The two fundamental issues to be considered by the Green Paper on social care for older people, due in the summer, are the long term sustainability and equity of the system. But running like a fault line through both is the fundamental division between health care, which is essentially free, and social care, which is essentially chargeable. That divide leads to problems of both fairness and efficiency.
The political principle of free health care has become something of a sacred cow, even though it is in practice impure, given the charges for prescriptions, eye care and dentistry. Yet it remains politically acceptable to charge for social care, even though the impact of, say, health condition of cancer and the social care condition of Alzheimer’s disease on people’s lives and finances may be very comparable. The cancer sufferer faces no treatment or accommodation costs, whatever their earnings or capital assets. The Alzheimer’s sufferer in nursing care is likely to be paying £1,000 per week until their assets are reduced to £23,250. So a house owner with equity of £180,000 who is in nursing care for three years will likely pay £156,000.
That won’t happen to many people. The Dilnot Commission’s (2011) analysis showed that 20% will turn out to have no social care need, and the median total cost of social care is just £20,000. However, a small number of people will incur very high costs, and every house owner faces that risk. Such a pattern suggests that the risk should be pooled, as with the NHS (ill health risks fall similarly) or fire insurance cover.
The Dilnot Commission’s research showed widespread dissatisfaction with the current position. People feel it is unjust for two main reasons. First, because it is a matter of chance whether an individual faces long-term costs classifiable as a health need or as social care. Second, many people feel that, having saved throughout their lives to purchase a house, they should be able to pass the asset on to their descendants subject only to the universally applicable rules of inheritance tax.
The problem could, in theory, be solved by insurance. However, the private sector doesn’t provide an insurance product for social care costs: not because they are unwilling, but because they don’t know what the cost curve will be for current insurance purchasers – costs may well be 40 years away, and further big shifts in the patterns of old age spending could occur. The private sector can’t take on such a potential for ‘aggregate shocks’, so there is a complete market failure. This is not to blame the private sector: the difficulties faced may be confirmed by the realisation that the problem is not UK-specific – nowhere in the world is there such a market. The key difference in covering this through the public purse is that the state can change the level of the cap in future in response to any aggregate shock, as a private company could not.
Moreover, this sharp divide makes the process of deciding whether someone qualifies for Continuing Health Care (CHC) cost-critical for both organisations and individuals. It makes a huge difference to the budgets of councils (who pay for the social care of those who cannot pay for themselves) and CCGs how someone is classified. That causes unnecessary disputes, which can undermine joint working. At present people are forced to ‘self-insure’ – which causes stress and leads to strong incentives to ‘cheat’ by giving away assets.
In terms of equity, the system needs to ensure fairness both within and between generations. That isn’t to say that older people shouldn’t make a larger contribution overall to the costs they incur than they do currently, given that their wealth relative to younger generations has increased sharply in recent decades, but the balance needs to be rationally justifiable. The system adopted also needs to protect individuals from very high social care costs by pooling risks.
The proposals enacted (but not implemented) by the Care Act, 2014, would have addressed this and reduced the CHC boundary problem. There are other options, and CIPFA does not recommend any particular system for organising the split between state and individual contributions to the costs of social care. However, CIPFA believes it is vital to make a strategic change, not to defer a substantive decision – as has already happened several times over the past two decades in which the problem has been getting worse. That strategic change should reduce the sharpness of the differential between social care, as a largely paid-for service, and health as an essentially free service; and it should protect individuals from the possibility of very high social care costs by finding a means of pooling risks.