Dominating the news over the past few days has been the announcement of the long-anticipated reforms to health and social care in England. Naturally, the question of funding has remained central to the debate. Measures have been proposed to raise £36bn over the next 3 years through the introduction of a 1.25% health and social levy, along with an increase in dividend tax. Initially however, this levy will be used to fund the NHS, and then eventually be diverted to social care.

OCC’s work is intrinsically linked to that of local authorities in the social care sector. We are watching closely to determine the potential impact of the reforms on social care funding on our products.

In this insights article, we explore whether any substantial changes have been introduced since Dilnot’s first reform proposals in 2011 and take a look at the potential challenges.

Social care in general is widely misunderstood and its complexity not to be underestimated. At OCC we spend a lot of time “under the hood” as it were, and it is paramount that we gain an in depth understanding of the implications.

Lord Dilnot’s 2011 proposed reforms were intended to be implemented in 2015 and in 2016. This was to be achieved through new legislation, known as the Care Act, which was to be delivered in two tranches.

2015: Universal Deferred Payment Agreements

This change was pre-empted by a desire to ensure that “no-one will have to sell their house in their lifetime”. The inclusion of the word “lifetime” really qualifies the scope of the policy here. Rather than selling a property, an individual may instead accrue a debt by way of a loan against their property. This is known as a Deferred Payment Agreement. Where an individual is;

• in residential care (this includes some specific supported living and extra care settings); and
• the property is not occupied by a spouse,

a loan can be offered (with interest) against a property.

The value of the loan (care costs plus interest) could need to exceed 85% of the property value before an individual would become eligible for state funding. Once the property is sold following a death, the loan would need to be repaid by the executors of the estate. Critically, a family home may still need to be sold at some point.

Capital Threshold Increase and the Care Cap

The increase in the capital threshold, along with the highest amount which someone could be expected to contribute over their lifetime, or “care cap”, was due to be implemented in 2016, but was delayed in July 2015. Until recently this had largely gone unmentioned. In 2011 it was suggested that the care cap should be 35k, this was increased to £72k in 2016. In the latest announcement, this figure has gone up again and now stands at £86k. Clearly, there has been a significant increase in this figure, even if allowances for inflation are made over the past 10 years.

A further amendment to the numbers involved has been announced in relation to the higher capital threshold. This is currently £24,250; back in 2016, it had been intended that the higher capital threshold increase would be £118k. Anyone with assets up to this amount would be means tested and receive help with their care costs. The new proposals cap this at 100K, which will mean that fewer people will be eligible for assistance.

Early reporting also suggested that anyone with assets under £20k would pay nothing, although this was later clarified and it has been stated that anyone with assets under £20k would still need an assessment. Their assets however would not be considered. The current threshold for this is £14,250.

At OCC we are interested in the technicalities, particularly those that were not ironed out back in 2015 also still need to be addressed, these are outlined below in more detail.

Tracking Care Expenditure

Firstly, there is the thorny question of how the total expenditure on care would be tracked. Or, more specifically, how to flag up where the £86K spending limit on care costs is reached.

This is harder than it might seem initially. Even considering the simplest case (residential care), this is a complex matter. Firstly, “care” costs must be split from “housing/lodging costs”. I.e., what proportion of residential home costs would be paid anyway to live in your own home. In 2016 the proposal for this figure was £12k a year or £230 a week.

Another pertinent point is that council funded homes often have preferable (bulk buy/subsidised) rates compared to private providers. Should an allowance be made for this? Where an individual selects a premium care home provider out of personal choice, the inflated cost would be unlikely to count towards the £86k cap and the basic council rates would be considered instead.

For non-residential care this question becomes increasingly difficult to answer. Care costs vary weekly depending on hospitalisations, family visits and holidays. Would individuals be required to keep all their receipts for the entire duration of their care provision?

In 2015 the idea was put forwards that individual assessments of the total expenditure would simply track the value according to the level of care they required. It was this notional amount which would count towards the £86k cap. However, this can lead to a disconnect between the £86k and the real expenditure. Once the reality becomes too distanced from the figures used, the disconnect in public trust and understanding in the system will surely follow soon after? Will an individual contact their local council every time their care needs vary? Will there be cases where the counter should have stopped or started, but the individual in question is unaware of this fact? Will vulnerable, but still independent people (e.g. with early onset dementia) easily lose track and suffer unnecessary anguish?

A further complication to keeping track of care costs will surely also arise from the requirement to potentially count costs across local authorities and the devolved nations. Where an individual moves within England, they may well need to take their records with them. It is presumed that if an individual moved to another devolved nation then the contributions towards the £86k could stop.

It can also be expected that the usual lengthy processing time for Continuing Health Care and Funding Nursing Care applications will mean that adjustments may need to be made retrospectively too. It is also conceivable that adjustments might need to be split across local authority boundaries (and maybe even local authorities that have been split, combined etc.). Closer cooperation will surely be required between health and social care, local authorities and other government departments.

Assessing Eligibility for Care

Currently there are many people receiving care who are largely unknown to their local authority, e.g. private or self-funders. Under the new rules, it is presumed that these private funders would need to be assessed by the local authority where they previously would not have been, to assess whether that care should contribute towards the £86k cap. It is hard to imagine how this additional ongoing workload for each council might be managed. The logistics of on-boarding would also pose a substantial challenge, as everyone in care on the start date will need to be assessed by this time. It is not clear if any funding from the new levy would be put towards tackling this additional administration.

Unpaid Care – Will it Count?

The support of family and friends is often crucial for those who require care. Unpaid care provided by relatives and friends can reduce the need for either state, or private funded support. If an allowance for this is not included, it may indeed undermine the willingness of people to assist their loved ones. This applies to both those who have not yet reached the amount set by the cap, but also people who have exceeded the cap, who would go on to receive fully funded care.

Injury Settlements

Some people in receipt of social care have been awarded a settlement (e.g. after a work place injury). Some of the settlement will be with some consideration to the lifetime cost of care. Will the cap unfairly benefit those who have already received their settlement over those who do so in future?

Changes to the 86k Cap

It seems inevitable that changes to the cap will be required after a certain amount of time has elapsed. This begs the question of what would happen where an individual has spent £85,999 on care, and the government change the threshold to £90k to allow for inflation? In 2015 it was suggested that the contribution to date would be increased proportionately to the increase in the cap. This seems fair, but again this all needs to be tracked and further obfuscates the cap figure from the potential true figure.

Further Announcements

Like everyone we look forward to future clarity from the Department of Health and Social Care over the coming months. In particular, we would welcome guidance over how these challenges will be addressed. The hope remains that given the time which has passed since the original reforms were published in 2011, some serious consideration has been given to addressing these issues. We hope to be able to implement these reforms within our products well ahead of the October 2023 start date.

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