The long awaited proposals resulting from the Dilnot report were expected to outline a welcome and acceptable solution to the controversial issue of care home costs and paying for Care in England and Wales
By Jacqui Johnson, Head of Corporate Development
However upon closer examination, are they as generous as first thought and will you be one of the lucky ones to avoid care home fees?
On 15 February 2013, Jeremy Hunt, the Health Secretary, announced that a cap of 75,000 towards care costs could be introduced in 2017.
This will be after the General Election, along with an increase in the mean-testing threshold from 23,250 (the current limit) to 123,000.
So, how do the new proposal compare with the current situation?
There are countless examples of people, who have carefully planned throughout their working life, hoping for a level of lifestyle that they feel is worthy of their efforts, and more importantly, of their contribution to society, especially if and when they reach retirement. This is why it is important when planning your retirement, to take the same level of care.
But often there are extreme situations of people from similar financial backgrounds contributing widely different amounts towards the services, some will have to deal with the full financial burden of care home fees and others will avoid care home costs altogether.
At the moment, basic social care must be provided for everyone, and this must be covered financially by the person’s primary care trust. This means that a primary health need will be provided by the NHS for free, irrespective if this is in or out of hospital.
If a person’s situation changes and or their health deteriorates, they will then be assessed for ongoing care and this will be one of four needs: low, moderate, substantial or critical. Usually only substantial or critical care is then covered financially.
Will you avoid care home costs & fees?
We have heard about many situations where elderly people in particular, are ultimately forced to sell their home to pay for Long Term Care, where others may receive the same care for free.
This led the government to task a Commission, launched on 20 July 2010, on the Funding of Care and Support, which was carried out by an independent body chaired by Andrew Dilnot.
The recommendations from this report formed the basis of the recent announcement that there will be a cap on the amount an individual has to pay towards care. However is this all good news?
When looked at in detail, the 75,000 cap will only apply to the actual social care costs. The widely used residential care costs, of which only about a third is for social care costs, is largely made up of ‘hotel’ costs which provides accommodation and food, and will still have to be paid for by people themselves.
In addition, people paying for care may also find themselves subsidising people who are state funded due to the complicated way that local authorities pay care fees.
Due to their purchasing power, local authorities can often command reduced rates compared with an individual, and combining that with the calculation used when working out what someone is eligible for in terms of assistance from the local authority, may mean that people end up paying more than 75,000.
And is the 75,000 a realistic cap? Is it likely that most people will spend 75,000?
It has been estimated that it would take about 4 or 5 years for someone in a care home – either a residential or a nursing home to reach the 75,000 cap, after which their fees would be fully funded.
Considering the average time for the elderly to spend in a care home, it is unlikely that many will reach the fully funding situation.
So what are the options?
The insurance industry has been unattracted to this market for a long time due to the open-ended nature of the benefit, resulting in few appropriate financial product solutions.
However, the health secretary indicated that future flexibility around pensions may change this view. In addition, the cap on contributions may encourage new solutions, and with a limited liability, the insurance industry may see a commercial opportunity.
However this doesn’t present any immediate solution from the insurance sector, or certainly until 2017, the earliest when the new proposals would come into effect, if at all. No cross-party agreements have been signed off on this matter.
So for individuals who are facing the issue of care now, there are still fees to contend with and assets which people would wish to protect.
Jacqui Johnson – Head of Corporate Development, The London Investor
Having dedicated more than 20 years of her life to Financial Services, Jacqui is an adaptable and dynamic professional with excellent relationship and communication skills matched with a confident, focused approach to achieve the financial goals of her clients.
In her current role Jacqui is more than just a Development Manager; her background working with a diverse range of clients across industry sectors has given her a unique insight into the needs and financial pressures of both individuals and her corporate clients.
Think of Jacqui as your eyes and ears in a fast moving and dynamic financial services market place.