EXCLUSIVE: So what is the answer to the elderly care problem?

Monday, August 10, 2009

In our aging society, the provision of adequate care for the elderly becomes increasingly pressing as every year goes by. Lengthy discussions are taking place about financing this through increased social security contributions (in particular through raising the age of retirement) and the recent Department of Health Green Paper moved the debate on still further.

The figures are telling. A study last year by Saga and Laing and Buisson, highlighting the 'postcode lottery' of adult care home fees, demonstrates the increasing cost of care. In the most expensive region, the Northern Home Counties, the average annual cost was £43,472. Even in the cheapest region, Northern Ireland, the average cost was £27,976. Anyone with savings over £22,250 must pay for care themselves. It is clear to see how, with charges at this level, these savings are quickly eaten up and indeed the family home will often need to be sold. It is estimated that 45,000 people sold homes in 2008 to pay for care home fees. The problem is increased in many cases by the fall in house prices, meaning the cash realised by a sale doesn't go as far as it used to.

Currently, provision of long term adult social care is the responsibility of local councils (as opposed to the NHS). the Local Government Association has, previously, asked for 2% of the NHS budget to be transferred to local government to cover the shortfall in care costs.

How to pay for adult social care is an issue that will become even more pressing with time since not only are costs increasing but also the population of adults requiring care. However, healthy life expectancy is not increasing at the same rate as life expectancy. The government has made its case for the need for change in its Care, Support, Independence review (see http://careandsupport.direct.gov.uk/).

The Green Paper contained several proposals to resolve this. The real headline grabbers were proposals designed to avoid the need to sell the family home. That situation is widely viewed as unfair and is very unpopular with the voting public. On the other hand, increasing taxes further is not a popular option so the ultimate solution will need to strike a balance between these issues.

The most well publicised proposal is what is being termed an inheritance levy. It is quite straightforward in principle. Essentially, this will be a state insurance policy. People will be asked to pay around £12,000 on retirement following which their future care would be free. There is an element of gambling here since it is possible that one could pay this amount on retirement and then not need long term care or not need care to that value (and that risk varies again on the postcode lottery of care cost rates). Similarly, it is important that people understand that there is no proposal to stop clinical care on the NHS being free. There are a large number of elderly people who fall ill and never need to have non NHS care. However, given the potential cost should care be needed, it is to be expected that if this proposal makes it on to the statute books many people will be ready to take that bet. Others may simply decide to spend or dispose of their money to try to avoid paying at all.

Department of Health officials have said that of those they questioned about this proposal a large majority would rather pay this sum than risk losing their homes and savings, together with their children's inheritance, if they develop dementia, Alzheimer's or another chronic disabling condition. But what will they get for the money? It isn't clear whether, on paying, there will be an agreed level of care that is guaranteed for what may be many years ahead. There is an assumption too that there will be sufficient care facilities of equivalent standards for the increasing demand and that the levy would cover an appropriate level of care for individual needs that are impossible to predict. Most people would want to know where that care is going to be provided too. Wealthier people may prefer to spend more on receiving higher private standards of care and it isn't clear whether the levy would provide a 'credit' against that.

Following the Green Paper, consultation is going to continue until October this year, meaning that the chance of new legislation before next year's general election is slim. The issue of who will meet the cost of caring for an increasingly aging population isn't going away just yet.

Iain Donaldson heads the Wealth Management Team of Matthew Arnold & Baldwin LLP Solicitors and advises the elderly and infirm on managing their affairs.