For more than two decades, policy makers have been wrestling with the issue of how we as a society should pay for long-term care, from a Royal Commission which reported back in 1999 to the work of the independent ‘Commission on Funding Care and Support’ headed by Sir Andrew Dilnot. Even though the recommendations of this Commission were put into law as part of the Care Act 2014, its main recommendations have yet to be implemented. So how can we break the logjam when it comes to care funding and establish a sustainable long-term system?
The first thing we need to do is be clear what problem(s) we are trying to solve. There is no doubt that there is a short-term care funding crisis. Many of the longer-term solutions that would help to ease the pressure, such as a much bigger focus on early intervention and prevention, would take too long to deal with the pressures that local services are facing on an almost daily basis. A short-term funding boost to relieve immediate pressures is almost certainly needed.
Who provides what?
But we also need to plan for the long-term. And in particular, we need to think about the boundary between what the state will provide for us and what we provide for ourselves.
In almost any conceivable system, the state is likely to be there as a provider of last resort. For those who have no assets of their own, or who outlive the assets they do have, a civilised society should always be there to make sure that a basic level of care is available for all.
But as demand for services increases, access to that safety net service is increasingly tightly rationed. It is incredible to think that despite the large growth in the population aged over 85 in the last 10-15 years, the number of people in residential care has barely increased. The barriers to accessing taxpayer support are getting higher and this means more and more people will have to rely on their own resources or those of friends and family.
However, this does not mean that the state has no further role.
A unique feature of the care system is that it exposes the public to – in the words of Andrew Dilnot – the last big uninsured risk. We take it as given that we don’t need to worry unduly about our house burning down or our car being written off because we are (mostly) part of collective insurance schemes which help the unfortunate minority who face catastrophic costs.
But when it comes to care costs, there is no effective pooling of risk. Whilst most of us will not need expensive residential care at the end of our life, those who do can face bills which easily run into tens of thousands if not hundreds of thousands of pounds. It is unrealistic to suppose that we could or should save this amount of money when most of us will not need it.
That is why we need some form of social or private insurance to enable us to pool that risk.
The insurance market
So far, the private insurance market for care costs has been very slow to take off, for a variety of reasons.
First, very few of us want to think about ourselves as being old and frail and needing expensive care. This means that by the time we do start to think about it we don’t have very long to pay in to an insurance policy before it might have to pay out.
Second, many of us assume that somehow the state will be there in our hour of need. For as long as the state is unclear about what it will and will not provide, it becomes very hard to design, let alone to sell, insurance products for care costs.
Third, insurers are very wary of exposing themselves to the extreme costs which would be associated with a small number of people living for many years in expensive residential or nursing care. With house insurance, the insurer is generally clear as to the extent of their potential liability. But with care insurance it really does look like an open-ended commitment and it is a known fact that people who have care insurance and go into care tend to live longer than those who do not.
The state and insurance
So, if the state wants to see a functioning insurance market it needs to do two things.
First, it needs to be much clearer and more honest about the very limited nature of state provision. Yes, if you have nothing, you may get basic care provision. But it is likely to be in the cheapest accommodation in the local authority area and you are likely to have little or no choice over where you spend your final days.
Second, the state needs to take on the ‘tail risk’ of extreme longevity with care needs. This was the idea of the now famous ‘Dilnot cap’ which proposed a lifetime limit on how much people might have to pay for their social care before the state would step in. This remains a good idea and it could be the key to unlocking an insurance market which would ensure that no-one need see their life-savings ravaged because they or their loved ones incur catastrophic care costs for which they could not reasonably have been expected to provide themselves.
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