What does the Dilnot Report propose exactly: a primer


1:43 pm - July 4th 2011

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contribution by Dr Emma Stone

Today sees the launch of the Dilnot Commission’s report on how to reform the funding system for adult social care. What does it propose, what does it mean?

The key proposal: a social insurance model with an excess
The centrepiece of the reform package is a proposal to share the costs of care in later life between individuals and the state, with individuals paying for their own care until they reach a ‘cap’, after which the state pays for their care.

An individual’s lifetime contributions towards their care costs are currently potentially unlimited. Dilnot proposes capping these somewhere between £25k and £50k (Dilnot suggests £35k), after which the individual is eligible for full state support.  

This is a ‘limited liability’ model of social insurance – whereby those of us who can afford it and who have lived long enough to accumulate wealth, are expected to pay the ‘excess’. On this basis, none of us will be expected to lose all our savings and assets in order to cover the ‘catastrophic’ costs of sustained high-level care and support (often in residential care).

‘Those who can afford it’  

The big surprise in today’s report is the extended means test for residential (not home-based) care. In 2007, the Joseph Rowntree Foundation called for the very low threshold of £23k (liquid assets including housing assets) to be doubled, in order to prevent people with modest assets having to lose the lion’s share of their life’s savings to pay for care. Today, Dilnot has called for the means-test threshold for residential care to be quadrupled to £100k – thereby immediately making the system feel much fairer for large swathes of home-owners in England.

From principles to practicalities

The report sets out a wide range of recommendations about the practicalities of implementing the proposed funding system. Here are some of the key points.

  1. This will be a nationwide system, with a national framework for assessments and eligibility, and a degree of portability. This is not only welcome – it is essential; there really is no other way to deliver sensible and sustainable funding reform on this scale. 
  2. This model has the potential to incentivise greater investment into low-level or preventative support and services…as long as the meter is set running at a low enough level to include the sort of care and support that older people have described as ‘that bit of help‘ (e.g. help with getting out and about, with shopping or cleaning, basic telecare). A rebranded but otherwise intact Attendance Allowance will obviously also play a key role in enabling people to access low-level support in later life. However, it is disappointing that the Dilnot Commission recommends that, until the current assessment system is replaced, the threshold should, at a minimum, be set at ‘substantial’. I would have liked the threshold to have been low enough to cover ‘low-level targeted support’, as proposed by the Law Commission and our own evidence
  3. How spending levels are set (pre-cap by the individual and post-cap by the state) will be calculated based on how much the state would expect to pay to meet needs at the assessed level. Dilnot also proposes that people should contribute a standard amount to cover their general living costs in residential care (like food and accommodation, around £7–10k per year). People with the means can choose to pay more, but in the knowledge that any ‘top-up’ payments won’t count towards the ‘cap’ and won’t be funded by the state once they are eligible for full state support.  
  4. How people meet the costs of their contribution can and will vary within and across generations, and will change over time – including drawing down equity from one’s housing assets, purchasing insurance, unlocking pension funds. There is real potential here for the financial services to work together with older people, disabled people and others to develop products that work well for people as well as being commercially viable. 
  5. How people understand and navigate the system will clearly be a ‘make or break’ for this (and any) system. The last few months and years have revealed how little we all know and understand about social care. That has to change, and Dilnot is clear on this: a) an awareness campaign, and b) an endorsement of the Law Commission’s proposed duty on local authorities to provide a universal entitlement to access information, advice and assistance (JRF would call for the inclusion of advocacy too), irrespective of whether or how you pay for care. 
  6. The Dilnot Commission’s report highlights the importance of family and informal carers – and recommends that carers should be supported by improved assessments to ensure the impact on the carer is manageable and sustainable, and by additional legal rights as proposed earlier this year by the Law Commission

We know that Dilnot’s reforms will not address the fundamental issues of social care quality, or outcomes, or safeguarding – as that will require far wider transformation and a shift in culture and values, as well as increased resources.

Nonetheless, I am clear that the Dilnot proposals are the most competent and credible basis we have to reform a broken, unfair and overly complex system of funding care. The proposals are based on evidence and expertise from across the social care sector, and reflect our own understanding of the issues from research and practice

They are the best chance we have of reform. Let’s discuss, and let’s decide.


Dr Emma Stone is Director of Policy and Research at the Joseph Rowntree Foundation. A longer version of this blog-post is here.

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Reader comments


Is it such a bad thing if people who’ve built up substantial assets use them to pay for their care rather than passing them on down to their children? (If the assets are houses, this’d mean mortgaging the house or using some alternative setup where you continue to live in your house but don’t pass it all on when you die.)

2. Sevillista

@TomAsh

Good point.

The report doesn’t explain exactly why the taxpayer should spend £5 billion/year by 2020 to provide free asset insurance to those with assets of more than £100,000. Some kind of levy on estates that people are allowed to defer until after their death may be fairer?

It also doesn’t explain why the private insurance industry should get a big subsidy to guarantee its profits.

Or why the cap should be set at the level suggested (conveniently at the level at which an £8,000 private insurance product protecting all assets could be offered – didn’t one of the parties have a manifesto commitment on this?).

Good for wealthy baby boomers though!

3. Sevillista

Slide 22 of Dilnot’s presentation illustrates the regressive nature of the proposed reforms.

https://www.wp.dh.gov.uk/carecommissiom/files/2011/07/CFCS-launch-presentation-WEB.pdf

I really don’t understand why free asset insurance to the wealthy is something that attracts support from the left. Why not use the money to improve care for those who cannot afford to pay (e.g. provide support for those with less than ‘substantial’ needs on FACS criteria)? Surely this is the pressing problem – poverty-stricken elderly people denied the support they need to ribose dignity in old age.

4. Chaise Guevara

@ 1 Tom Ash

“Is it such a bad thing if people who’ve built up substantial assets use them to pay for their care rather than passing them on down to their children?”

No – but obviously that’s not the only potential result of making people pay for their care. Seems to me that the fairest way to resolve your issue is for the state to pay for care, but tax inheritance to do it.

“I really don’t understand why free asset insurance to the wealthy is something that attracts support from the left. Why not use the money to improve care for those who cannot afford to pay (e.g. provide support for those with less than ‘substantial’ needs on FACS criteria)?”

Don’t know how this fits with the specifics of Dilnot, but if the reforms put social care on a more universalist footing, then isn’t there a good social democratic argument in favour? In the medium term, people who can’t afford to pay will do better from a universal system which everyone feels that they benefit from than from a residualised system, even if the short term distributional aspects aren’t progressive.

It’s a shame the ‘death tax’ – a levy on care users’ estates – got taken off the table, because that still looks to me like a sensible option.

Still, the Tories had three excellent reasons for refusing to consider it:

1. It made for a nice ‘scare’ poster.

2. It makes room in the market for private companies to extract profits from vulnerable people seeking to release equity in their home, etc.

3. A levy of, say, 10% on care users’ estates would have meant people with modest assets – a house of average value, say – got a relatively good deal (10% of £175,000 = £17,500, half the proposed cap), while the rich got a relatively poor deal (10% of, say, £700,000 = £70,000, double the proposed cap.) And we couldn’t have the rich subsidising care for the poor, now could we?

7. Chaise Guevara

@ 3 Sevillista

“I really don’t understand why free asset insurance to the wealthy is something that attracts support from the left.”

Three reasons spring to mind. First, a system that doesn’t provide support to all will inevitably let some people fall through the cracks. You have to make the rules so they apply to the whole country, so there’ll always be outliers who find themselves disqualified from claiming benefits they badly need.

Secondly, a system like that can create a situation where those at the low end of the “wealthy” bracket end up worse off than those at the higher end of the “deserving” bracket, because the difference between them is lower than the amount they will have to pay as a result. That seems to move from expecting people to pay their way to actively penalising people for earning money.

Thirdly, affluent people are more likely to support a system that they are entitled to use, even if it is a net drain on their money. If the NHS only provided treatment for low earners, for example, with everyone else expected to buy private insurance, it might well have been shut down by now. I remember this being a key point during the debates over child allowance.

8. Sevillista

@donpaskini @chaise

Valid arguments I guess to set against my concerns.

But they need to be understood in the context that those with ‘substantial’ needs under FACS criteria will still be denied help if they are too poor to purchase support privately, while the state funds asset insurance for the wealthy.

The redistribution from the general taxpayer to those with wealthy relatives also sticks in the throat – those without wealthy family will continue to be unable to e.g. afford a home of their own while subsidising their more fortunate peers to do so (as well as funding the massive tax breaks given to home-owners)

Sevillista

“The redistribution from the general taxpayer to those with wealthy relatives also sticks in the throat”

The general taxpayer routinely pays for services and benefits received by people rich enough to cover the cost of such benefits and services privately – education, healthcare and pensions being the obvious ‘big ticket’ items. But this is 1 – fair enough, since rich people are taxpayers too and deserve to get something out of a system they pay into, and 2 – essential if we don’t want those services and benefits to wither away as they become more and more ‘targeted’ at those in need.

A world in which state-funded healthcare, education, pensions etc were a ‘safety net’ for those in need, with better-off people relying on private provision, would be a right-wing paradise of low taxes, low spending, a stripped-down welfare state and a divided, increasingly unequal society. But moves in that direction, like the Child Benefit cut, would also be welcomed by many left-leaning voters – a case of turkeys voting for Christmas if ever I heard one.

10. Chaise Guevara

“But they need to be understood in the context that those with ‘substantial’ needs under FACS criteria will still be denied help if they are too poor to purchase support privately, while the state funds asset insurance for the wealthy.”

Certainly – if I had my way essential services like this would be free at the point of use for all, subsidized by our tax system, which (in theory) makes those fortunate enough to be wealthy pay proportionately more.

11. Charlieman

@5. Don Paskini: “Don’t know how this fits with the specifics of Dilnot, but if the reforms put social care on a more universalist footing, then isn’t there a good social democratic argument in favour?”

Already though, the argument about a common minimum standard for social care has been converted to a universal standard. Running alongside the standard arguments about post code lotteries, which for once are true.

A universal standard imposes a cap on what can be provided or may define methodology. It ignores regional differences in the type of care that is required. Minimum: yes. Universal: no.

12. Charlieman

@10. Chaise Guevara: “Certainly – if I had my way essential services like this would be free at the point of use for all, subsidized by our tax system, which (in theory) makes those fortunate enough to be wealthy pay proportionately more.”

There is a rational argument that a progressive tax system on death duties (IHT) — starting at a lower threshold — might deliver such services. There is no evidence that UK politicians are fit or willing to conduct that debate.

13. paul ilc

Very interesting summary, Dr Stone. Thank you —- More articles like this please, Sunny.

I’ve actually heard a good response to my original question: excluding people who’ve built up assets would create an incentive not to build them up. I can’t see a neat way to avoid this, but I still don’t like the assumption that old people’s assets (regardless of whether or not they’re houses) are sacred, so would rather see a universal, state-funded system combined with some sort of wealth or inheritance tax.

15. Chaise Guevara

@ 12 Charlieman

“There is a rational argument that a progressive tax system on death duties (IHT) — starting at a lower threshold — might deliver such services. There is no evidence that UK politicians are fit or willing to conduct that debate.”

Yup. Bizarrely, the UK as a whole appears to prioritise fairness to the dead over fairness to the living.

In a genuinely fair society, inheritance tax would be 100%, although I imagine that this wouldn’t be practical in reality.

16. Charles Wheeler

“How people meet the costs of their contribution can and will vary within and across generations, and will change over time – including drawing down equity from one’s housing assets, purchasing insurance, unlocking pension funds. There is real potential here for the financial services to work together with older people, disabled people and others to develop products that work well for people as well as being commercially viable.”

This is the tricky bit. 50% of the population share 5% of the wealth. Without substantial redistribution millions have no means of support. Over the last 30 years inequality has INCREASED along with its corollary – debt – effectively shifting income from those increasingly dependent to the rentier class, exacerbating the problem, and ensuring that millions more will be entirely dependent on the state even as the resources available to government through an eroded tax base diminish.

As even orthodox economists are beginning to recognise – excessive inequality kills economies.

17. Readthedetail

There seems to be universal praise for the Dilnot report but has anyone really analysed the report in depth. For instance raising the capital limit from £23,250 to £100,000 and retaining the tariff income. Do the sums!! £100,000-£14,250 = £85,750. For every £250 the resident must contribute £1, that is £343 week, and on top of their pension(s) less £22.30 week. Far more than the local authority would usually pay in total for care. They would be better off remaining self funding! But more importantly the current problem is underfunding of the care system, not protecting peoples inheritance at the expense of the taxpayer or other services. Without a substantial increase in the what the state actually pays for care, the pressure on care providers will remain, and introducing these proposals will add complexity and not clarity.

18. Leon Wolfson

Sevillista;

Afaik, the right place for the wealthy to pay their way isn’t via denying them universal benefits, it’s general taxation. Means-testing benefits makes them for, in the rich’s parlance, “scroungers”, and not something they see as a social good.

Certainly general taxation – and I support higher tax rates on unearned incomes, as the rich have a much higher percentage of – should be set at rates which take into account the benefits richer people gain from said universal benefits.

It works better (human minds are strange that way) AND you don’t need to pay to do the means testing!


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    What does the Dilnot Report propose exactly: a primer http://bit.ly/j9pkZZ

  2. Abigail Scott Paul

    RT @libcon What does the Dilnot Report propose exactly: a primer http://t.co/ko7rVfq by @jrfemma

  3. Christian Nurse

    What does the Dilnot Report propose exactly: a primer | Liberal Conspiracy http://t.co/DBaoQSp #dilnot #ukcare

  4. Andrew Ducker

    A good explanation of the Dilnot proposal for reforming adult social care http://bit.ly/iP84nH





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