How not to pay for an ageing population

Thursday, July 29, 2010

The government is wrong to consider paying for care of the elderly solely through general taxation, not least because this would cost up to £106bn a year – the equivalent to funding a second NHS, according to the Policy Exchange.

In its report 'Careless: funding long term care for the elderly', the think tank said the commission looking into the issue should consider three specific funding models: the King's Fund partnership model; a social insurance model as used in Europe; and a hybrid model whereby the state guarantees some level of care but people are required to top-up for their long term care through insurance or annuity backed products.

The report also strongly recommended that the commission looked into merging the social care budget with the NHS because the services are largely interdependent. The NHS already spends about 4 per cent (£4.23bn) of its budget on social care, the report revealed.

Henry Featherstone, author of the report and head of Policy Exchange's Health and Social Care Unit, said: "Most people think that paying their taxes and national insurance will guarantee them free care in old age, but that is not the case."

He added: "Despite nine major reviews in the last 15 years, the current system remains unfair, bewilderingly complex and penalises homeowners. We now have an opportunity, and the time, to properly think through and implement a fundamental reform of the way that we pay for long-term care of the elderly – to make the system clearer and fairer, and able to meet the future demands of an ageing population."