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Will the cap fit? What the government should consider before introducing a cap on social care costs

The care and support older people receive has been in the spotlight this year. The 2017 General Election saw funding of social care in England climb up the political agenda. The public response to the Conservative Party’s proposed care reforms and the fallout which followed is even credited with having an impact on the election result.

In many ways, the election debate illustrated problems characteristic of England’s social care system. It is complex, often controversial and politicians often promise to reform it.

In the end little changes, but demand continues to grow and costs continue to soar.

Few people understand that, unlike the NHS, social care is means-tested so large numbers of people have to draw on their own resources to pay for it1. Access to state support to cover these care costs is tightly controlled with what has been described as “the most pernicious means-test in the whole of the British welfare state”

England remains one of the few major advanced economies not to have undertaken funding reform for long-term care in response to its ageing population.
This made it difficult to propose, what felt to many at the election, like a radical redrawing of the state’s responsibilities to pay for care.

Social care at a tipping point
The social care system in England has been described by regulators to be close to reaching a tipping point3, both in terms of the funding available and its capacity to manage increased demand. As the population ages and people live for longer with multiple and costly care needs, there are new strains being felt.
These are felt both inside local authorities and across the millions of families who find they have to organise, and pay for their own care.

There is universal acceptance that something needs to change. The question is what, and how fast those changes will take place.

One of the key areas in need of reform
– as recognised by all the major political parties – is social care finance. That is the balance between:
• state contributions for those who can’t afford to pay; and
• individuals’ own responsibility to make provision for, and meet private care costs where the state deems they can afford to pay.

Focus on a care cap
In the run-up to the election, there were reports the government was going to refresh its commitment to a lifetime cap on individuals’ care costs. This means that
even where people have to pay for their own care needs, there will be a cap on how much they have to pay. As explained later, the government’s position on a ‘care cap’ came under great scrutiny. As a result, the Prime Minister used a speech to confirm there would be an “absolute limit” on how much any individual would have to pay for social care, regardless of income or wealth.

At present, individuals who do not meet the means-test for state-funded social care do not have a limit on the amount they could be required to pay for their own care. To provide some reassurance, the government has now reaffirmed a commitment to introduce a cap on care costs.

We believe that introducing a limit on the amount individuals have to contribute towards their own care is the right way forward.

It introduces an element of social insurance where previously none existed beyond the means-test. A cap, designed in the right way, could bring much needed clarity and simplicity to the care and support system.

Set at the right level, it could even help families to plan for later life with greater certainty and be clear about their own responsibilities to save and pay for care.
Introducing a level of social insurance

There are different forms of social insurance. In this context, it means providing a state guarantee that any eligible adult will be insured against paying excessive care fees, beyond a defined level.

In this report, we set out how the funding model for care should include a degree of social insurance that:

• protects individuals who have the highest need
• makes it clear which costs are covered by the state and which are not.

If the government agrees to cap care costs, so that those individuals who face the highest costs receive support from the state, it could help many more individuals to plan for their care needs. However, this will be dependent on the contract between individuals and the state being clear and the cap being set at an appropriate level.

Who pays for what?
The government is appraising a number of options on who pays for what for social care. This report makes clear that if a cap is to go ahead, the government should include all significant costs in the cap, including daily living costs and any ‘excess’ top up fees.

We conclude that of the various options available to the government, an all-inclusive cap of £100,000 which covers all these core care costs, is the most effective approach.