The government has finally published its green paper on the future of social care.
It proposes a new ‘National Care Service’. Andy Burnham, health secretary, has stated that the concept will be at the forefront of the government’s bid to win a fourth term in power. He wants social care to be one of the “top three” election issues. The conservatives have not as yet nailed their colours to the mast. The key question for society and insurers is how will such a National Care Service be funded?
Two options are ruled out – that everyone should be responsible for paying for themselves or that the tax payer should foot the entire bill. The latter may seem obvious to us but lack of clarity on this matter now and in the future has been one of the reasons why long term care insurance was always a very difficult sale. Another barrier was the different eligibility and cost responsibility arrangements in different local authorities and the National nature of the proposed arrangements should bring clarity on this too.
The option preferred by the green paper is the ‘partnership’ option. Here, everyone who qualifies for care and support from the state would be entitled to have a set proportion of their basic care and support costs paid for by the state. A 65-year-old in England will need care and support that costs on average £30,000 during their retirement, so someone who got the basic offer of a third or a quarter paid for might need to pay around £20,000 or £22,500 themselves.
Note also, that attendance allowance would be abolished to support the state funding element and so will not be available to individuals to help pay their own bill. Many people would pay much less than £20,000. And some people who need high levels of care and support would pay far more. The green paper proposes that insurance should meet these costs.
The state could play different roles to enable this. It could work more closely with the private insurance market, so that people could receive a certain level of income should they need care and support. Or the state could create its own insurance scheme. If people decided to pay into the scheme, they would get all their basic care and support free if they needed it. People could pay for their insurance in several different ways, in instalments or as a lump sum, before or after retirement, or after their death if they preferred. Once people had paid their contribution they would get their care and support free when they needed it.
We will wait and see how the political debate turns out, and the devil will be in the detail, but insurers with an interest should be planning from now on how a commercially based partnership arrangement might operate in practice so that they are in a position to lobby for the best terms of entry and are ready to respond rapidly to the call for a new long term care insurance product.
Richard Walsh is managing director of SPPR Consulting
