Long-term care: The Latest Government Report
A report into funding the cost of long-term care,commissioned by the coalition government shortly after coming into office, was published in July. If you have the feeling that this is not the first such report, you would be right.
A Royal Commission into the same subject was initiated by another relatively new government – that of Tony Blair – in late 1997. The Royal Commission’s report emerged in 1999 and suggested the state should meet all personal care costs. Not surprisingly the proposal horrified the Treasury and, as a result, was kicked into the long grass.
However, the issue did not disappear and, over the years, criticism of the vagaries of the care-funding system accumulated.Devolved government saw the UK’s four regions each developing their own approach, with Scotland choosing to offer free care, but England sticking to a strict means-tested system.
In July 2009 the previous government issued a Green Paper on care costs, a move widely seen as designed to defer difficult decisions until after the election.Once this had been achieved, the paper joined the Royal Commission report on a dusty shelf.
No shelf space for the new report?
Whether the latest report will suffer the same fate as the other long-term care reviews remains to be seen. The chairman of the commission which authored the latest report, the respected economist Andrew Dilnot, has pulled no punches. In his letter to the Chancellor and HealthSecretary accompanying the report he said ‘The system is in need of urgent reform. There have been many years of debate on how to take this forward; now is the time for action’.
The report’s recommendations, which under devolved government rules would only affect England, are:
- Contribution Cap If you enter care at or after age 65, your lifetime contribution to care costs should be capped at £35,000. A lower figure would apply if you enter care at a younger age. The present regime places no cap on personal contributions which means, as the report notes ‘some could spend hundreds of thousands of pounds’. Based on average 2010/11 fee rates, £35,000 would pay for a little under a year’s nursing care (at £693 a week) or about 16 months’ residential care (at £498 a week).
- Means Test Capital Increase At present, if you have capital of more than £23,250, you are given no state support beyond,possibly, the flat rate £108.70 a week for NHS funded nursing care. The Dilnot report proposes an increase in the capital limit to £100,000. However, this increase is not quite as generous as it seems, because you would still be required to make some contribution to the extent that your capital exceeds an unchanged lower means test limit of just £14,250. Below that figure, the state pays all. Between these limits you would be expected to make a contribution towards your care of £1 a week per £250 of capital above the lower limit –equivalent to up to 20.8% of your capital each year. For example, if you had total capital of £64,250 your contribution would start at £200 a week.
- Living Costs If you enter care, you would also be required to pay a standardised amount to cover general living costs, even if the state is paying your other costs. The commission suggested ‘a figure in the range of £7,000 to £10,000 a year’, but used £10,000 in its cost calculations.At just under £200 a week, there have already been comments that this sum is too low.
- Other Benefits There would be no change to entitlement to long-term disability benefits, but payment of attendance allowance would stop if the state pays your care costs because you have reached the £35,000 contribution ceiling. Under today’s rules attendance allowance is stopped if the state pays because your capital is below the £23,250 limit.
The cost of the proposals would be £2.2bn in2015/16 rising to £3.6bn ten years later. Given the constraints on spending,the Government’s initial response has been sadly predictable: more consultation. It was stated in the report that Spring 2012 will see publication of a White Paper which will include the findings of the Commission.
As the report says, ‘There is no way of predicting in advance what the (care) costs might be for any one person’. There is currently no insurance cover available for long-term care, other than‘immediate needs’ annuities for those just about to enter, or already in care.This is a specialist area on which Fiducia are qualified to advise.
For those not yet requiring care, the strategy is largely about making sure you have sufficient retirement funds and ensuring that those funds are appropriately managed during retirement; again issues on which we have vast experience and expertise.