Abstract

Background: An ageing population and increased longevity will result in long term care becoming progressively more expensive in the UK. Despite a series of reviews stretching back 20 years, no meaningful action has been taken which addresses the situation where only those with greatest need receive any support. The latest in this long line of reviews has been the recommendations made by the Dilnot Commission in July 2011, which should give rise to a White Paper on Social Care some time during 2012.

Objective: The main objective of this presentation is to consider the role which private finance products could play in partnership with State provision in the supply of long term care. Since one of the disincentives for private enterprises to develop innovative products is the current arcane means testing arrangements, the research considers how that system could be made fairer and greatly simplified.

Data and methods: We consider the ability of individuals to fund their long term care needs from their own resources and to test what people could afford before or after any State support is factored in. Using the English Longitudinal Study of Ageing (ELSA) dataset, we split the total numbers of people aged 65+ into household types and estimate their levels of income, savings and housing assets. We then assess the number of years of long term care which each subgroup could afford. From this analysis, we consider the types of long term care product which might be developed to suit the financial circumstances of each sub- group. This also allows us to propose reforms that could be made to the current means testing arrangements which would give these sub-groups an incentive to make proper provision for their future long term care needs.

Results: We find that few households are able to pay for long term care out of only income and savings but the number increases substantially if housing assets and other assets are also included. We show that suitable products can be devised for a range of personal circumstances, although State support would need to continue. We propose a simplified means testing system based on a combination of income and assets.

Policy implications: We argue that if the means testing arrangements are reformed in the way we recommend then there would be a greater incentive for everyone to make suitable provision for their future long term care needs. This, in turn, should encourage the development of a wider choice of private finance products. In this way, a more satisfactory partnership between the State and private providers should emerge than at present.

Slides