Care cap: government change leaves less well-off at risk of ‘catastrophic’ bills, analysis finds

People with less wealth and in poorer regions will have significantly reduced protection against “catastrophic” care costs due to a government change to the way the cap on care costs will work, an analysis has found.

The proposed government amendment to the Care Act 2014 would would mean that only client contributions to personal care costs – not the full bill – would count towards the £86,000 cap for those receiving means-tested council support. As a result, they would take much longer to reach the cap, and become eligible for free personal care, than wealthier people.

The proposal – added to the current Health and Care Bill in November – was much criticised at the time by opposition MPs, charities and the the originator of the policy, Andrew Dilnot, for reducing protections from high care costs for the less well off.

‘Catastrophic costs’

Protection from such “catastrophic costs” – often taken as being in need of care for 10 years or more – is a core rationale for the policy, which is due to come into force in October 2023.

The extent of this impact was set out yesterday in an analysis by think-tanks the Institute for Fiscal Studies and the Health Foundation.

They stressed that the change would not affect most people needing care, as they would either not reach the cap or be eligible for means-tested support under the way the cap is legislated for currently.

However, they found:

• Older people in the second least wealthy fifth of the population would lose out the most from the Care Act amendment, with a 10-year residential care journey costing them an extra £12,000 on average, equivalent to 10% of their assets. This compares with a loss of 1%, or £2,300, on average, for those in the second wealthiest fifth.
• Regionally, those in the North East, Yorkshire and the Humber, and the Midlands would see the biggest erosion of protection against catastrophic costs. For a 10-year residential care journey, a quarter of North East residents would have to contribute an extra 10% of their assets, compared with one in forty Londoners.
• Someone with £106,000 in assets and annual income of £11,800 would be most affected, losing  £76,000, or 71% of their initial assets under the government amendment, compared with £44,000, or 41% of their assets, under the existing legislation, following 10 years in a care home.
• Those who receive several years’ domiciliary care before entering residential care would be particularly hard hit. For example, someone with annual income of £12,000, housing wealth of £75,000 and other assets of £25,000 would see their assets depleted by £52,000 under the amendment, compared with £12,000 under current legislation, if they had five years’ home care followed by five years in a care home.

‘Significantly reduced benefits’

“The new social care cost cap is important not just for those who end up having large care costs,” said David Sturrock, a senior research economist at the IFS. “Given the unpredictability of future care needs, it offers many people peace of mind and an ability to plan. The government’s proposed amendment would significantly reduce those benefits for those with moderate assets and income.

“This disproportionately affects those in the North East, Yorkshire & the Humber and the Midlands, given lower house prices and wealth levels in those regions compared to the South of England. This change seems to cut across the government’s plans to “level up” across regions.’”

The version of the cap legislated for through the Care Act has never been implemented, though provides the basis for the governemnt’s forthcoming reforms.

The amendment seems very likely to pass into law as it has already been backed by the House of Commons, and an attempt to overturn it in the Lords was unsuccessful.

‘More people will be supported’

The government has justified the amendment by saying that its reforms as a whole (see below)would leave no one worse off and many better off than the current system.

A Department of Health and Social Care spokesperson said: “For the first time in history we are stopping people having to pay unlimited quantities for their care.

“Compared to the current system more people will be supported with their social care costs, have greater certainty over what they need to pay and receive higher quality care.”