The government announced in September that there will be, for the first time, a cap on assessed social care costs of £86,000. But a seemingly technical change to the way the cap will operate will have big effects on those with modest levels of assets. As MPs debate these changes, they should consider a fairer alternative proposal.
It was already clear that the cap proposals would still leave those with modest assets having to use a large share of their assets to pay for care. This was always part of the proposals originally drawn up by the Dilnot Commission back in 2011. Nevertheless, there was still an element of progressivity to these proposals. Not everyone would have to contribute the full value of the cap: means-tested support received towards these costs would count towards the cap. Since extending means-tested support to those with assets up to £100,000 was also part of these proposals, this would have at least reduced the burden for those with lower asset levels. Irrespective of wealth, everyone would hit the cap after incurring costs of £86,0000 – which corresponds to just over three years in an average care home – rather than after paying £86,000 out of their own pocket.
Those with modest assets may have to use two-thirds of their assets to pay for care
Note: Assumes total lifetime costs of £150,000, annual assessed care costs of £26,500 and income just sufficient to pay for hotel costs.
Source: TBI calculations.
The amendment to the proposal published last week changes that. Although those who incur costs below the level of the cap are unaffected, under the revised plan, care users with modest assets will have to keep paying until they have either paid the full £86,000, or their assets have diminished to £20,000 (the level where users do not have to make any contribution towards the cost of their care under the means test). Someone with assets of £130,000 who spends the last six years of their life in a care home facing total costs of £150,000 would have to pay an additional £20,000 towards the cost of their care and have to use nearly two-thirds of their assets towards the cost of care.
This creates a significant problem. The idea of the Dilnot cap was always that it would provide meaningful insurance to millions of homeowners, protecting them from catastrophic costs. The revised plan offers arguably unnecessary protection to the very wealthy while leaving those with modest assets barely any better off than they are today. Typical homeowners in the ‘Red Wall’ will not have insurance against catastrophic care costs to any meaningful extent.
As we argued in our report in September, a fairer approach would be link a care user’s maximum contribution towards their care costs to their initial level of assets. We estimated that a cap of 15% of initial assets would cost about the same as the original Dilnot proposals, which themselves would cost £1-1.5 billion more than the Government’s current plans.
As well as providing effective insurance against catastrophic care costs to everyone, it would better fulfil another of the aims of the Dilnot Commission’s proposals of stimulating innovation and reform in the care market. Only the very wealthiest would feel confident paying for better-quality care not covered by cap knowing that they would potentially have to pay £86,000 before the state stepped in to help. A cap that was proportional to asset holdings would enable more people to pay more for better quality care and drive up quality across the system for everyone.
A proportional cap is not only fairer, but provides better insurance and is the much more likely to drive up quality. MPs should consider it as they debate the government’s proposals tonight.