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

Think-tanks set out extent to which Care Act amendment hits people with moderate wealth and residents of poorer regions

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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.”

Funding reforms in brief

  • People will be eligible for free personal care once they have spent £86,000 of their own money on the costs of meeting their assessed eligible needs, excluding daily living costs in a care home. Money spent by their council on meeting their needs would not count, under the proposed amendment to the Care Act.
  • 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.
  • Daily living costs in a care home – both before and after someone reaches the cap – will be counted at a fixed rate of £200 a week. This is more generous than under the original version of the cap, under which it would be £258 a week.
  • Councils will be expected to pay providers a “fair rate for care” in order to remove the significant difference in the fees paid by self-funders and council-funded care users.

For more insight, see Community Care Inform legal editor Tim Spencer-Lane’s guide to the reforms.

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

  1. G February 8, 2022 at 4:22 pm #

    The ‘care cap’ appears to be a misnomer due to not including hotel costs however surely it is entirely fair that the tax payer should not pay twice for someone’s care by Local Authority contributions being double counted as personal contributions.towards the care cap limit?

  2. Chris Sterry February 9, 2022 at 12:58 pm #

    To ensure people with less wealth and in poorer regions are not disadvantaged would it not be fairer to only take earned income into account, rather than welfare benefits people receive or remove the personal contribution altogether.

  3. Beth February 11, 2022 at 7:27 pm #

    Having worked dam hard for nearly 40 years in health and social care I am adamant that I will not be giving care providers my hard earned property.
    This gov will never level up or be fair to northerners.
    Northerners will be lucky to live long entropy even get their pensions! Life expectancy reduced for us! Thanks Boris!!
    Retirement.. not possible in cold underfunded north. Will take my hard earned money and run thsnks..

  4. A Man Called Horse March 2, 2022 at 7:09 pm #

    The Tories are absolute scum. Credit due to them because it was deliberate they hate the North and Northern people, it’s their own fault that Daddy didn’t give them a trust fund. They knew what they were doing with the reforms it was designed to leave the children of northern people with nothing including a roof over their head. Clearly many of the children of 1960s boomers will never be able to afford to buy and they are clearly saying that their children can rent or sleep in the park. Meanwhile southern Tories get to keep 90% of their assets and pass them on to little Tabitha & Rupert to compare the Tories to vermin would be an insult to vermin. People should take action to transfer their housing assets 7 years before needing care to avoid accusations of deprivation of assets. Make sure your children get what you worked hard for all of your life. Personally I would rather burn my house to the ground than hand it over to these thieves and charlatans. I guess this is their idea of levelling the people of the North down into dust. Fight back stop voting for rich Eton toffs that see it as their greatest achievement that they have left you with almost nothing.