New ideas to save the family home

Who should care for the elderly: you, the state or insurance companies? By Clifford German

Horror stories about decent old people being forced to sell the family home to pay for long-term care have dropped out of the news recently, but the problem of how to pay for care without losing a lifetime's savings since the Government withdrew the cash for local authorities to finance free care for local residents is still with us.

When last heard of, the most likely way forward was some form of partnership between the state and private insurers which would enable anyone who bought a private policy from the likes of PPP Healthcare, Bupa or an insurance company such as Commercial Union or Legal & General to keep some of their assets, including a family home.

Partnership would allow individuals who buy private insurance and are forced to go into a home to claim on the policy while they still have assets, including a family home worth, say, pounds 60,000, and in turn allow the insurance company to hand on the burden of care to the state when the policy has delivered either a fixed value of care or paid out for a fixed length of time. As such, a partnership policy might cost less than half the cost of a fully comprehensive care policy which provides guaranteed care for life as soon as the old person can no longer perform two or more of half a dozen standard tests of physical and metal ability to look after themselves. But the partnership scheme has been turned over to an inquiry to consider just how the burden should be shared between the policy-holder, the insurer and the state.

Meanwhile, the latest contribution to the debate came this week from the Joseph Rowntree Foundation, which suggested that everyone should contribute 1.5 per cent of earnings to a special fund, to be administered by insurance companies and care providers. But this raises more questions than it solves, and has not found favour with the care providers or the Government.

A Rowntree-style fund would immediately generate around pounds 3bn a year, enough to finance full residential care for 200,000 elderly and infirm each year at current costs. If the money was used only to provide care, and anyone needing residential or nursing care would still have to pay for food and accommodation, the money would stretch much further. But it could take up to 15 years to build up resources to the point where the fund became fully self-financing, so the question immediately arises who exactly would qualify for care and when. In an ideal world, elderly people already in care should immediately be helped to conserve their assets, and it might also be difficult to deny anyone who has already retired and has no chance of building up a private insurance fund out of their own resources.

Anyone over 50 and still working would have to contribute before they could hope to benefit, but anyone on an average income of pounds 15,000 a year would be putting in less than the current cost of a private insurance scheme, and would stand to gain from a Rowntree scheme. Individuals much under 50, especially young people in their twenties with up to 40 years still to work and contribute, would however be entitled to complain that they would be helping to pay for the current generation of middle-aged and retired people and also over-paying for their own care when the time came.

The idea of a comprehensive fund is unlikely to appeal to the sub-class of individuals, already several million strong, who have little or no chance in the current economic climate of accumulating enough savings and financial assets before they get old. Under current circumstances, if they have assets of less than pounds 10,000 they would qualify for free residential care in any case without having to contribute from their own resources. For them, a 1.5 per cent deduction from anything they do earn would be an unnecessary extra tax which they could ill afford, for a benefit they would receive free anyway.

The fund is also unlikely to appeal to anyone who already has enough money to pay for private care of a self-sustaining basis, either out of assets or an income stream or a pension of more than pounds 20,000 a year. Anyone who has already been contributing to a private insurance scheme, either by paying an annual premium or a lump sum up front, would also be unlikely to welcome a compulsory pay-as-you-go scheme suggested by the Rowntree Foundation.

Add in the four people out of five who on current numbers will die relatively suddenly without qualifying through loss of their physical or mental powers for paid-for nursing care at home or residential or nursing care in a residential home, and it is obvious that there is a powerful constituency of individuals who would rather not contribute to a universal scheme.

At this particular moment, a universal contributory scheme is unlikely to find much favour with politicians of any party with serious hopes of winning the next election. A mandatory 1.5 per cent contribution to a long-term care fund would be all too easy for opponents to denounce as an additional tax, at a time when the Conservatives are trying desperately to project a claim to be the party of lower taxation. The health minister Simon Burns has already condemned the Rowntree proposals as "a new and unfair tax".

For the same reason, the Labour party is unlikely to endorse a comprehensive scheme. In the past year it has already backtracked on the idea of a mandatory extra pension scheme to which everyone in work would be obliged to contribute.