New plans to care for the elderly are unlikely to keep the wolf from your door

The consultation document on the future of long-term care for the elderly announced by the Chancellor in the last Budget is likely to be published by Easter. But the proposals are unlikely to take effect before April 1997 at the earliest, and any hopes they will guarantee comfortable middle-class families against the need to sell their parental homes to pay for care are likely to be dashed.

The proposed partnership between private insurers and the state to underwrite the cost of care in a nursing home is likely to be targeted firmly at families with assets of up to pounds 60,000, including the family home, who cannot be expected to buy long-term care insurance from their own resources.

The two front-running schemes which the Department of Health and experts on long-term care in the insurance industry are studying are versions of the dollar-for-dollar guarantees - as used in several American states, notably Connecticut - and the time limit scheme that operates in New York state.

Dollar-for-dollar schemes work on the basis that individuals who buy, say, $50,000 worth of private insurance protection will be able to ring- fence that amount of assets and claim support from the state once they have used the proceeds of their insurance and run their own assets down to that figure. Time limit schemes require individuals to insure their care costs in full for a specific period, three years in New York, after which the state will take over the full cost of further care indefinitely.

Oliver Heald, a junior minister at the DSS, went to the US last month to study the respective schemes, leading figures in the private health- care insurance business are being consulted and a briefing paper is being prepared for circulation to all MPs.

Peter Gatenby, appointed actuary at PPP Lifetime Care, the market leader in the infant private long-term care insurance market, believes the approved UK scheme will combine the characteristics of the two US versions.

Individuals who take out a private health-care policy plan could buy basic cover for a minimum period in a nursing home, and that would entitle them, once the policy had been exhausted, to claim support from the state or local authority as soon as their own savings had been run down to the guaranteed level.

The average stay in a nursing home is only two or three years, but the state guarantee would allow insurance companies to reduce significantly the premiums on private policies and make private insurance more affordable.

The protection would be additional to the existing level of protected assets which will double to pounds 16,000 in April this year. But in order to keep down the cost of the safety net to the taxpayer, state support would be means-tested and the qualifying level at which individuals could claim from the state would be capped at around pounds 60,000 of assets.

That level will be chosen to represent the value of the average house. Investors with larger assets would not be eligible for the support on the grounds that they could afford their own policies or their own care costs.

The consultation document will not offer any tax concessions to policyholders to help them pay their policy premiums, and the industry recognises that very few of the individuals who are likely to need long-term health-care insurance can easily afford it. In the past five years only around 9,000 policies have been sold, two thirds of them by PPP.

Premiums on existing long-term care policies are substantial. For pounds 1,000 a month of support indexed for up to 5 per cent annual inflation, a male aged 45 would pay a lump sum of pounds 6,436, or pounds 30 a month, until a claim is made; for a woman the cost would be pounds 11,310, or pounds 36 a month. At 60 a man would pay pounds 8,695, or pounds 53 a month, a woman pounds 14,640, or pounds 62 a month; and at 80 a man would have to pay pounds 11,383, or pounds 150 a month, and a woman pounds 17,500, or pounds 245 a month. And claims are only triggered by medical need. Even with state backing the cost of insurance, especially for the 50- and 60-year-olds - whose need is the most immediate - will run into several thousand pounds.

For most individuals who will qualify for the state partnership scheme their homes are their only significant assets apart from a pension. In order to fund a wider take-up of private long-term care policies it may still be necessary for many individuals to earmark their pension lump sum or take out an equity release scheme that will require them to surrender some of the equity in their home to buy a policy.

Even if the outline of the Government's proposals are published within weeks and win largely bi-partisan support in the House of Commons, there is a real possibility that legislation could be overtaken by an election and delayed another two years.

Since time is of the essence in taking out insurance policies - and premiums escalate sharply the older the individual is when the policy is taken out - PPP Lifetime Care is actively marketing policies with a guarantee that if the rules are changed to reflect the introduction of Government support their premiums will be amended, or they will be allowed to switch to a more appropriate product.