As the end of the 2005-2010 Parliament approaches, and the political classes gear themselves up for the general election, each of the political parties’ health teams will be looking to prove that they have the big ideas to take the NHS forward in a period of tight public finance but escalating public expectation.
In this short series of opinion pieces, Health Mandate’s team of expert health policy consultants look at some of the big issues that will shape the political and the NHS landscape in the next parliament. Today’s piece examines the future of social care funding.
Mend the gap: how do we fund social care?
Recent weeks have seen the three main political parties engage in fierce debate over their respective plans (or lack thereof) for funding social care. The debate began when apparent efforts to build a consensus on the issue crumbled in the face of political necessity, continued with an intervention by social care charities berating politicians for being too political, and then drifted off the news agenda once the political parties had fought themselves to a messy stalemate.
The charities, in their intervention, claimed that the issue of social care funding is too important to be used as a political football – but, in many ways, the decision of how to fund social care is the most political of them all. Should it be funded through insurance, general taxation, or on a pay-as-you-go basis (as at present)?
Some generations will find echoes in these debates of those – seventy years ago – on how to fund healthcare. And like that issue, this one is set to run and run.
Unfair, unaffordable, unsustainable: what’s the problem with the current system
No politician will ever be heard saying that the current system is not in need of reform. Politicians of all parties have been saying the same since this issue first surfaced with the closure of the NHS long-stay wards in the early 1980s. This one change meant that older people needing care could no longer stay in hospital (for free) but had to move into care homes, and pay.
This change was driven by the same factors which have now made the issue so pressing: cost. We are getting older, and we are living longer; this was costing the NHS its money, and now it is costing individuals theirs. Life expectancy has increased by 11 per cent since 1948 and those with disabilities are surviving much longer than they ever did. Demographic projections suggest that by 2026 the UK will have 1.7 million more adults requiring social care.
So politicians are rightly concerned with the prospect of a £6 billion black hole inside 20 years. Cynics might also point to the fact that the baby-boomer generation – that massed block of voters who have arguably driven all major political change since the 1960s – are about to enter retirement, and recognising
that they are about to spend their children’s inheritance on care home fees. They are angry about this, they have votes and they tend to use them.
These voters aren’t particularly bothered by the £6 billion black hole – they don’t even know about it – but they are bothered by the vagaries of a funding system which they worry is about to fleece them mercilessly. This system demands that anyone with assets of £23,000 (and a person’s ‘assets’ include, most controversially, their home) must pay for all of their social care costs. A person with no assets has their care costs paid for by the taxpayer.
In the last decade, 70,000 people have been forced to sell their homes to pay for care. The baby boomers of middle England – people who made their money in Thatcher’s Britain – are now beginning to notice, and are fuming -
“I’ve worked hard for my money and my house, so why should I have to sell it to pay for my care whilst someone who hasn’t bothered to work hard gets all their care for free?”
The answer to this is set to dominate Election 2010 not because politicians are far-sighted, but because they have heard the question being asked.
The big care debate
We have been here before. In 1999 a Royal Commission on long-term care was established by a new Prime Minister to make sure that ‘no-one should sell their homes to pay for care’. The Commission couldn’t agree, baby-boomers were not 60 but 50, and another ten years slid by without real reform.
The challenge politicians have always faced with achieving ‘real reform’ is that the current system, for all its faults, is actually quite progressive – in so far as richer people pay more. The pressure for reform comes about only because more people are wealthier, and the difficulty politicians have is that the reform which baby-boomers want essentially involves a mass redistribution of wealth from the poor to the wealthy. This is what makes the debate so vexed. The right answer – politically – is on the wrong side of the argument for politicians seeking to hug the centre ground.
Playing for time, the Government set out some funding options in their July 2009 Green Paper, Shaping the Future of Care Together. The Paper – 136 pages long – is rich in detail on what should be provided but spectacularly light on how to pay for it. Five options for funding are set out – and none of these make any hint of the levy on an individual’s estate (the ‘death tax’) which is suddenly deemed particularly likely.
More complexity was stirred into the mix when the Prime Minister used his 2009 speech to the Labour Party Conference to announce free care at home for those with the highest need. This, again, wasn’t in the Green Paper.
Andy Burnham reacted to the latest furore by saying that Labour’s favoured funding option will be on the table by the time of the election campaign. The bravery of such a move makes its likelihood slightly more questionable, although what is not in doubt is that – if Labour do identify a favoured funding model – this will definitely not have been in the Green Paper.
The Conservatives are slightly clearer on how they will fund at least part of the long-term care system – which is by giving everyone the one-off opportunity to pay £8,000 at age 65 and be guaranteed free residential care in the event that they need it. The calculation underpinning this policy is best described as interesting – although frankly this doesn’t matter (it has so far managed to withstand pressure from the Labour Party’s usually-fearsome campaign machinery, and from journalists; this calculation is not one which will be pulled apart easily).
The biggest problem with the Conservative policy is that – by giving people a once-only opportunity to gamble £8,000 on whether they need residential care – it gives people who take the gamble a massive incentive to pretend they require the free-of-charge residential care when actually they don’t.
In economics-speak, the Conservative policy suffers from ‘adverse selection’ – a weakness so boring and academic that it lends itself to zero coverage during the election campaign. Soundbites are the order of the day from this point on – and the Conservatives have managed to frame this issue (no mean feat) into a choice between an £8,000 gamble and a £20,000 death tax. The reason why this issue therefore has to resurface is because Labour has to try and re-frame the debate on itsr own terms. Labour needs everyone to be talking relentlessly about their plans for a ‘National Care Service’ to win this argument, and at the moment no-one is, so watch Labour make the next move on this one.
Is there a policy solution in sight?
Sceptics will say that politicians will simply continue to sweep this issue under the carpet for another ten years, pointing to the failure of so many politicians to have reformed the system in the past. But this time around it is different, because the electoral logic demands that something is done. An incoming government will be savaged when they come up for re-election if they don’t address this issue – not least by the baby-boomers who had to sell their homes, but also by their children.
This is not to say, of course, that this issue is not almost impossibly difficult to resolve – and it will take time to work through the implications of designing a funding system which needs to
raise tens of billions of pounds. After all, seventy years ago and after fierce debate, the political parties managed to settle on a ‘National Health Service’ funded by general taxation – and almost immediately they had to bring in prescription charges because they got their figures slightly wrong.
It is interesting to reflect on the fact that we would not be having this debate now were it not for the way the NHS is funded. Ultimately, if we had to pay for health care, we would not be so angry about having also to pay for social care. And it is just as likely that the debate over how social care should be funded will be as fraught and as fierce as that same one over healthcare seventy years ago.