The state will help, but we all need to prepare for funding our future social care needs

Featured article - 06 April 2018
By Deborah Rozansky, SCIE Associate

Head-shot of the author, Deborah Rozansky, SCIE Associate

Secretary of State Jeremy Hunt recently announced a set of foundational principles for the government’s widely anticipated Social Care Green Paper. What was evident from his remarks was that the government’s future proposals will focus not only on how best to fund our growing social care needs, but also what we should expect from a future social care system.

This dual purpose should be welcomed, particularly the emphasis on personalised care, promoting independence and choice, and the integration of health and social care. Hunt also acknowledged the importance of investing in the social care workforce, supporting family and informal carers, and encouraging technological innovations that offer new solutions for how we care for people in their own homes. Diversity of provision, rather than state-provided care, will be encouraged, along with transforming our model of care.

So far, nothing too controversial or imaginative. These ideas are laudable and in fact consistent with recent policy reforms and initiatives. But in considering how we will pay for this ideal care system, Hunt’s words merit closer examination. A handful of clues left me wondering about the future direction and our ultimate destination.

For his final two principles - a sustainable funding model and security for all - the Secretary of State appeared to lay the groundwork for some combination of insurance and savings on the part of both individuals and the state. The speech refers to ‘delivering a stable and vibrant market’ and ‘risk pooling’, suggesting roles for both private and social insurance are being explored. Whilst acknowledging the lottery of illness and the unfairness of the current system, the principle of personal responsibility was re-asserted, adding that people should continue to expect to contribute to their own care costs, but in partnership with the state.

Does this mean we should expect state-funded protection against catastrophic costs - the capping of individual liability, as recommended previously by the Dilnot Commission? Probably not. A state-only solution seems unlikely because the political will to allocate the necessary funds - or to create a new entitlement - does not exist.

So what policy options should we consider?

Fortunately, we can learn from other countries that have mixed public-private funding models. Evidence from Japan, Germany and France offers useful insights for how a combination of personal savings, tax-funded social insurance and private insurance can be used to fund and transform social care.

Japan’s mandatory social insurance system is the most generous of the three examples, and it is designed to cover the total costs of care. Introduced in the year 2000, the system is 50% funded through general taxation and 50% through payroll taxes and income-based insurance premiums, with 10% of care costs paid through individual cost-sharing. People pay into the system starting in their 40s and become eligible for benefits at age 65, or earlier in the case of illness.

The German system, introduced in 1995, is also based on a social insurance model, but the costs of care are only partially met. Income-based premiums are paid by all working age and retired people. The French system, which was introduced in 2002, is funded through general taxation, and it too does not cover the full costs of care. A private long term care insurance market “tops up” the state funding to cover the remaining costs. In both Germany and France, social assistance is available to people whose incomes are too low to provide for the additional costs of care.

These international examples demonstrate that a mixed funding solution is possible. However, finding the best option for England will require extensive engagement with the public. The Secretary of State's speech also made clear that, in relation to social care, our social contract with the state will be renegotiated. Shifting public expectations away from state-only solutions will not be simple or straightforward. As Mr Hunt acknowledges, ‘resolving this will take time.’

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