Paving the way for a new approach to elderly care

Standing on a train platform recently, I overheard a woman pouring her heart out to her friend about the problems of finding a suitable care home for her elderly mother. She had been greatly taken with one establishment, which she informed her friend was like “a smart hotel with a fancy restaurant”, but had been turned away as her mother’s dementia was just too advanced.

Weary after visiting a long list of unappealing homes and despairing about how to meet the financial burden, my fellow commuter is just one of the many people trying to deal with the issues caused by our increasingly ageing population. With a final sigh she half whispered: “The thing is she could live to be 100.” What once would have sounded unrealistic had a ring of truth about it: a recent survey said that a girl born this year has a one in three chance of reaching 100, and a boy one in four. Statisticians estimate that by 2066, half a million people will be aged over 100.

This issue of funding care of the elderly has long troubled legislators, and in the run-up to the 2010 election, there was consensus between the major British political parties that it was a nettle that would have to be grasped. Shortly after coming to power as Prime Minister of the coalition Government, David Cameron invited Andrew Dilnot, a leading economist, to head a commission on this difficult area of social welfare.

Health Minister Andrew Lansley summed up the feelings of many when he said that the current system was a “terrible lottery’’, and the goal of reform was to prevent families suffering the “catastrophic loss of everything they have worked for in their lives” to be able to pay for care.

However there was a cautious response from him to the publication on 4 July 2011 of the Dilnot Commission on Funding of Care and Support, which although focusing on the care system in England, has lessons for the Scottish system too. The Health Secretary said that: “In the current public spending environment, we have to consider carefully the additional costs to the taxpayer of the commission’s proposals against other funding priorities.”

Despite the carefully worded response to the report, the Prime Minister’s Office has indicated a commitment to publish a white paper on this matter in early 2012.

I believe that we should get behind these proposals and make sure the Scottish Government looks at introducing a similar system in Scotland.

The Dilnot solution

The key proposal of the Dilnot Commission is that the cost of individual care should be capped – which would go a long way to alleviating some of the financial burden of elderly care that leads to some 20,000 families a year having to sell their homes to pay for care. At the present, it is estimated that over one in 10 pensioners will be required to spend more than £100,000 of their money on care costs. The effects of such expenditure on many estates can amount to a total denuding of any inheritance the adult children of such an individual might otherwise have expected. Over and above the figure of £35,000, the costs of care would be funded by the taxpayer. At present, in England, anyone having capital of more than £23,250 has to meet their own care costs.

One major drawback of the current system is that it is regressive. Those with smaller estates have discovered that funding their care costs will largely deplete their children’s inheritance.

However, the Dilnot Commission has stripped out of care costs what they regard as board and food. In that connection, the individual will be required to contribute between £7,000-£10,000 per annum towards those costs.

This would make a huge difference to the lives of families. It is clear that considerable thought has gone into the matter, and Dilnot has costed implementation of his proposals at £1.7bn initially, rising to £3.6bn by 2026. This is against a current overall Government spend of approximately £700bn per annum.

The proposals are also clever, in the sense that they are an encouragement to the insurance industry. When Lord Sutherland submitted his report in 1999, he indicated that the insurance industry had been consulted as to its role in assisting in the funding of care costs. The response of the insurance industry to Sutherland was that it could do no more than it had already done.

This included the issuing of long term care policies, which fell out of favour some time ago as they were found not to fund care costs fully, and were bedevilled with allegations of mis-selling. If the insurance industry can be presented with a clear policy which indicates that it would really only be insuring up to, say, the ceiling of £35,000, then no doubt we will see an influx of new policies being brought into the market place. Such a move would greatly assist future funding of care costs, provided the policies in question can be introduced at an economic rate.

Whether or not the Dilnot report is kicked into the long grass by the Government, the underlying problem will not go away. In fact, it will only get worse in the face of Government torpor.