Long Term Care Scheme - Ministerial Response - 4 December 2013

Ref.

Panel Finding/Recommendation

Response from the Minister

F1

The demand for long-term care, and the cost of its provision, is expected to rise substantially in coming decades. There are  compelling  reasons  for  additional State  intervention  in  the  market  for long-term care, and as the demand rises, the  need  to  address  this  issue  is becoming increasingly pressing.

Agreed.

F2

Reforms to the provision of long-term care must be seen in the wider context of competing demands for government spending.  The  ageing  population  is predicted to lead to increased pressure on healthcare services and spending on pensions.

The Health Insurance Fund is similarly facing  pressures  from  an  ageing population.

Agreed.

Both  the  Health  Insurance  Fund  and  the Social Security Fund face pressures from an ageing  population.  UK  Government Actuary's  Department  reviews  are conducted  every  3–5 years  and  the Department  keeps  long-term  trends  under careful review.

Ref.

Panel Finding/Recommendation

Response from the Minister

These predictions suggest that taxpayer contributions  will  rise  significantly  to fund these areas in the future.

P.99/2013 states that the LTC contribution rate will need to rise over the next 30 years.

F3

Funding  of  long-term  care  by compulsory  contributions  is  supported by  70%  of  the  population.  However, opinions on taxation are at odds with this support as there is little support for increased levels of taxation.

The  Funding  of  long-term  care:  Green Paper –  Response  Summary'  (R.87/2010) stated the preferred funding mechanism was regular compulsory contributions (similar to Social  Security  contributions).  This  was supported  by  over  70%  of  respondents. Although  collected  through  the  same mechanism  as  Income  Tax,  the  LTC contribution  rate  is  not  an  increase  in general  taxation.  Like  Social  Security contributions,  LTC  contributions  will  be collected  into  a  ring-fenced  fund  (LTC Fund). As such, the LTC Fund will not be available for wider spending on other cost pressures.

F4

The OXERA report notes that there is evidence that the average length of stay in care, in Jersey, is greater than in the UK. However, Jersey plans to invest in a range of community-based services in order  to  reduce  demand  and  enable people to remain in their own homes.

There  is  no  comprehensive  data  set  on length of stay in Jersey. As such, UK data – based on research completed by the Personal Social Services Research Unit (PSSRU) on length of stay in BUPA care homes – was used and is a good benchmark in the absence of  comprehensive  Jersey  data.[1]  With  the introduction of the LTC scheme, the Social Security Department (SSD) will be able to gather  length  of  stay  information. Investment in community-based services to reduce the demand for long-term care is part of  both  health  policy  P.82/2012  and  LTC policy P.99/2013.

F5

Estimates in the 2011 proposal showed that  if  the  government  were  to  do nothing  to  reform  long-term  care provision, the cost of long-term care to the  States  would  double,  reaching £60 million  in  real  terms  by  2026. Individual contribution would similarly double over the period.

Agreed.

Ref.

Panel Finding/Recommendation

Response from the Minister

F6

The 2013 proposals will lead to a rise in the cost of care compared to the current provision, first because the new capped cost  offer  provides  an  immediate subsidy to those not eligible for means- tested  support  with  the  highest  long- term care costs, and second because the asset disregard for means-tested support will rise substantially.

The introduction of the LTC scheme does not, in itself, affect the total cost of care. P.99/2013 states that the total cost of care will increase irrespective of introducing the LTC scheme – Jersey is facing an increased ageing population. P.99/2013 addresses the balance of how these care costs should be shared between the individual needing care and the community at large.

F7

The key differences between the 2011 and 2013 proposals relate to how costs are  shared  between  government  and individuals,  and  the  mechanism  by which individuals' assets are protected against very high costs of care.

Agreed.

F8

The  2011  proposals  suggested  that homes worth up to £750,000 together with  assets  to  £25,000  would  be disregarded  from  means-testing.  For non-homeowners  a  much  lower disregard  of  £100,000  was  proposed. The  new  scheme  proposes  a  much lower asset disregard value of £419,000 (which has been based on the value of a two-bedroom property (£394,000) plus £25,000)  and  is  not  limited  to homeowners.

Agreed.

F9

Both  homeowners  and  non- homeowners are on the same level of asset  disregard.  The  introduction  of property  bonds  in  2009  has  already meant that the elderly no longer need to sell  their  homes  in  order  to  pay  for long-term care. Currently no interest is charged by Social Security, but under the  2013  proposals  interest  will  be charged at the Bank of England base rate plus 0.5%.

The Parishes, both under the historic system and  the  Income  Support  system  currently, have  provided  limited  support  to homeowners. The new LTC Law will extend this  to  enable  a  much  higher  number  of homeowners  to  take  advantage  of  a  loan against their principal residence. The interest charged on these loans will help maintain the real value of the money lent, as it may be many years before the loan is repaid.

F10

All individuals in receipt of residential long-term care will pay accommodation costs  in  the  form  of  a  "co-payment." The proposed value of the co-payment is  currently  £300.  This  value  is  just under  the  median  income  of  a  single pensioner  after  housing  costs,  but  is significantly  higher  than  the  current States pension for a single pensioner of

P.99/2013 states that the proposed value of the  co-payment  for  those  placed  in  an institutional setting is currently a minimum of £300 p/w (2013 prices).

Separately, the States pension is a weekly benefit  that  is  paid  once  an  individual reaches  a  certain  age.  The  pension  is designed to assist with basic needs in old

Ref.

Panel Finding/Recommendation

Response from the Minister

£193.48 (based on 2009/2010 figures).

age. As such, it is not a good comparative measure for the LTC co-payment, which is linked to the basic accommodation charges an individual faces.

F11

Regulations  will  prevent  individuals from  divesting  their  assets  to  avoid long-term care costs by including any assets divested in the previous 10 years in the assessment.

Agreed.

F12

A cap of £50k provides protection for individuals against the very high levels of  costs  that affect  1 in 10  over-65s. However,  the  scheme  does  not  just benefit those incurring these costs, but rather  acts  as  insurance  against  such costs  for  the  wider  community, removing  financial  uncertainty  as individuals move into care.

Agreed. The objective of the LTC scheme is to  help  protect  individuals  against catastrophic care costs.

F13

The  estimated  growth  in  the  cost  of long-term  provision  is  based  on  the tripling of the elderly population over the next 30 years.

The  population  scenario  350+  net  inward migration has the elderly' population (those over 85) tripling from 1,900 (2010) – 6,000 (2040).

F14

The  level  of  migration  plays  an important  role  in  determining population  trends  in  Jersey,  and estimated  population  numbers  are highly dependent on assumptions about migration patterns. This has potentially important  implications  for  both  the demand for long-term care and for its finance.

As detailed in the Minister's response to the written  question  dated  10/09/2013 (1240/5(7812)): The number of people aged over 65 in Jersey will increase under each of the  population  scenarios  and  in  general terms, the number of people requiring care over  the  next  30 years  is  not  strongly influenced  by  different  population scenarios – the great majority of people who will require care before 2044 (when they are in  their  70s,  80s  and  90s)  already  live in Jersey.  However,  the  working-age population  is  quite  strongly  dependent  on the population scenario chosen.

 Increasing  net  immigration  above 350 persons  per  year  will  increase the number of working-age people and will decrease  the  LTC  contribution  rate required in 2044. For example, the LTC model suggests that net immigration of 700 persons per year would reduce the 2044 break-even LTC contribution rate from 2.7% to 2.5%.

Ref.

Panel Finding/Recommendation

Response from the Minister

 A  net  immigration  level  below 350 persons  per  year  will  lead  to  a decline in the number of working age people, and this will increase the LTC contribution rate required in 2044. For example, the LTC model suggests that nil net immigration would increase the 2044 break-even LTC contribution rate from 2.7% to 3.0%.

F15

Investment  in  cost-saving  measures, such  as  more  suitable  housing  and technologies to enable people to stay at home for longer, may reduce costs of long-term  care  provision.  This  was recognised  in  P.82/2012  "Health  and Social Services: A New Way Forward" and is currently being implemented by the  Health  and  Social  Services Department.

Agreed.

F16

There  is  no  co-payment  payable  by those receiving care in their own home which results in a saving of £300 per week,  although  these  savings  are arguably not real because costs of living still have to be paid.

Agreed,  for  those  choosing  to  receive  the care in their own home, there is no liability for the minimum co-payment of £300 p/w (2013 prices) as these people will have to meet their living costs – as do all who live in their own home.

F17

One omission from the OXERA report is discussion of pensioners' income, the median value of which was £326 per week  in  the  2009/10  Jersey  Income Distribution  Survey,  and  how assumptions  about  variations  in pensioners' income may impact on the value of state spending on means-tested support.

The Oxera model allows for sensitivities to be explored in various areas, including the relationship  between  care  costs  and household incomes. The base case assumes that these will both increase at the same rate (i.e. in line with earnings). If care costs rise faster  than  earnings,  the  contribution  rate would  need  to  increase,  or  reductions  be made  in  the  generosity  of  the  benefits  or disregards.

F18

The proposed long-term care rate of 1% will be in addition to taxes levied on the individual. The long-term care liability for all taxpayers (marginal and full-rate) will  rise  to  1/20  of  their  income  tax liability in 2016 or £5 for every £100 of tax  paid.  An  Upper  Earnings  Limit (UEL)  is  to  be  applied  with contributions due only on income up to UEL £152,232.

Agreed.

Ref.

Panel Finding/Recommendation

Response from the Minister

F19

The  fund  is  to  be  financed  from  a combination  of  funding  from  central government  and  new  funding  to  be raised from contributions paid through the income tax system. It is proposed that  the  States  will  transfer  current annual spending on long-term care into the  fund,  which  at  present  stands  at £31 million  a  year.  Although  this amount is going to be increased by RPI on  an  annual  basis,  there  will  be  no growth  in  the  real  value  of  this contribution over time.

Although  the  gross  expenditure  by  both Health  and  Social  Services  (HSSD)  and Social  Security  (SSD)  is  approximately £31 million, this will not be the value that is transferred  into  the  LTC  Fund.  See  the supplementary  report  for  P.140/2013  for more details (P.140/2013 Add.).

F20

It  was  recognised  during  the development  of  the  long-term  care scheme that the benefit it would provide for older people needed to be balanced against  the  costs  it  would  impose  on younger people. Therefore, pensioners will also be liable for the long-term care contribution,  with  payments  liable  on all earnings and other income. Between one-third and a half of all pensioners are  expected  to  be  liable  for  the contribution.

Agreed –  LTC  contribution  liability  is dependent on income tax liability. Designing the  LTC  scheme  on  an  individual's  tax liability ensures that pensioners continue to contribute into the LTC Fund. This increases the sustainability of the LTC Fund in light of an ageing population.

F21

The average duration of long-term stay data has been taken from UK evidence. Improved data that is specific to Jersey would enable better assessment of the cost implication of setting a cap on the cost of care.

Agreed – see response to F4.

F22

Couples  who  both  require  long-term care  will  have  a  care  cost  cap  set  at £75,000.  The  2013  proposals  assume that  income  will  be  assessed  on  the basis  of  an  individual  and  their partner's incomes. How much income a partner will be allowed to retain when their  partner  enters  long-term  care  is unclear.

This  information  will  be  specified  in Ministerial Orders. Details will be available on  the  www.gov.je/longtermcare  website and  communicated  to  individuals  on  an ongoing basis.

F23

The  long-term  care  scheme  covers everyone over the age of 18. Younger people  (those  under  65)  in  receipt  of long-term care are treated in the same way as pensioners in the proposals.

Agreed.

Ref.

Panel Finding/Recommendation

Response from the Minister

F24

Discussions  between  Social  Security, Treasury and Resources and Health and Social  Services  are  taking  place  to determine  what  services  currently provided by the Health Department will be  passed  onto  the  Long-Term  Care Fund. The Panel is concerned that this work has not yet been completed.

The  LTC  Law  explicitly  identifies  that benefits  can  only  be  paid  to  eligible individuals  receiving  approved  care packages. The Minister for Social Security is responsible for setting and maintaining the eligibility criteria and the approval process for  care  packages.  HSSD  do  provide services  that  fall  outside  the  remit  of  the LTC  Law,  and  HSSD  will  continue  to receive  tax-funded  budgets  in  respect  of these services. See the supplementary report for P.140/2013 for more details.

F25

Although the Minister is determined the Long-Term  Care  Fund  will  be  ring- fenced, the Panel is concerned that the criteria for care could be expanded to include  other  healthcare  services, broadening  the  original  intention  and cost of the Fund.

See response to F24.

R1

Improved data on the average duration of  long-term  stay  specific  to  Jersey should be gathered and maintained.

Agreed. There is no comprehensive data set on length of stay in Jersey. As such, UK data – based on research completed by the Personal  Social  Services  Research  Unit (PSSRU) on length of stay in BUPA care homes – was used, and is a good benchmark in the absence of comprehensive Jersey data. With the introduction of the LTC scheme, SSD  will  be  able  to  gather  length of stay information.  Investment  in  community- based  services  to  reduce  the  demand  for long-term care is part of both health policy P.82/2012 and LTC policy P.99/2013.

R2

Regular analysis of Jersey-specific data relating  to  the  duration  of  long-term stay should be carried out in order to monitor and assess the cost implications of  the  Long-Term  Care  Fund  and  its financial  condition.  This  should  not only  be  included  in the Department's actuarial review, but also reported to the States on an annual basis.

Agreed.  The  information  on  duration  of long-term care will be required to inform the regular actuarial reviews of the LTC Fund. The Social Security Reports and Accounts (2014)  will  incorporate  key  information pertaining to the LTC Fund, such as average duration of long-term care claims.

Ref.

Panel Finding/Recommendation

Response from the Minister

R3

Further work should be undertaken by Social Security in order to understand the  potential  variations  to  pensioners' income  caused  by  economic  changes and the likely impact on the Long-Term Care Fund.

Agreed.  Regular  Income  Distribution Surveys are conducted by the Statistics Unit (the next one is planned to start in 2014). The UK Government Actuary's Department will  include  sensitivities  based  on  this information as part of the regular actuarial review  of  all  Funds  administered  by  the Social Security Department.

R4

The publicity campaign carried out by the Social Security Department should not only include an explanation to the public of how the scheme works, but also impress on them the need to save for their future, particularly in order to cover  the  £300  per  week accommodation costs.

Agreed.  The  communications  plan  for  the LTC  scheme  has  taken  this  into consideration.

R5

Prior  to  the  implementation  of  the scheme, it should be made clear how much  income  an  individual  will  be allowed  to  retain  when  their  partner enters long-term care.

Agreed. This information will be specified in  Ministerial  Orders.  Details  will  be available  on  the  www.gov.je/longtermcare

website and communicated to individuals on an ongoing basis.

R6

In order for the Council of Ministers to fulfil what was approved by the States in  P.82/2012  "Health  and  Social Services:  A  New  Way  Forward",  the long-term  care  charge  should  not  be increased  above  1%  until  further consideration is given to the sustainable funding  mechanism  for  health  and social  care.  The  outcomes  of  the discussions should be reported back to the States before the end of September 2014.

P.99/2013 sets the LTC contribution rate at 1% in 2016, and confirms that the Minister plans to hold the 1% contribution rate until the end of 2018. During the first 5 years of the  scheme,  work  will  be  undertaken  to review the contributory requirements for the LTC Fund. The LTC contribution rate is set by Regulations and requires States approval to  be  changed.  The  Ministers  for  Social Security and Health and Social Services will continue  to  work  together  on  the commitments included in P.82/2012.