Memorandum by the MAP2030 Research Group
(SC 55)
SOCIAL CARE
EXECUTIVE SUMMARY
— This memorandum covers the costs of long-term
care and disability benefits for people aged 65 and over under
a range of potential reforms to the funding system in England.
— Under the current system, public expenditure
on long-term care and disability benefits for older people is
projected to rise from £15.8 billion in 2007 to £37.6
billion in 2032, an increase of 225%.
— The public expenditure costs in 2007
of introducing a policy of free personal care, along the lines
proposed by the Royal Commission on Long Term Care (1999), would
be approximately £1,980 million more than the current system;
of introducing free personal care for people living at home, proposed
by the Prime Minister at the Labour Party Conference, would be
approximately £660 million more than the current system;
and of introducing a Partnership model the along lines suggested
by the Green Paper, assuming 33% of personal care costs are guaranteed
(HMG 2009), would be approximately £470 million more than
the current system.
— The Green Paper proposes that the new
National Care Service could be funded by transferring some disability
benefits into the social care system. If, under the Partnership
model considered here, Attendance Allowance and Disability Living
Allowance for older people were withdrawn, then public expenditure
costs in 2007 would be approximately £4,140 million lower
than under the current system.
— Average weekly financial gains to care
home residents would be largest for free personal care (around
£95 a week in 2007), but would be between £30 and £40
a week under partnership options.
— Average weekly gains for home care users
would be some £20-£30 a week under free personal care.
They would be just £1 to £2 a week under the partnership
model or, if Attendance Allowance and Disability Allowance were
withdrawn, home care users would lose around £40 a week on
average.
— Gains from all the reform options examined
are largest for care recipients in the highest fifth of the (age-specific)
income distribution and smallest in the lowest fifth. Under the
partnership model with Attendance Allowance and Disability Living
Allowance withdrawn, losses are largest in the lowest income group.
— Our findings on the partnership model
are dependent on the form of the means test which would remain
for that part of care costs not met by the state, particularly
if Attendance Allowance and Disability Allowance are withdrawn.
We have assumed that those means tests would operate as now. If
they were more generous, gains (losses) could be larger (smaller)
and more targeted on those on lower incomes.
ACKNOWLEDGMENTS
The MAP2030 Research Group is funded (grant
number RES-339-25-0002) under the New Dynamics of Ageing Programme,
a cross-council research programme involving the Economic and
Social Research Council (ESRC), the Medical Research Council (MRC),
the Arts and Humanities Research Council (AHRC), the Biotechnology
and Biological Sciences Research Council (BBSRC) and the Engineering
and Physical Sciences Research Council (EPSRC).
The Family Resources Survey and General Household
Survey are crown copyright and made available by the Office for
National Statistics via the UK Data Archive.
All responsibility for the analysis and views
expressed in this paper rests with the authors.
Ruth Hancock and Marcello Morciano
Health Economics Group, Faculty of Health
University of East Anglia
Juliette Malley, Derek King, Linda Pickard, and
Adelina Comas-Herrera
Personal Social Services Research Unit
London School of Economics
PAYING FOR
LONG-TERM
CARE: POTENTIAL
REFORMS TO
FUNDING LONG-TERM
CARE
1. This discussion paper has been prepared
by the MAP2030 study team as a contribution to the House
of Commons Health Select Committee Inquiry into Social Care. This
inter-disciplinary team, covering a number of institutions, is
investigating the needs and resources of older people to 2030.
It should be noted at the outset that this report is independent
of work commissioned from the PSSRU by the Department of Health,
exploring the costs and benefits of funding options in the Government's
Green Paper Shaping the Future of Care Together (HMG 2009).
2. The present paper covers a range of potential
reforms to the funding system for long-term care in England. It
presents current and projected future public expenditure costs
of long-term care for older people under the reform options and
the implications of the options for the costs of care borne by
individuals in different income groups. The reform options considered
here include a version of "free" personal care which
was a policy recommended by the Royal Commission on Long Term
Care (1999), the version of "free" personal care proposed
by the Prime Minister at the Labour Party Conference, and several
versions of a Partnership model along lines suggested by the recent
Green Paper on care and support (HMG 2009).
3. In light of concerns about the restricted
coverage of the current system we compare expenditure under a
selection of the reform options to expenditure under a potential
expansion in care services for older people along the lines of
the care packages recommended in the Wanless report on funding
social care (Wanless 2006). Such an expansion could also come
about as a result of the reforms themselves: by reducing the cost
of care to individuals the reforms might generate an increase
in demand for care. The reforms could drive up the fees that care
homes charge to local authorities. The sensitivity of the reforms
to such changes is therefore investigated. All estimates relate
to England and are expressed in constant 2007 prices.
METHOD
4. The method is as used in an earlier study
and is described in detail in Hancock et al (2007). The
analyses were conducted using two linked models—the CARESIM
microsimulation model and the Personal Social Services Research
Unit (PSSRU) cell-based long-term care finance model. CARESIM
simulates the incomes and assets of future cohorts of older people
and their ability to contribute towards care home fees or the
costs of home-based care, should such care be needed (Hancock
et al. 2003). The PSSRU model makes projections of demand
for long-term care and associated expenditure, under clearly specified
assumptions (Wittenberg et al. 2006).
POLICY OPTIONS
CONSIDERED[31]
Funding Policy Options Considered
5. Free personal care: The policy
of free personal care has been described and discussed in detail
elsewhere (Royal Commission on Long-Term Care 1999, Wanless 2006).
The Royal Commission report envisaged several ways of implementing
free personal care, one of which was that, for residential care,
there would be a personal care allowance, applied by all local
authorities (Royal Commission on Long Term Care 1999: 66 £6.39).
This sum would be deducted from the charges made in individual
care homes, leaving the balance representing living and housing
costs[32].
There would be means-testing of ability to pay for hotel costs,
entitling people with little means to receive help with the charges
for living and housing. An important feature of this approach
is that the amount allowed for personal care is applicable in
any care home. This "fixed care costs" version of free
personal care is the one we model. The weekly personal care allowance
was set at £248.70 in April 2007 and assumed to rise with
general price inflation in future years. The cost of all need
for personal care at home, as assessed by local authorities, is
assumed to be met by the state under free personal care.
6. Free personal care for those with
the highest needs living in the community: The Prime Minister
announced the Government's intention to introduce a policy of
free personal care for older people with the highest needs living
at home. We model the implications of this policy by assuming
that the means-test for local authority support for home care
would be abolished for older people with personal care needs currently
receiving "high" or "very high" packages of
care, as defined by our model. In practice this means that those
people with personal care needs receiving packages of home care
of five or more hours per week would no longer contribute to the
costs of their care. The means test remains for people receiving
fewer than five hours of home care, for those without personal
care needs and for older people living in care homes.
7. Options relating to a partnership
model: The Green Paper proposes a partnership model in which
everyone who qualifies for care and support on the basis of their
care needs would be entitled to have a set proportion of their
basic care and support costs met by the state. The proposal has
a progressive element such that older people with fewer means
will have more of their costs met by the state; and those with
the fewest means will have all their care costs met by the state
(HMG, 2009). Based on our interpretation of the Green Paper, we
assume that all those who qualify for care are eligible to have
one-third of their personal care costs met by the state.[33]
The Green paper is not specific on who would be eligible for more
than a third of their care costs. We assume that those who under
the current funding system are entitled to a state contribution
of more than one-third of their care costs, continue to receive
the same state contribution as under the current system.[34]
8. Partnership model with withdrawal
of some disability benefits: The Green Paper also proposed
that the new National Care Service could be funded by transferring
monies from some elements of the benefits system into the social
care system. It suggests that one option is to withdraw Attendance
Allowance (AA) for new claimants and transfer the money into the
social care system (HMG, 2009). AA is a non means-tested benefit
for disabled older people aged 65 and over and is payable at one
of two rates. We model a variant of the partnership scheme in
which AA and Disability Living Allowance (DLA)[35]
are withdrawn. Since receipt of AA or the middle or higher rate
of DLA determines eligibility for a Severe Disability Premium
(SDP) in Pension Credit we assume that if AA and DLA were withdrawn,
the SDP would also be withdrawn. Receipt of AA and DLA also determine
eligibility for Carer's Allowance for carers of people with impairment,
and the Pension Credit Carer Premium, but our analysis does not
cover these benefits. Modelling of the withdrawal of AA under
the current system, carried out by Forder and Fernandez (2009)
for the Department of Health, has allowed for some targeting,
but this does not seem to be described in the Green Paper itself
and has not been modelled here. The Green Paper also implies some
transitional arrangements, whereby "people receiving any
of the relevant benefits at the time of reform would continue
to receive an equivalent level of support and protection under
a new and better care and support system" (HMG 2009: 104).
The modelling here does not take account of this phasing-in of
the reforms.
9. Effects of rises in care home fees:
In independent care homes, fees paid in respect of residents who
are supported by the local authority are often lower than those
paid by "self-funders". The free personal care and partnership
model options would increase the proportion of care home residents
eligible for local authority support with their fees and it is
implicitly assumed here that all those receiving local authority
support with their fees under the reform options would be eligible
for the lower local authority fee rates. There could therefore
be pressure for local authorities to increase the fees they offer
care home owners in respect of local authority supported residents.[36]
Two possibilities are considered here. In the first, local authority
fees are assumed to remain at their current levels. In this case,
part of the costs of the change would implicitly fall to care
home providers, which is probably unrealistic. If fees for local
authority-funded residents do not rise, the reforms would yield
reduced revenue for care home providers and some might go out
of business. In the second possibility, local authority fees are
assumed to rise such that provider income per resident remains
at its 2007 level under the current funding system. The higher
fee rates are assumed to apply to all supported residents and
not just to those specifically benefiting from the reformed funding
system. The state contribution to personal care is taken to be
unchanged so that all of the fee rise relates to hotel costs and
is subject to means-tested user charges under all options.
Pattern of Care Policy Options Considered
10. Wanless pattern of care: A scenario
describing an expansion of services for disabled older people
is modelled along the lines of the "core business" scenario
described in the King's Fund Social Care Review, led by Sir Derek
Wanless (Wanless 2006). In the Wanless Review, under this scenario
all older people identified as having personal care needs receive
services at levels which are deemed to be cost-effective. Cost-effective
services are defined as those which cost less than £20,000
per person per year to produce an outcomes gain equivalent to
one ADLAY, where an ADLAY is an ADL[37]-adjusted
life year and can be understood as a year of life fully ADL-compensated.
In the scenario reported here we have expanded services so that
the total numbers of older people receiving services match those
reported in Wanless (2006).
11. This scenario addresses the criticism
that there is large unmet need in the current system (CSCI 2008;
HMG, 2009). It also demonstrates the sensitivity of the projections
to changes in the eligibility criteria for care services, which
is of central importance to the partnership model since the offer
of public resources is available only to those who "qualify"
for care and support services. Combined with the free personal
care and partnership funding reforms this pattern of care can
also give an indication of the public expenditure consequences
of demand for care increasing in response to the reduced care
costs that individuals would face under those reforms.
"BASE CASE"
ASSUMPTIONS
12. The PSSRU and CARESIM models produce
projections on the basis of specific assumptions about future
trends in the key drivers of demand for long-term care (Box 1).
A base case projection takes account of expected changes in factors
exogenous to long-term care policy, such as demographic trends
and trends in housing tenure. It holds constant factors endogenous
to long-term care policy, such as patterns of care and the funding
system. The base case is used as a comparison when the assumptions
of the model are varied in alternative scenarios.
BOX 1
KEY ASSUMPTIONS OF THE BASE CASE
— The number of people by age and gender changes in line with the Government Actuary's Department 2006-based population projections for England.
|
| — Marital status changes in line with GAD 2006-based marital status and cohabitation projections for England and Wales.
|
| — Prevalence rates of disability by age and gender remain unchanged, as reported in the 2001-02 General Household Survey (GHS) for Great Britain.
|
| — Home-ownership rates, as reported in the pooled 2003-04, 2004-05 and 2005-06 Family Resources Survey (FRS), change in line with projections produced by the CARESIM model.
|
| — The proportions of older people receiving informal care, formal community care services, residential care services and disability benefits remain constant for each sub-group by age, disability and other needs-related characteristics.
|
| — The funding system remains unchanged as the current system for England.
|
| — Health and social care unit costs rise by 2% per year in real terms (but non-staff revenue costs remain constant in real terms). Real Gross Domestic Product rises in line with HM Treasury assumptions.
|
| — The supply of formal care will adjust to match demand and demand will be no more constrained by supply in the future than in the base year.
|
|
PUBLIC EXPENDITURE
UNDER CURRENT
FUNDING SYSTEM
AND POLICY
OPTIONS
13. All results relating to public expenditure under
the current funding system and policy options are shown in Tables
1 and 2 and Figure 1.
Public Expenditure under Current Funding System
14. Public expenditure on long-term care and disability
benefits for people aged 65 and over is projected to rise, under
base case assumptions, from £15.8 billion in 2007 to £37.6
billion in 2032, an increase of 225%. These figures relate to
public expenditure on long-term health services and social services
and to all disability benefits for older people in England. If
Gross Domestic Product (GDP) rose in line with HM Treasury assumptions,
public expenditure on long-term care and benefits would rise from
1.29% of GDP in 2007 to 2.05% in 2032. These projections are sensitive
to varying the assumptions about future life expectancy, trends
in disability rates and trends in real unit costs (Wittenberg
et al. 2006). They relate to the funding system currently
used in England.
Public Expenditure Costs of Options
15. Under free personal care (fixed care costs variant)
around 100,000 privately-funded care homes residents and around
200,000 privately-funded users of home care would become eligible
for public support. The additional net public expenditure cost,
compared to continuation of the current funding system, would
be around £1,980 million at 2007 prices comprising an additional
cost of around £2,075 million to social services, offset
by a saving of around £95 million in disability benefits.
This saving occurs because publicly-funded care home residents
cease to receive AA/DLA and under free personal care, all care
home residents are publicly-funded. The additional net public
expenditure cost would rise to around £3,750 million in 2027
and £4,890 million in 2032 at constant 2007 prices. Public
expenditure on long-term care and disability benefits would rise
from 1.46% of GDP in 2007 to 2.31% in 2032.
16. Under free personal care at home for people with
high needs the additional net public expenditure cost would be
around £660 million in 2007. The net additional cost would
rise to around £1,380 million in 2027 and £1,770 million
in 2032 at constant 2007 prices. Public expenditure on long-term
care and disability benefits would rise from 1.35% of GDP in 2007
to 2.14% in 2032.
17. Under a Partnership model (with 33% of personal care
costs guaranteed), the additional net public expenditure cost,
above continuation of the current system, would be around £470
million in 2007, comprising a cost of around £570 million
to social services offset by a saving of around £95 million
in disability benefits. The net additional cost would rise to
around £1,170 million in 2027 and £1,590 million in
2032 at constant 2007 prices. Public expenditure on long-term
care and disability benefits would rise from 1.33% of GDP in 2007
to 2.13% in 2032.
18. If, under a Partnership model, disability benefits
are withdrawn, net public expenditure cost would be around £4,140
million lower than under the current system in 2007.[38]
There would be additional costs of around £1,175 million
to social services but this is offset by a reduction of £5,320
million in disability benefits. The net reduction in public expenditure
would rise to around £6,040 million in 2027 and £6,480
million in 2032 at constant 2007 prices. Public expenditure on
long-term care and disability benefits would be 0.95% of GDP in
2007, which is a lower figure than the current percentage (1.29%).
This would rise to 1.69% in 2032, which again would be lower than
the percentage in 2032 under the current system (2.05%).[39]
Sensitivity Analysis: Care Home Fees
19. Under free personal care where care home fees for
local authority-supported residents rise, the additional net public
expenditure cost, above continuation of the current system, would
be around £2,200 million at 2007 prices rising to around
£4,220 million in 2027 and £5,510 million in 2032 at
constant 2007 prices. Public expenditure on long-term care would
rise from 1.47% of GDP in 2007 to 2.34% in 2032.
20. Under the Partnership model where care home fees
rise, the additional net public expenditure would be around £710
million in 2007 rising to around £1,660 million in 2027 and
£2,200 million in 2032 at constant 2007 prices. Public expenditure
on long-term care would rise from 1.35% of GDP in 2007 to 2.17%
in 2032.
21. If, under the Partnership model, disability benefits
are withdrawn and LA fees rise, net public expenditure cost would
be around £3,900 million lower in 2007. The reduction
in public expenditure would be around £5,540 in 2027 and
£5,820 million in 2032 at constant 2007 prices. Public expenditure
on long-term care would rise from 0.97% of GDP in 2007 to 1.73%
in 2032. These percentages are both lower than their respective
equivalents under the current funding system.
Sensitivity Analysis: Wanless Packages of Care
22. This sensitivity analysis considers the net public
expenditure cost of an expansion of care services for older people
as per the care packages recommended in the Wanless report on
the funding of social care. The additional net public expenditure
cost, compared with continuation of current care packages, would
be around £3,200 million at 2007 prices comprising a cost
of around £2,550 million to social services, £200 million
to the NHS and £485 million in disability benefits. The net
cost would rise to around £8,110 million in 2027 and £10,140
million in 2032 at constant 2007 prices. Public expenditure on
long-term care would rise from 1.56% of GDP in 2007 to 2.60% in
2032.
23. If free personal care was implemented alongside expanded
packages of care, the additional net public expenditure cost would
be around £5,640 million in 2007 rising to around £12,750
million in 2027 and £16,100 million in 2032 at constant 2007
prices. Public expenditure on long-term care would rise from 1.76%
of GDP in 2007 to 2.92% in 2032.
24. If partnership was implemented alongside expanded
packages of care, the additional net public expenditure cost would
be around £3,610 million in 2007 rising to around £9,170
million in 2027 and £11,580 million in 2032 at constant 2007
prices. Public expenditure on long-term care would rise from 1.59%
of GDP in 2007 to 2.27% in 2032.
Table 1
PUBLIC EXPENDITURE ON LONG-TERM CARE AND DISABILITY BENEFITS
FOR PEOPLE AGED 65 AND OVER UNDER POTENTIAL REFORMS TO FUNDING
LONG-TERM CARE, ENGLAND, 2007
| | |
| £ million |
| Public expenditure
| Long-term care | Disability benefits for
|
| on long-term care
| Personal | NHS
| people aged 65+* |
| and disability |
Social | |
|
| benefits for people
| Services | |
|
| aged 65+ |
| | |
Base case—Current funding arrangement in England
| 15,810 | 6,765
| 3,725 | 5,320
|
| Free personal care in all settings | 17,790
| 8,840 | 3,725 | 5,225
|
| Free personal care for high/very high domiciliary care users
| 16,465 | 7,420 | 3,725
| 5,320 |
| Partnership with 33% guarantee | 16,280
| 7,330 | 3,725 | 5,225
|
| Partnership, AA/DLA (65+) discontinued |
11,670 | 7,945 | 3,725
| 0 |
| Free personal care + fee rise | 18,010
| 9,060 | 3,725 | 5,225
|
| Partnership + fee rise | 16,515
| 7,565 | 3,725 | 5,230
|
| Partnership, AA/DLA (65+) discontinued + fee rise
| 11,910 | 8,185 | 3,725
| 0 |
| Wanless packages of care | 19,015
| 9,295 | 3,915 | 5,805
|
| Wanless packages of care + free personal care
| 21,455 | 11,855 | 3,915
| 5,685 |
| Wanless + partnership | 19,425
| 9,825 | 3,915 | 5,685
|
Source: Caresim and PSSRU Models
| | | |
|
| Note: *"Disability benefits for people aged 65 and over" refers to Attendance Allowance (AA) and Disability Living Allowance (DLA).
| | | |
|
| |
| | |
Table 2
PUBLIC EXPENDITURE ON LONG-TERM CARE AND DISABILITY BENEFITS
FOR PEOPLE AGED 65 AND OVER UNDER POTENTIAL REFORMS TO FUNDING
LONG-TERM CARE, ENGLAND, 2007 AND 2032 (£ MILLION, % GDP)
| Public Expenditure—in £ million (2007 prices)
| Public expenditure % GDP
|
| 2007 | 2032*
| 2007 | 2032* |
Base case—Current funding arrangement
| 15,810 | 37,590
| 1.29 | 2.05 |
| Free personal care | 17,790
| 42,480 | 1.46 | 2.31
|
| Free personal care for high/very high domiciliary care users
| 16,465 | 39,355 | 1.35
| 2.14 |
| Partnership | 16,280 | 39,180
| 1.33 | 2.13 |
| Partnership, no AA/DLA | 11,670
| 31,115 | 0.95 | 1.69
|
| Free personal care + fee rise | 18,010
| 43,100 | 1.47 | 2.34
|
| Partnership + fee rise | 16,517
| 39,815 | 1.35 | 2.17
|
| Partnership, no AA/DLA + fee rise | 11,910
| 31,770 | 0.97 | 1.73
|
| Wanless | 19,015 | 47,735
| 1.56 | 2.60 |
| Wanless + free personal care | 21,455
| 53,685 | 1.76 | 2.92
|
| Wanless + partnership | 19,425
| 49,165 | 1.59 | 2.67
|
Source: Caresim and PSSRU Models
| | | |
|
| Note: * Projections of public expenditure are under-estimates since they assume constant take-up rates of DLA by age and gender and do not allow for maturation of the DLA scheme.
| | | |
|
| |
| | |
Figure 1
PUBLIC EXPENDITURE ON LONG-TERM CARE AND DISABILITY BENEFITS
(65+): DIFFERENCE BETWEEN CURRENT SYSTEM AND REFORM OPTIONS, ENGLAND,
2007 (£ MILLION)
£ million
Source: Caresim and PSSRU Models
Notes: see notes to Tables 1 and 2
FINANCIAL GAINS
AND LOSSES
TO CARE
HOME RESIDENTS
AND HOME
CARE USERS
FROM THE
REFORM OPTIONS
25. The average financial gains from reform options,
in pounds per week (April 2007 prices), are shown in Table 3.
Figures are given for people aged 65+ and aged 85+ in 2007, and
aged 85+ in 2027. They are shown separately and in combination
for care home residents and home care users. The gains are largest
under free personal care for care home residents who would be
on average about £95 a week better off in 2007 and £130
in 2027, or a little lower if care home fees rise. Gains to care
home residents would be between £30 and £40 a week under
the partnership options.
26. Under free personal care, gains are somewhat lower
for home care users—some £20-£30 per week. They
are a little higher under Wanless patterns of care. This is because
these patterns of care assume that more people are cared for at
home with more expensive packages of care than at present. A move
from the current funding system to free personal care under these
patterns of care is therefore more beneficial for home care users
than under current patterns of care. Home care users gain only
small sums from the partnership model when AA and DLA are retained.
If AA and DLA are withdrawn they lose about £40 a week.
27. These losses need some explanation. Because there
are variations in how local authorities charge for home care services,
we have assumed a standard means test that embodies the principles
set out in national guidance. We have also had to make assumptions
about how the means tests would work if AA and DLA were withdrawn.
For the current funding system we assume that all Local Authorities
include AA and DLA in the income which is taken into account in
assessing user contributions to home care. We also assume, to
comply with national guidance, that they therefore disregard part
of any AA/DLA that the recipient uses towards Disability Related
Expenditure (DRE)[40].
Under current guidance, if LAs disregard AA/DLA into account in
the means tests, they do not need to make any allowance for DRE.
We have assumed that if AA/DLA were withdrawn, LAs would not make
any allowance for DRE but would apply an otherwise similar means
test to the proportion of care costs not met by the state (ie
two-thirds). Thus although some users gain from the non means-tested
33% state contribution, the loss of AA/DLA (and in consequence
the DRE disregard) more than outweighs this gain for most.
Table 3
AVERAGE WEEKLY GAINS, CARE HOME RESIDENTS AND HOME CARE
USERS, 2007 AND 2027 £S PW, APRIL 2007 PRICES
| Care home residents and home care users combined
| | Care home residents
| | Home care users
|
| 2007
| 2027 | 2007
| 2027 | 2007 2027
|
| 65+ | 85+
| 85+ | 65+ | 85+
| 85+ | 65+ | 85+
| 85+ |
| Free personal care in all settings | 47.00
| 56.30 | 71.30 | 95.50
| 96.30 | 131.20 | 24.60
| 28.40 | 31.30 |
| Free personal care for high/very high needs home care users
| 12.40 | 13.20 | 14.10
| 0.00 | 0.00 | 0.00
| 18.10 | 22.40 | 23.50
|
| Partnership model, 33% guarantee | 12.90
| 16.60 | 25.70 | 37.30
| 38.10 | 61.10 | 1.60
| 1.70 | 2.10 |
| Partnership model, AA/DLA (65+), discontinued
| -16.10 | -8.20 | 0.80
| 37.30 | 38.10 | 61.10
| -40.80 | -40.50 | -39.50
|
| Free personal care + LA fee rise | 43.80
| 52.10 | 64.30 | 85.30
| 86.30 | 112.60 | 24.60
| 28.40 | 31.30 |
| Partnership + fee rise | 10.10
| 13.10 | 19.20 | 28.40
| 29.10 | 44.70 | 1.60
| 1.70 | 2.10 |
| Partnership with AA/DLA (65+) discontinued + fee rise
| -19.00 | -11.90 | -5.80
| 28.40 | 29.10 | 44.70
| -40.80 | -40.50 | -39.50
|
| Free personal care in all settings under Wanless patterns of care
| 44.60 | 54.60 | 65.70
| 96.00 | 101.70 | 135.70
| 31.80 | 38.30 | 42.60
|
| Partnership under Wanless patterns of care |
8.70 | 11.50 | 17.50
| 36.80 | 40.00 | 62.90
| 1.70 | 1.70 | 2.50
|
| Partnership with AA/DLA (65+) discontinued under Wanless patterns of care
| -18.90 | -13.00 | -10.40
| 36.80 | 40.00 | 62.90
| -32.70 | -31.20 | -34.70
|
Source: CARESIM model |
| | | |
| | | |
|
| |
| | |
| | | |
|
How do Financial Gains and Losses Vary by Income Group?
28. To assess how the financial effects of the reform
options for care recipients are likely to vary across different
income groups, the average gains within each fifth (quintile)
of the income distribution are compared[41].
Care recipients are classified according to the quintile of the
income distribution in which their income falls, where that distribution
is specific to five-year age group. In the analysis that follows,
someone classified as having an income in the highest income quintile
has a high income relative to people of a similar age. This may
not be a high income relative to the total population. When compared
to the total population income distribution, older people are
in general concentrated in the second and third quintiles of the
income distribution, and this is even more pronounced for those
aged 85 and over.
29. Financial gains and losses are measured by changes
in users' disposable incomes after meeting care costs[42].
The distribution of these gains and losses are shown for care
recipients aged 85 and over, in figures 2 (2007) and 3 (2027).
Figure 2
Figure 3
Source: CARESIM model
30. Under all the options, gains are highest and losses
smallest in the top income group; gains are smallest and losses
largest in the lowest income group. In 2007 care recipients (aged
85+) in the top income group gain around £90 a week from
free personal care, some £20 a week from the partnership
options and lose a maximum of £8 a week under the partnership
models when AA/DLA is withdrawn. Care recipients in the lowest
income group gain £20-£25 a week from free personal
care, between £3 and £9 a week from partnership options
which retain AA/DLA and lose up to £26 a week on average,
when AA/DLA is withdrawn.
31. The picture in 2027 is similar to that in 2007, except
that the extent to which the highest income group gain compared
with a continuation of the current funding system is more marked,
and differences in gains/losses across the lowest three income
groups are less pronounced.
32. The distributional results take no account of how
the revenue to finance the reform options might be raised, yet
these may affect the results. In past work, we have examined the
effect of financing free personal care by an increase in the higher
rate of income tax and found that gains from free personal care
would in fact be redistributive (Hancock et al 2007: 79).
Under the partnership options where AA and DLA for those aged
65 and over is withdrawn, we have not shown the effect for people
who are not receiving care services who would also lose their
AA or DLA.
33. There are of course many different ways in which
revenue could be raised to finance extra public spending on long-term
care and they will differ in their distributional effects. Analysis
of a range of revenue raising options is planned for the future
as part of MAP2030.
DISCUSSION OF
FINDINGS
34. A key finding is that current public expenditure
would be lower by approximately £4 billion if disability
benefits for older people were discontinued, even if a partnership
model was introduced. The Green Paper does not contain much detail
about its proposals and the modelling here has therefore relied
on an interpretation of its intentions. For example, the Green
Paper proposes to improve preventative services, such as re-ablement
and tele-care, but these were not included in the modelling here
because there is no indication of the extent of increases in spending
on these services that might be implied. Nevertheless, if we had
included these non-personal care costs, public expenditure costs
would have been higher. Public expenditure costs would also have
been higher in the initial period after the introduction of the
reforms, had allowance been made here for some phasing-in of the
changes. Finally, the detailed implementation of any withdrawal
of disability benefits for older people, such as a targeting of
the withdrawal, would also affect public expenditure costs and
distributional effects.
35. However, there are also reasons why a discontinuation
of disability benefits would reduce public long-term care expenditure
under a partnership model. One reason is that disabled older people
use disability benefits to pay for other disability-related expenditure,
such as extra heating and special diets. A second reason is that
disability benefits are a universal entitlement and all disabled
older people, including those with informal carers, receive them.
However, the Partnership model would not necessarily be universal
in this sense. The Green Paper seems ambiguous on this point.
Following some statements in the Green Paper (HMG 2009: 103-104),
it has been assumed here that there would be a continuation of
existing eligibility criteria, under which disabled older people
with informal carers (including some of the most severely disabled
in the community) are regarded as "less eligible" for
publicly-funded long-term care than those without informal carers
(Royal Commission on Long Term Care 1999, FACs 2003, CSCI 2008).
Elsewhere, the Green Paper seems to suggest that the new National
Care Service might include disabled older people with informal
carers (HMG 2009: 119). If the modelling were to assume a genuinely
universal entitlement to publicly-funded social care by all
disabled people, public expenditure on long-term care would
be greater and more of the public expenditure saved from withdrawing
AA/DLA would be transferred to social care funding.
36. Our modelling highlights the importance of the (as
yet unspecified) details of how, under the Partnership Model,
the means tests for the part of the care costs not met automatically
by the state would operate, particularly if AA/DLA are withdrawn.
If for example, LAs were required to disregard DRE even with AA/DLA
withdrawn, home care users would lose less or even gain under
this scenario. Likewise, if the means test applied to the two-thirds
of care costs for care home residents were more generous than
at present, the proposals would benefit those on lower incomes
more than our results suggest.
REFERENCESAge Concern Scotland
(2003) Free for All? Age Concern Scotland's Report into Free
Personal and Nursing Care, Age Concern Scotland.
CSCI (Commission for Social Care Inspection) (2008) Cutting
the Cake Fairly: CSCI Review of Eligibility Criteria for Social
Care. London: CSCI.
Department of Health (2003) Fair Access to Care Services. Guidance
on Eligibility Criteria for Adult Social Care. London: Department
of Health.
Department of Health (2009) Impact Assessment of the Care and
Support Green Paper. London: Department of Health. http://www.dh.gov.uk/prod_consum_dh/groups/dh_digitalassets/documents/digitalasset/dh_102731.pdf
Forder J and Fernandez J-L (2009) Analysing the Costs and Benefits
of Social Care Funding Arrangements in England: Technical Report.
PSSRU Discussion Paper 2644. http://www.pssru.ac.uk/pdf/dp2644.pdf
Hancock R, Comas-Herrera A Wittenberg R and Pickard L (2003) Who
will pay for long-term care in the UK? Projections linking macro-
and micro-simulation models. Fiscal Studies, 24(4) pp 387-426.
Hancock, R, Pickard, L, Wittenberg, R, Comas-Herrera, A, Juarez-Garcia,
A, King, D & Malley, J (2007) Paying For Long-Term Care
for Older People in the UK: Modelling the Costs and Distributional
Effects of a Range of Options. Report to the Nuffield Foundation.
PSSRU Discussion Paper 2336/2.
(http://www.pssru.ac.uk/pdf/dp2336_2.pdf)
HMG (2009) Shaping the Future of Care Together, CM 7673.
London: The Stationery Office
Royal Commission on Long Term Care (1999) With Respect to Old
Age. Cm 4192. London: The Stationery Office.
Wanless D (2006) Securing Good Care for Older People: Taking
a Long-Term View. London: King's Fund.
Wittenberg R, Comas-Herrera A, King D, Malley, J, Pickard L and
Darton R (2006) Future Demand for Long-Term Care, 2002 to 2041:
Projections of Demand for Long-Term Care for Older People in England,
PSSRU Discussion Paper 2330, March 2006 (www.pssru.ac.uk/pdf/dp2330.pdf).
November 2009
31
The modelling of all options considered here assumes continuation
of existing eligibility criteria relating to disabled older people
who receive informal care. Disabled older people with informal
carers are currently treated as "less eligible" for
publicly-funded support than those without (DH 2003). Some implications
of this are discussed at the end. Back
32
In nursing homes there is now also a standard NHS contribution
to the costs of nursing care. Back
33
The Green Paper also indicates that there would be investment
in prevention, such as investment in re-ablement and tele-care
(HMG 2009: 51-2, 103). This has not been included in the modelling
here. Back
34
Although the options suggested by the Green Paper, modelled here,
relate to the partnership option, it should be noted that there
are similarities between the comprehensive option and free personal
care. Back
35
A similar benefit which can be received by people aged over 65
who started to receive it before reaching that age for over 65s Back
36
In Scotland, when a "fixed care costs" version of free
personal care was introduced, private and voluntary care providers
were reluctant to provide places for older people under "integrated"
contracts, under which local authorities managed the contractual
arrangements with care homes on behalf of older people receiving
free personal care (Age Concern Scotland, 2003: 19-20). The underlying
problem, that local authority fees are lower than self-funders'
fees, is addressed here by allowing for scenarios in which local
authorities increase the fees they offer to care home owners. Back
37
ADL stands for Activities of Daily Living. Difficulties in or
inability to perform ADLs is a common measure of the need for
care. Back
38
The modelling looks at the effects if AA and DLA for people aged
65 and over were withdrawn in 2007 and therefore does not take
into account transitional arrangements, which the Green Paper
suggests would be introduced (see £7 above). Back
39
A reduction in net public expenditure costs is also shown
in the impact assessment prepared by the Department of Health,
which shows a reduction in public expenditure of £1.1 billion
in 2024 under the partnership option with withdrawal of some disability
benefits (DH 2009: 3). This is a smaller reduction than that shown
here in 2027, but the precise reasons for the difference are difficult
to ascertain because the DH has not yet published details of its
modelling of the reform options. Back
40
DRE can include eg higher transport, laundry and heating costs
attributable to the person's disability. Back
41
Income is the net income (before housing costs) of the family
unit (single older person or older couple) that they would receive
when living in their own homes without any care needs. The before
housing costs definition is not identical to that used in the
annual National Statistics publication "Households Below
Average Income". Here we do not include Housing Benefit (HB)
as income on the grounds that high HB is at least in part the
result of high rent so that to include it in income, without deducting
rent, may exaggerate the economic well-being of people with high
rents. Income is adjusted for family size using the OECD equivalence
scale of 1 for the first adult, 0.5 for each subsequent person
aged at least 14 years and 0.3 for each child aged under 14. Back
42
There may also be changes in users' wealth if capital is depleted
at different rates under the different options. This is not taken
into account explicitly. Back
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