that people in the means-tested system reached the cap more slowly than wealthier self-funders with similar needs. This is because, for the latter group, the full cost of meeting their eligible needs – minus daily living costs – would count.

Dilnot criticism

The government faced significant criticism after announcing the change last week, led by Andrew Dilnot, whose commission devised the cap on care costs idea in its 2011 report.

Echoed by many others, including Conservative MPs, Dilnot said the change would mean that the cap did little for people with lower levels of wealth. His commission proposed having both self-funders and council-funded people progress to the cap based on the full cost of their care package minus daily living costs.

This carried through into last night’s vote, which saw the government’s working majority of 77 cut to 26 after 18 Tories voted against and several were absent.

The Commons later approved the Health and Care Bill, which now moves to the House of Lords, where the government lacks a majority.

Call for Lords to overturn amendment

Following the vote, Age UK urged peers to overturn it.

“The government’s amendment may have been passed by the House of Commons but no doubt the House of Lords will fulfil its constitutional role and give it the intense scrutiny it needs,” said charity director Caroline Abrahams. “We hope peers will vote to overturn it.”

She added: “No one disputes that the amendment significantly waters down the government’s plan for a cap on catastrophic care costs and does so in a way that protects only the better off. This is unfair and means the people who are most in need of protection against the risk of their care bills wiping out all their assets are least likely to receive it.”

In a similarly critical response, the King’s Fund also highlighted that the Lords’ role meant this was “not the end of the story”.

‘A regressive step’

Its director of policy, Sally Warren, said: “The change to the social care cap is a regressive step that will leave people with low levels of wealth still exposed to very high care costs.

“It is likely to mean that some people with moderate assets living in poorer areas will still be forced to sell their home to pay for their care, while wealthier people from richer parts of the country will be protected from this.”

However, health minister Edward Argar told the Commons yesterday: “We have always intended for the cap to apply to what people personally contribute, rather than on the combination of their personal contribution and that of the state.

“It will mean that people with fewer chargeable assets meter towards the cap more slowly, because they are paying much less each week than people who are entirely self-funding. This amendment will make it simpler to understand the amount that will go towards the cap and make it fairer.”

He added that no one would be worse off and the majority of care users better off than under the current system.

What the reforms involve

Besides the cap, the funding reforms, due to come into force in October 2023 in England, also include a more generous means-tested system:

The upper capital limit, above which people must meet their care costs in full, will rise from £23,250 to £100,000. Below this level of savings, people will be eligible for support for their care costs, whether in a care home or their own home.

The lower capital limit – below which people have all their care costs met by their council though must contribute from their income – will rise from £14,250 to £20,000. However, this rise more or less accounts for the impact of inflation since the lower limit was frozen in 2010.

Finally, councils will be expected to pay providers a “fair rate for care”. This is designed to lower, or possibly eliminate, the huge gap between the fees paid by self-funders and those paid by councils or the NHS for the people they support.

£900m saving

In a paper published last week, the DHSC estimated the reforms would cost the state an additional £3.7bn a year by 2027-28, including money allocated to the devolved nations. At that point, the costs of the system would have stabilised as people start hitting the cap following its introduction in 2023.

It said restricting contributions to the cap for those being means-tested to their care charges would save an estimated £900m by 2027-28 in cash terms.

This is one way in which the latest proposals are different both to those proposed by Dilnot and also those put forward by the coalition government in 2015 on the basis of the Care Act. These were due to have been implemented in 2016 but were then delayed and finally scrapped in 2017, by subsequent Conservative-only governments.

However, echoing Dilnot, in evidence to MPs last week, the DHSC pointed out that there were two respects in which its latest proposals were more generous than the 2015 ones.

More generous aspects

Under both models, daily living costs in a care home, calculated at a fixed rate, would not count towards the cap and the person would be liable to pay them after they passed the cap.

However, the latest proposals set daily living costs at £200 per week, rather than the £230 per week (£258 in 2023 prices) put forward in 2015.

This means that more of people’s care home fees would count towards the cap and, once they had reached it, their bills would be lower.

The DHSC said this would increase the cost of the package by £500m in cash terms by 2027-28.

While this just benefits care home residents, the DHSC said home care users would benefit from its decision to set the same upper capital limit (£100,000) for all types of care.

The 2015 plan, following Dilnot, had proposed a £118,000 (£141,000 in 2023 prices) limit for care home residents whose property was being taken into account in their financial assessment. For home care users and other care home residents, it would have been £27,000 (£32,000 in 2023). As a result, more of the latter group will benefit from state support, at a cost of £200m in cash terms by 2027-28.

Comparative benefits

Illustrating the impact of the reforms with the example of an older person on average incomes spending the average amount of time in residential care (about 97 weeks) at the average fee rate (£683), the DHSC said:

• Someone starting with £65,000 in wealth would lose 65% of this over their care career under the current system. Under the current and 2015 reforms, they would lose 22%.
• Someone starting with £100,000 in wealth would lose 45% of their wealth under the current system and 26% under either reform.
• The 2015 reform performs slightly better for those with £140,000, who would deplete 28% of their assets compared with 31% under the latest proposals and current system.

For the same person spending 10 years in residential care, the current reforms perform better for those with more than about £140,000 in assets than the 2015 proposals.

However, the 2015 reforms do better for those with less than this and more than about £60,000, reflecting Dilnot and others’ points that those with modest wealth and catastrophic costs would do worse.