States Assembly | Options for Care Funding - what could be done now - Long-Term Care Scheme - Research

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Options for care funding: what could be done now?

Solutions

Lessons for policy March 2009 and practice

What's the issue? Ways forward

The current economic situation could cause the Fairer and more sustainable methods of funding include: reform of the UK long-term care funding model to lose • equity release , allowing older homeowners to pay momentum. According to Government figures the for home-based care by deferring the costs until their present model is already unsustainable ( Johnson , 2008) home is sold;

and funding would need to be trebled (Hirsch, 2006) just • higher capital limits for care home fees to help

to maintain the status quo. those with modest assets;

• doubling the personal expenses allowance for people living in care homes supported by local Consensus on the need for reform authorities;

• restructuring help for people in nursing homes,

• Many experts, the public and the Government agree breaking down the barrier between health and social that the UK needs a new care funding system. The care.

Joseph Rowntree Foundation (JRF) and others have

shown that the present system is unfair, unclear and

unsustainable (Hirsch, 2005). Stakeholders want Practice innovations

clearer entitlements, and would consider a new shared

funding contract between individuals and the State Pooled risk makes it possible to support those least able (www.caringchoices.org.uk, 2008). to afford care home charges. The Joseph Rowntree

• Recent reports confirm that long-term reform isneeded Housing Trust's (JRHT) care services demonstrate how (Resolution Foundation, 2008). In the interim, immediate some of these solutions work in practice:

improvements can be made at modest cost, as shown • Co-payments/social insurance scheme –

in this Solutions, which updates a 2007 paper. residents pay a monthly fee according to their age,

• InSpring 2009, the Government willproduce a Green established at the outset.

Paper on its visionforsocial care reform. Many other • Loan stock/bonds scheme – new residents possibilities and building blocks' for a new system invest in the scheme, giving them a rebate on their have already been put forward (Lloyd, 2008). residential or nursing care fee.

• Immediate change is imperative. Itmay be a decade • Mixed tenure and affordable housing with care before a new system is in place – in the meantime, – as demonstrated by a new partnership scheme in another generation of older people and their carers Hart lepool.

will have to cope under the present system, which

has been further strained in recent months by the

credit crunch.

Author

Sue Collins, Joseph Rowntree Foundation

www.jrf.org.uk

The case for change

The current long-term care funding system is:

• unsustainable. Without changes, older people – including those on very modest incomes – will increasingly have to pay more out of their own pockets;

• unfair. It is riddled with inconsistencies that determine who pays what; and

• unclear. There is often confusion about whether the health service or local authorities are responsible for payment, and there are different entitlements between local authority areas.

Evidence shows that:

• As the population ages, demand forlong-term care is growing.

By 2050 there will be twice as many people aged over 85 as there are now, and spending on long-term care overall (including what people spend privately) will need to increase fourfold.

• Even today, spending is too low to provide adequate levels of services. For example, councils have to concentrate limitedfunds on people with very severe needs so the less disabled, who would have benefited from help like meals on wheels and home helps, do not now receive this help.

• The current economic climate could be said to disproportionately

affect older people on low to modest incomes. Those who

worked hard and have led thrifty lives' (Caring Choices, 2008)

are seeing their savings, investments and homes lose value.

• Under new equalities legislation, the current faultline'between

what is deemed a continuing health need and a social care need

willbe increasingly challenged, forexample those older people with dementia who are deemed ineligible for continuing health care.

• Although the system is designed to ensure support forthe worst

off, older people with few assets and on low incomes may not

have a choice over their care, and are too often deprived of their dignity. They also often lack the information they need to use

services properly, and may have nobody to advise them.

• People believe the system is unfairand unclear (Caring Choices, 2008)

– evidence shows that they want State contributions to care costs to be clarified, along with robust advice, information and advocacy.

Costed policy • Double the personal expenses allowance for solutions Those who go into a carpeople living in carlocal authorities e home who depend entire homes supported by ely

upon local authority charges must currently give

If reform across the system is to occur, then a fair

up their entire State pension, leaving them with settlement is needed across all aspects of people's

just £21.90 per week (from April 2009) to cover lives. But in the short term it is possible to move

personal items like clothes and shoes, presents for towards fairer funding arrangements in specific areas,

grandchildren and so on. Doubling the figure to £43.80 particularly by ensuring that everyone has basic

per week would give people more personal dignity. entitlements.

Evidence from Age Concern (Age Concern, 2008)

has suggested that this figure would give care home JRF has drawn up four detailed, costed options which

residents a more reasonable amount to manage on begin to pave the way for a fairer system, even in the

than the current rate.

current economic climate, whilst more radical reform

is worked out. They do not replace the need for more

Other recent JRF evidence on minimum household fundamental system changes (Hirsch, 2006).

budgets (Bradshaw et al, 2008), based on the views

of groups of pensioners, shows that £42 per week is Improvements to the present system the minimum a single pensioner would need to spend

on clothes, personal goods and services and social

• Equity release participation to achieve an acceptable standard of

This would allow older homeowners to pay for home- living.

based care services by deferring the costs until their Cost: £250 million per annum

home is sold (such as when they die or move into

care), with debt being rolled up at a reasonable interest • Free personal care for people with nursing

rate. Although there are private sector schemes for care

advancing loans on a homeowner's property, there It is unfair that two care home residents with similar

are barriers for less affluent owners. This scheme, like needs can be treated very differently. One might be loans for students, allows repayment later, enabling funded by the NHS while the other would have to

those who are capital rich and income poor to tap their pay their own costs, despite both having the same hidden assets. Currently, although poor enough to income and assets. This measure would extend public qualify for pension credit, one million households have coverage of care costs beyond people classified housing equity of at least £100,000 (Sodah, 2005). by the NHS as requiring continuing care' following

Due to high house price growth rates since these hospital treatment. If everyone had to pay for non-care figures were obtained in 2002-03 even the current costs such as accommodation – subject to a means price fall won't impact adversely on this sum. This may test – it would be possible to pay full personal and

be a credible way to release some income to pay for nursing care for all those currently receiving nursing supplementary domiciliary care. But there are limits care payments, representing people with the highest

to this pot, and equity release on its own cannot fund care needs and with only a modest rise in public pensions, care and the next generation. spending.

Cost: possibly £33 million per annum Cost: £212 million per annum

• Higher capital limits for care home fees

This would help those with modest assets by raising the ceiling that dictates whether an individual in a care home receives support from a local authority, from

the current level of £22,250 to £42,500. Similarly, the very high deductions from income currently charged on capital over £13,500 should be reduced to a rate that reflects the actual interest that can be earned in a deposit account.

Cost: £280 million per annum

JRF's Paying for long-term care' programme identified The Caring Choices coalition:

a range of costed solutions for the future. The three-

year programme examined evidence from overseas stakeholders agree on some

and Scotland, where the system differs. JRF looked broad requirements for solutions

at previous evidence, including its 1996 Inquiry into Caring Choices, a coalition of 15 organisations led Continuing Care and the 1999 Royal Commission on by JRF, the King's Fund, Age Concern and Help the long-term care, and at possible solutions in the private Aged, gathered views of older people, carers and sector. Following the completion of this programme, others with direct experience of the care system, on JRF joined with 14 other organisations in 2007 to who should pay for long-term care and how. During organise a wide-ranging consultation, Caring Choices 2007, it engaged with more than 700 individuals

(see box). at events across England and Scotland and via an

interactive website. It concluded:

In the five years following the Royal Commission,

there had been little political appetite for change. More • that there is almost no support for the current recently, in contrast, the Government has committed care funding system;

itself to reform. Following evidence from JRF, the • that stakeholders place great importance

King's Fund and others that the system is broken, the on producing a simpler system, in which

2007 Spending Review accepted that fundamental entitlements are clearer and people are able to change in care funding is now needed, and the Green plan ahead with greater understanding of what Paper (England, Spring 2009) will set out principles will be on offer;

on which this is to be based. The Welsh Assembly is • that almost without exception, stakeholders do currently consulting on adult social care costs and due not think that a satisfactory system is possible

to publish (Spring 2009) a Green Paper on the vision without spending more money;

for Wales. • that the prevailing (though not universal) view

is that the cost of long-term care should be

At the same time, the Government is promoting shared between the Government and the important principles for long-term care provision, individual;

including choice and control for service users and the • that funding personal care' is only one issue. importance of early intervention as is evident in its To many people, having adequate resources White Paper, Our health, our care, our say (Department to meet wider needs like practical help

of Health, 2006). But these ambitions cannot become with shopping and gardening are of great

a reality without an adequate funding system. importance;

• that State support for schemes like equity

Evidence from JRF's research supports current release, to help unlock private resources, Government policy on the importance of choice and have considerable support. But views on any control for older people. Findings from JRF's consumer one option are mixed – pointing to a menu of testing activity and the Caring Choices exercise also options available rather than a single means of underline older people's and other stakeholders' desire encouraging private funding;

for clarity around costs, so that those who need care • that support for unpaid carers is widely thought can make informed choices. Caring Choices also to be inadequate, and many people feel that

made clear that people are generally favourable to this is a neglected aspect of paying for care.

the idea of a partnership in which costs are shared

between government and users, provided that the

terms of this partnership are seen to be clear and fair.

Examples from practice

JRHT, JRF's sister charity, provides a number of care services for older people and people with disabilities in York and the North East of England. JRHT has concluded that pooling risk in relation to care costs

is an effective funding mechanism. The continuing care retirement community Hart rigg Oaks, based

in York, demonstrates how this works in practice. More recently, in partnership with local stakeholders, JRHT has also opened an extra care mixed-income community in Hart lepool.

Innovative ways of using capital to fund housing with care for older people are provided in this paper.

Social insurance scheme

Hart rigg Oaks is a continuing care retirement community, consisting of 152 one- and two-bedroom bungalows and 42 en-suite bed-sitting rooms within The Oaks Care Centre. A range of communal facilities are also available for the benefit of residents, including a restaurant, spa pool, community shop and library. Under Hart rigg's scheme, residents pay a monthly fee, established at the outset according to their age. For

a 70-year-old this monthly fee is currently £523.25, whilst for a 75-year-old it is £581.50. Residents with higher levels of capital can pay a non-refundable lump sum to reduce the monthly fee. Other than annual inflation adjustments, the same fee is paid regardless of an individual's care needs, even the provision of nursing care. The annual increase in the monthly fee is capped at 3 per cent above the rate of inflation. This scheme is a form of social insurance. By pooling risks, Hart rigg Oaks can fund up to 21 hours of domiciliary care per week, and residential and nursing provision is available for those with higher needs.

Mixed-income communities

Hart fields, JRHT's scheme in Hart lepool, has been developed in partnership with the local authority, Primary Care Trust and local NHS Trust, and demonstrates how a mixed-income community model can work in practice.

This scheme opened in mid 2008 and is attempting to create a lively vibrant community that offers older people the type of housing with care they prefer: 218 apartments and 34 cottages sit alongside facilities including restaurants, gym and spa, hairdressing and an entertainment suite. The development has also created a local community space providing G.P. services and day care for older people. The health facilities are also open to the public.

This model offers 60 per cent affordable housing: 40

per cent for rent and 20 per cent shared ownership,

with the remainder fully owned. This type of mixed- income community shows how schemes can offer housing with care in a localised setting that older

people on lower incomes can afford.

The equity appreciation in the housing is shared between JRHT and the resident. The equity share retained by JRHT is used to create a sinking' fund for future major repairs.

In effect, JRHT is demonstrating the principle of using an equity release mechanism to keep the fees lower for residents. By using capital appreciation to pay

for major repairs the overall service charge can be lowered. This has the net effect of freeing up more disposable income for residents.

Therefore, older people and their carers are more in

control of their care, and commissioners have clarity

about better outcomes for older people. The barrier

between care and support has been removed, creating

a flexible pot of money that can be used to achieve the outcomes older people want.

In addition to the monthly fee, the resident pays an

upfront fee to occupy a bungalow. This capital' fee Plans to evaluate the model, looking at the experience is repaid at the original level when the resident leaves of this type of mixed-income community and the

the community. The bungalow is then resold' to a new impact of extra care housing, are due to come to resident at a higher price. The community as a whole fruition in the next two years. For example, can we benefits from the increase in value. This primarily funds demonstrate a reduction in the need for formal care? major repairs and the cost of capital but also provides

an additional resource to fund the cost of care in the

community should this be necessary. For example, Mrs

A pays £225,000 to occupy a bungalow and a monthly

fee of £581.50 in the knowledge that her care needs

will be met for life. On leaving the community, Mrs A

recovers £225,000 and the bungalow will be resold to

a new resident at the current value.

Bonds scheme/equity release Loan stock scheme

Bedford Court in Leeds is an integrated care complexRed Lodge is an integrated care facility for older

for older people. Accommodation consists of 34 people near York, with 42 apartments for residential bed-sitting rooms, four double apartments and ten care and 21 for sheltered and extra care. Lamel bungalows, suitable for a range of older people, Beeches care home provides accommodation and

from those who have no care needs to those who residential and nursing care for 41 older people. The require full-time care. Bedford Court runs a bonds Oaks Care Centre is an integral part of the Hart rigg

rebate scheme, meeting a number of purposes. Oaks community (see page 5).

One is to offset the capital cost of building Bedford

Court. A second is to create a sense of ownership' These homes use a loan stock scheme similar to the

in the scheme for residents. A third is to contribute bonds scheme. New residents with capital assets

to a bursary scheme that will supplement the fees of above £40,000 are required to invest in the scheme, residents in receipt of State support. which entitles them to a rebate on their residential or

nursing care fee. One important difference from the

Under this model, any new resident with capital bond is that, on leaving the scheme, residents are only assets in excess of £40,000 is required to buy a repaid the original amount they invested. Bursaries,

bond. This then entitles residents to a rebate on their funded by the excess interest earned by JRHT over accommodation charge (equivalent to a rent). The the rebates, are available to those residents who are

bonds are invested by JRHT and any excess interest in receipt of social security benefits and have capital received over the cost of rebates is used to create a assets of less than £10,000.

bursary fund. This is available to other residents within

the scheme who do not have sufficient finances to Plans are in place to extend this scheme to help JRHT fund their care. residents wishing to enter JRHT care schemes that

cannot afford care home fees or are not entitled to

For example, under this scheme Mr B purchases a top-ups by their local authority or the Government.

bond for £40,000. His full accommodation charges

would be £72 per week but he receives a rebate For example, Ms D enters Lamel Beeches with total

on this calculated against the level of his bond. The assets of £110,000. As her capital assets exceed

annual rebate is calculated as 3 per cent of his bond £40,000, Ms D is only required to purchase loan

value, which is £1,200 per annum. This translates stock equal to 75 per cent of the remaining £70,000:

to £23 per week, meaning Mr B actually pays a net£52,500 of loan stock. This investment, at a rate of accommodation charge of £49 per week. On leaving 2.9 per cent, would produce an annual rebate of Bedford Court Mr B will have his £40,000 repaid to £1,522.50 – reducing Ms D's care fees by £127 per him, increased in line with the retail price index for month.

periods in excess of twelve months. If, during his stay

there, his financial circumstances change there is

flexibility to review the level of the bond holding.

The benefits of the JRHT schemes are: Conclusion:

something can

• clear models of entitlement;

• transparent offer' for older people and their carers;

be done now

• it's possible to replicate elements of models

elsewhere;

• high levels of user satisfaction;

• the opportunity to positively plan for later life; This paper demonstrates JRF's costed solutions for

• the principle of equity release offered through a funding long-term care and practical examples of its trusted provider appears to be more acceptable to approaches in its own care facilities. All of these

older people (Rowlingson, K and McKay, 2005); schemes demonstrate ways that can make the current

• housing with care offer is welcomed by some oldersystem fairer, and more focused on individuals' needs people; as a start towards a more thorough overhaul of care

• no one needs to leave a JRHT scheme because funding. In order to alleviate the worst excesses

they cannot afford the fees; of the current economic climate, it is all the more

• the ability to use capital to fund care and support;imperative that modest changes happen now. By

• the bond and loan stock models keep fees lower pooling risk it is possible to support those least able

for residents; to afford care home charges in later life. This would

• pooled funding achieves flexible outcomes for move us closer to the situation where some of the

older people, carers and commissioners; and most disadvantaged people in our society could

• they create lively, vibrant communities that offer receive the kind of flexible support they want. The mixed-income housing with care. changes suggested here are not a comprehensive

plan for funding long-term care but rather show how

early policy and practice changes could help lay the However, downsides include: foundation for a fairer and more sustainable system

that clearly lays out the State offer towards care costs.

• The bond and loan stock schemes are non- In the longer term, radical reform with resources negotiable. is inevitable if we are to face the opportunities and

• Hart rigg Oaks' capital and income threshold challenges that living well later in life will bring.

reduces the scheme's affordability.

• Hart rigg Oaks residents do not benefit from capitalAbout this paper

appreciation and if they leave it might be difficult

for them to buy another property.

• At Hart fields, the current economic climate means This overview draws on JRF's research from its Paying that sales of self-funded apartments are slower for long-term care' programme, summarised in:

than anticipated. Paying for long-term care: Moving forward (www.jrf.

• Evidence from JRF's Equity Release Task Group org.uk/knowledge/findings/foundations/0186.asp).

(due to complete Autumn 2009) shows that there

is increased nervousness among older people It also draws on the practical experience of the Joseph about using equity release to fund additional care. Rowntree Housing Trust. Other relevant research can

be downloaded free from www.jrf.org.uk

For more information about JRHT's care services, visit www.jrht.org.uk

References

Age Concern (2008) Personal Expenses Allowance (PEA) campaign. http://www.ageconcern.org.uk/ AgeConcern/expenses_campaign.asp

Sodah, S. (2005) Housing rich, income poor: the potential of housing wealth in old age. http://www.ippr.org/ publicationsandreports/publication.asp?id=331

Williams, P.(2010) Home equity: accumulation and decumulation through the life cycle. Resolution Foundation

Bradshaw et al (2008) A minimum income standard for Britain: what people think. York: Joseph Rowntree Foundation.

Caring Choices (2008) The Future of Care Funding: Time for a change. http://www.caringchoices.org. uk/?p=88

Department of Health (2006) Our health, our care, our say: a new direction for community services. http://www.dh.gov.uk/en/Publicationsandstatistics/ Publications/PublicationsPolicyAndGuidance/ DH_4127453

Hirsch, D. (2006) Paying for long-term care: Moving forward. York: Joseph Rowntree Foundation.

Hirsch, D. (2005) Facing the cost of long-term care – Towards a sustainable funding system. York: Joseph Rowntree Foundation.

Options for Care Funding - what could be done now - Long-Term Care Scheme - Research - 1 March 2009