England’s care tragedy

21 Jul 15

The government’s decision to pause the ‘capped cost’ care reforms for four years has probably killed off the policy, and represents a tragic waste of time and money for the care system.

When it came, the news was still a shock. There had been chatter in social care circles for weeks that the ‘capped cost’ reforms to care funding in England were about to be ‘paused’. Yet the announcement that filtered out last Friday in a written ministerial statement still took everyone by surprise: the ‘pause’ is to last not one year, but until April 2020.

The immediate cause is funding. As the full complexity and administrative burden of the reforms has become clear to local authorities over the last 18 months, growing numbers questioned whether the reforms should be a priority as the care system struggles in the face of severe budget pressures and public spending cuts. The voice of councils – the Local Government Association (LGA) – wrote to ministers proposing that the funding allocated to the ‘capped cost’ reforms instead be directed at supporting those in the current, means tested system. This gave ministers vital political cover to suspend implementation and announce a pause.  

In recent weeks, concerns over the cost of the reforms had reached something of a fever pitch. Research from the County Councils Network highlighted the significant market cross-subsidy to councils from self-funders in care homes, which could be unwound by implementation of the ‘capped cost’ measures, leaving local authorities with an unfunded shortfall. And the chancellor’s announcement of a new National Minimum Wage in the summer Budget in a stroke tore up the medium-term financial planning of all local authorities and care providers, in a sector heavily reliant on low-paid workers.

There is now widespread speculation that in April 2020, the ‘capped cost’ reforms will not, in fact, be rebooted as ministers have promised. The real financial pressures bearing down on the care system reflect population ageing and rising demand, consistently flagged by the Office for Budget Responsibility in its annual assessment of the UK’s fiscal sustainability. If the ‘capped cost’ reforms are too expensive to implement in 2016, they will look even more unaffordable in 2020, and there is no indication that the current chancellor is keen to have a public debate about how society pays for its ageing population and new taxes needed to put the care system on a sustainable footing.  

In truth, it was always a stretch to think changes to who local authorities help with care costs, focused on helping (relatively) wealthy citizens, would survive at a time of unprecedented austerity in public spending. However, to characterise the U-turn over the reforms as simply being about money would be a mistake.

In his written statement, the minister for social care pointed to other concerns with the ‘capped cost’ reforms:

“A time of consolidation is not the right moment to be implementing expensive new commitments such as this, especially when there are no indications the private insurance market will develop as expected.”

The minister is not just linking the U-turn to the – always apparent – funding pressures on the care system, but is also apportioning some blame to the insurance industry, and its failure to launch care insurance products in response to the funding changes.

In other words, Friday’s announcement is not just about the affordability of the ‘capped cost’ reforms at a time of austerity, but about their design and what they will actually achieve.

Let’s focus on the insurance point. Many experts had warned the Department of Health that the ‘capped cost’ reforms would not result in a pre-funded care insurance market owing to how the changes defined people’s liabilities for funding care, and lots of other barriers to the development of a market – observable in all other developed countries.

In fact, a month after the Dilnot Commission launched its ‘capped cost’ recommendations in July 2011, the Strategic Society Centre published a response to the proposals highlighting that they would not lead to a pre-funded care insurance market. Others – including insurance companies that actually specialise in ‘point of need’ annuities for residential care fees – also made the same point.

So despite the minister’s words about an ‘expected market’, the Department of Health since the summer of 2011 been repeatedly told not to expect such a market to emerge. If the ultimate implementation of the ‘capped cost’ reforms is to be made conditional on such a pre-funded care insurance market developing, the reforms will simply never happen. And it appears the insurance industry is being lined up to take the blame for this.

But concerns with what the reforms would actually achieve extend wider than the issue of private insurance.

The truth is that the drum-beating enthusiasm for the ‘capped cost’ reforms that lasted from 2011 through to 2013 had long since given way to a more pragmatic assessment, as more and more stakeholders were compelled to get to grips with how the reforms would actually work in practice. In particular, few now really believe that the measures would cap people’s private care costs, owing to the difference in prices paid for care between councils and self-funders, and the requirement to contribute toward ‘living costs’ in residential care. For most care users in the system, the ‘cap’ would look and feel like a delayed, quite generous, co-payment for residential care fees.

And few now believe the reforms would provide peace of mind to the population given their complexity, the fact the ‘cap’ is not a cap, and variations in how the changes would play out among local authorities. As it happens, the peace of mind issue is probably the most critical of all.

A cost-benefit analysis of the ‘capped cost’ reforms published by the Department of Health in March 2015 was only able to derive a net benefit for the taxpayer from the reforms by contriving a monetised figure worth hundreds of millions of pounds for the peace-of-mind benefit to the population that would result from the changes. Officials had to apply a highly questionable methodology to achieve a positive figure, given the fact that so much of the cost of the reforms would comprise assessments and ‘metering’ of notional costs for individuals who would never actually receive any financial support.

So quite besides cost to the taxpayer and the lack of a pre-funded insurance market, what has most likely undermined the ‘capped cost’ reforms within Whitehall is that they look like poor value for money.

Unfortunately, lots of money has already been spent on the ‘capped cost’ reforms before the social care minister announced a pause last week.

Since 2010, dozens of civil servants at the Department of Health have worked on the changes. Huge amounts of external economic modelling and research have been commissioned. Several public consultations have taken place. The advertising agency Saatchi & Saatchi was reportedly retained by the Department of Health to develop a public information campaign for the launch of the reforms. And of course, up and down England, 152 local authorities have been training front line staff and managers in relation to the reforms and developing IT systems to meter people’s ‘care accounts’.

The National Audit Office will at some point no doubt seek to estimate how much money the ‘capped cost’ reforms have cost the taxpayer to date. I would estimate between £50m-£100m. This is a lot of money at a time that councils are cutting support packages for the most vulnerable members of their communities. And it is a lot of money when the issues with the reforms identified in last Friday’s Ministerial letter were readily apparent back in July 2011. At some point, various individuals and stakeholders will need to account for how we have got here.

But, if the ‘capped cost’ reforms really are dead in the water, what now?

In the short term, local government will have to fight to ensure that the savings from the pause to the ‘capped cost’ reforms are indeed directed back to the care system.

For social care charities and other stakeholders, the political strategy of publicly backing the government’s ‘capped cost’ reforms in the hope that this would prop up wider funding for social care has not worked. As difficult as it may seem, these organisations need to start talking publicly about the difficult options – including tax-raising – for driving more resources into the care system. This government is not going to lead this debate, so others must.

In the meantime, there may be some scope for limited care funding reforms. An important component of the ‘capped cost’ reforms was an increase in the ‘upper’ means test threshold for residential care to £118,000. This posed issues of its own, but creating a single, more generous means test threshold of, say, £50,000 would provide a lot of clarity for care users and reduce the proportion who watch their savings evaporate because of care costs. It would also help the 36,000 self-funders in residential care who were set to receive some means-tested council support for care costs in April 2016 and are the most immediate losers from the government’s change of course.

But in the background to all of this is the integrated care agenda. If the combined local authorities of Greater Manchester have success with their ‘devo-Manc’ plans, and the current talk of ‘accountable care organisations’ starts to become a reality in the UK, the ‘capped cost’ reforms may not reappear in 2020 simply because they are incompatible with the direction of health and care policy and efforts to integrate care funding, commissioning and delivery.

In the meantime, those passionate about social care must contemplate several wasted years, and the tragedy of an overstretched care system once again being pushed aside by politicians.

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