Joe Public's guide to Social Care Funding

18 months or so after Andrew Dilnot produced his groundbreaking report on how to pay for the cost of care, the coalition government have announced their plans to create ‘a new era of support’.

Jeremy Hunt’s announcement stopped short of following all of the Dilnot recommendations, but he has taken heed of some of the core principles and applied them as loosely as possible.

Unfortunately, the outcome for the vast majority of people is going to be negligible. And the scandal that people must sell their homes to pay for their care will continue inexorably.

I was mightily impressed with the way Mr Hunt MP managed to drop in the ‘caring’ and ‘fair’ references during his keynote speech. Clearly the party think-tank has managed to find enough strands to send this policy announcement spinning into fanciful coalition rebranding. However, there is very little that is either ‘fair’ or ‘caring’ in the depth of these proposals. Approximately 10% of people in care may benefit and, in truth, many more may end up paying into bespoke insurance and pension plans, but will never come close to recouping their ‘investments’.

To the government’s credit they have, at most, made everyone turn and look in the direction of our social care funding crisis, but have fallen short of taking a significant step in the right direction.

The basic numbers are summarised below:

To be implemented in April 2017	Current	Dilnot	Actual
Cap on care costs	-	£35,000	£75,000
Cap on food and accommodation costs	-	£7-10,000 pa	£12,000pa
Upper Capital Limit (means tested)	£23,250	£100,000	£123,000

To illustrate how the figures released on Monday will affect the average person we will look at Mr Joe Public who is average in every respect.

How long does it take for Mr Public to reach the £75,000 cap?

87 year old Mr Public is admitted into a residential care home in April 2017 (just after the reforms take effect).

He has total assets of £250,000 (including the value of his home) and has a pension and benefits income of £250 per week.

He is charged £650 per week for his place at the Wishful Thinking Care Home (an average amount for an average care home). Therefore, after his benefits income he has to pay £400 per week from his assets.

However, the local authority have a ‘benchmark’ cost (the amount that they are prepared to pay for the weekly cost of residential care) of £550 per week.  That means in the eyes of the local authority Mr Public only pays £300 towards his care every week, not the £400 he actually stumps up. In this ‘metered’ system Joe will tick over at £300 per week for his care costs until he reaches the cap of £75,000. This works out at 250 weeks in total, close to 5 years.

On his 92^nd birthday Mr Public has a party because he no longer has to pay all of his care costs.

Now the local authority begins to pay £300 per week as a contribution towards his care, £250 is still paid from his income. Unfortunately that leaves a shortfall of £100 per week still to be paid from his assets.  Poor Joe will have to continue to pay £5,200 per year for the rest of the time he lives at Wishful Thinking Care Home.

Don’t forget he also has to contribute up to £12,000 per year for his food and accommodation costs. This could work out at a further £230 per week.

Care costs if you live in your own home are also covered under the proposals, but don't hold your breath waiting for the cap to kick in.

If Mrs Josephine Public receives 1 hour of care at home a day for 7 days a week at the cost of £20 per hour it will take about 10 years for her to reach the £75000 cap. The cost of her care is £7280 per annum. It is very rare for an older person to receive home care services for that length of time. 

So what about the means- testing (the Upper Capital Limit)?

Let us say that Mr Joe Public has total assets, including the sale of his home, of £100,000. He still has his £250 income, but is below the £123,000 threshold.

His local authority is able to charge £1 for every £250 of assets that Mr Public has. That works out at £400 plus his income of £250 making a total of £650 per week. That is the amount of money Mr Public pays for his place at Wishful Thinking Care Home. Therefore the local authority does not need to make any contribution to his care.

Consequently, our friend, Joe Public will not benefit from Mr Hunt’s proposals and I’m afraid to say many other people will be in the same boat. The figures will be wildly different for every person, but in essence, the principle is flawed.

Average length of stay

All research conducted by organisations such as BUPA and Age UK state that the average length of stay in a care home is 1-2 years. Sadly, it is highly likely that Joe or Josephine will have passed away long before they get anywhere close to cap and upper capital limits. If they had had the foresight to take out one of the new insurance policies created in response to the social care funding proposals then they may well have passed away before the policy comes to fruition. 

When are the proposals due to take effect?

If you are receiving care now, or are in a position to be considering impending care options, these proposals will not affect you. Not until 2017 anyway.

Mr Hunt did announce that people will be able to defer payments in 2015, but it is not fully clear how this will work.

What should I do now?

At the present time there are some very limited insurance products on the market to help pay for care costs, but the uptake of these is very low. Over the coming 6 months-1 year more insurance and pension alternatives are bound to be launched, but paying for social care has low rewards for the insurance industry. In other words there is not a lot of scope for them to make a lot of money. It is likely that the new products, wistfully alluded to by Mr Hunt and Mr Cameron, will be relatively expensive. Also, bearing in mind the low likelihood that the insurance policy will ever kick in then it is not looking like the most attractive option, unless, of course you have a very good salary and can afford to pay for peace of mind.

Conclusion

The Dilnot Report had the potential to hail a revolution in the way we fund care and in the way health and social services work together for the good of the individual. Jeremy Hunt’s proposals announced on Monday fell pitifully short of both objectives.

I’m afraid the government has managed to pay enough lip service to Dilnot’s recommendations to garner a few positive headlines in Wednesday’s fish and chip paper. The plain fact is that unless you are part of a small percentage of the ageing population it will have absolutely no effect on you. The most likely beneficiaries may well be those in the insurance and pension industries.

Today we have witnessed a casual doff of the Conservative cap to dealing with social care costs. I am quite certain that before we get close to 2017 we will have had to take real action for our age-related crisis and Mr Hunt’s proposals will be long forgotten.

No one said that this was going to be easy!