Elderly people in England could be required to pay up to £20,000 to guarantee basic social care and support if they need it at the end of their lives, under Government proposals released today.
The compulsory insurance scheme is one of three options for funding a new National Care Service, designed to end the current "cruel lottery" under which some elderly people have to sell their homes and use up most of their savings to pay for care, while others pay nothing.
Launching a consultation on the future of social care with a statement in the House of Commons today, Health Secretary Andy Burnham said he wanted to create a system which was "fair, simple and affordable" to all.
He has already ruled out full state funding from general taxation, on the grounds it would place too great a burden on people of working age, and retaining the "pay for yourself" system, which is unfair to those who need years of care for conditions like Alzheimer's.
And he today called on the public to give their views on three possible solutions:
* A "partnership" approach, under which the state would pay around a quarter to a third of the cost of basic social care and support, leaving individuals to find the remainder;
* A voluntary insurance scheme, under which the state would pay the same proportion, but would also make it easier for individuals to take out insurance - at an estimated cost of around £20,000 to £25,000 at today's prices - to cover the rest;
* Compulsory insurance for all, costing around £17,000 to £20,000 at today's prices and providing free care for all who need it.
The National Care Service would offer assistance with needs like dressing, washing and moving around at home, but individuals who need to go into residential care would continue to pay the cost of accommodation and food themselves, whether they had taken out insurance or not.
However, new national arrangements would allow for bed and board costs to be deferred and paid as a lump sum after the individual's death.
The Department of Health is also consulting on whether insurance costs should be deferred until after death, paid in instalments or handed over in a single lump sum when an individual reaches retirement age.
Under all three options, those with little or no savings or assets would continue to receive free care.
At present, apart from those on low incomes or disability benefits, all elderly people are expected to pay for the full cost of social care, which can eat up all their savings - including the equity in their home - to a threshold of £23,000.
Around 20 per cent need care costing £1,000 or less during retirement but 50 per cent need more than £25,000 and 20 per cent more than £50,000, while a few can run up bills of £200,000 or more. The average 65-year-old today can expect to need care costing £30,000 - with the burden on women averaging £40,400 and men £22,300.
Mr Burnham said the figures contained in today's Green Paper, Shaping the Future of Care Together, were "indicative" but all three options could be expected to cost the state around the same as the current £14.7 billion annual budget.
He said the cost of care at the end of life was "the stealthiest tax of all".
"It is a real injustice that people who have worked all their life and paid taxes all their life, if they are unlucky enough to develop a condition like Alzheimer's in later life, they get no help to deal with the implications of that condition," said Mr Burnham.
"The way we look after our older people defines what we are as a country and I believe we can do better than we are today."
A National Care Service would get rid of "inequities and inconsistencies" by ensuring care needs were assessed and paid for in the same way everywhere in England and were based on personal circumstances and needs, he said.
Consultation on today's proposals will continue until November, and firm plans are expected to be published in a White Paper next year, to be phased in over a number of years from 2014.
In a foreword to today's document, Prime Minister Gordon Brown wrote: "The fact that as a nation we are now living longer is clearly a cause for celebration, but it also means that the pressures on our care and support system are greater than ever before.
"A care and support system that reflects the needs of our times and meets our rising aspirations is achievable, but only if we are prepared to rise to the challenge of radical reform."
Mr Burnham said successive generations of politicians had "flinched" from reform of the care funding system, but action was necessary now because people were living longer.
There are now more pensioners than children in Britain, and the burden on workers to cover state pensions and health care costs will increase.
By 2026, it is estimated there will be 1.7 million more adults requiring care and support in England. While there are currently four people under 65 for every one over that age, by 2029 the ratio will have dropped to three to one.
It is estimated that unless urgent action is taken, there will be a £6 billion black hole in the funding of social care within 20 years.
"We know that the money in the system at the moment will not be enough to pay for everyone's care and support in the future," said the Department of Health in today's Green Paper.
"If we want to meet the needs of all those who require care in the future, then as a society we are going to have to pay more for care and support. The question is where this additional money is going to come from."
The Government signalled yesterday that the legal retirement age of 65 is set to be scrapped or raised, allowing people to work for longer if they want to.
The age from which the state pension is payable is also due to rise to 68 for both sexes by 2046.
Jon Sparkes, chief executive of national disability charity Scope, said: "We urgently need a fairer, flexible and more transparent system where costs are spread more equitably, where people understand what support they are entitled to, and where eligibility is determined by need, not postcode.
"Whilst we understand there is no extra money in the pot, existing funding needs to work harder and deliver more."
GMB national officer Sharon Holder said: "GMB want the Government to support the option that residential care for the elderly is paid for out of taxation - like the NHS.
"We consider that this is the only fair solution. It is a complete lottery as to which one in 20 elderly people end up in residential care. GMB figures show that 43.4 per cent of those in care have to pay for themselves which in itself is another lottery.
"For Labour to make a manifesto commitment to return the welfare state once again to a cradle to grave service would be immensely popular.
"The Tory party, who introduced care home charges last time they were in power, will not support this. That would leave clear red water between the parties on this important social policy."