A new model for funding care
What is the Government proposing?
Costs for people who are disabled early in their lives
People who are disabled at birth or early in their lives are likely to have lower incomes, and are therefore likely to have their care and support funded by the state. The UK Government proposes that this will continue under a new system.
Help for everyone who qualifies for care and support
In England, the UK Government wants to use the money that is in the care system to make sure that everyone who qualifies for care and support will get some help with paying for their care.
Disability benefits
The UK Government has suggested that there is a case for integrating some disability benefits, such as Attendance Allowance, into the care and support system. The social care and disability benefits systems have developed separately over the past 60 years, and are allocated on different bases. The Government believes that this can lead to inconsistent and unfair outcomes. It wants to bring the two systems together so that state funding can be used more effectively.
Bringing new money into the system
As well as making sure that all the money currently in the system is used as effectively as possible, we also need to find new ways of bringing more money into the system.
The UK Government thinks that the new way to pay for care should be based on the idea of partnership between the individual and the Government.
This means that everyone who qualifies for care and support would have a proportion of their costs paid for by the Government, but they would have to make up the rest themselves. The amount that people would have to contribute would depend on how much they could afford.
The basic choice is whether we should leave it up to people to decide whether they want to protect themselves against high care costs, or whether we should insist on them being part of a scheme that would protect them.
The Wales Advisory Group set up by the Assembly Government to consider paying for care recommended that contributions should be compulsory for all people in paid work, and saw a central role for Government in guaranteeing the effective running of the scheme.
The five main funding options
The UK Government has considered the advantages and disadvantages of five funding options.
Option 1: Pay for Yourself
Under this option, you would be responsible for paying for your own care and support as and when you need it. This has been ruled out because it would leave many people without the care and support they need, and is fundamentally unfair because people cannot predict what care they will need.
Option 2: Taxation
Under this option, care costs would be met from general taxation. This has been ruled out because it would require a significant increase in the tax people already pay (because tax would fund all care, including the parts that people currently pay for themselves when they need it). It would also put a large part of the burden of paying for care and support on people who are working.
Option 3: Partnership
This option forms the foundation of the UK Government’s three preferred options for a new funding system. Everybody, regardless of their wealth, who was assessed as having a care need, would be entitled to have a share of their costs paid for by the state. For example, everyone might have a quarter or a third of their care costs paid for by the state. Above that amount, people would pay towards their costs directly from their own income and assets, as they do now.
The Partnership option alone would not fully protect people against the risk of having to pay high costs towards their care. But people who are less well-off would have more care paid for, and the least well-off people would continue to get all their care for free.
The final two options build upon the Partnership option. They consist of the ways in which people could make up the remainder of their care costs (i.e. the proportion that they would have to fund themselves).
Option 4: Insurance
People could choose to take out insurance in case they needed care in the future. When they needed care, the Government would pay a proportion of the costs under the Partnership option, and the insurance would pay for the rest. People could either pay into private insurance schemes, or into a Government-backed insurance scheme. People could pay in several different ways, before or after retirement, or after their death if they preferred.
People of working age who could not afford to take out insurance would receive free care and support.
Option 5: Comprehensive
Under this option, everyone over retirement age who had the resources to do so would be required to pay into a state insurance scheme. Care and support would then be free when people needed it.
The amount people had to pay could vary according to what they could afford. Or there could be a set amount so that people knew how much they had to save for. People might choose to pay this sum during their working life, as a lump sum or in instalments during their retirement, or even from their estate after their death. People who could not afford to pay into the system would have their contribution paid for by the state.
Because everyone would be in the system, people would be able to pay less than their likely average costs.
The Government could look at providing a lower rate for couples because the costs for two people can be very high and many couples support each other and provide care for each other. However, if we did this, we would need to make the contributions higher for single people.
Ways to contribute
There are various ways in which people could pay their contribution, either for the Insurance option or for the Comprehensive option. People could choose how to pay according to what suited them.
If someone had savings, they might prefer to pay their contribution as a lump sum when they have retired. If someone was able to delay their retirement, they might decide to defer their State Pension for a few years and use the money to pay into the scheme. People could pay in affordable instalments throughout their retirement. If people didn’t want to have to pay anything during their lifetimes, they could defer the whole payment until they died, and then pay it from their estate. Or we could combine these options so that people could pay partly as a lump sum from their pension and partly in instalments throughout their retirement.
We know that many people would like to be able to start to prepare before they retire. So, as the system develops, we would look to introduce options which give people greater flexibility to make their contribution during their working lives.
Accommodation costs
It is important to note that the options the UK Government has put forward consider only the costs of people’s care. Accommodation costs for those people in residential care are not paid for by the state. This includes such things as the costs of food and lodging, the costs of cleaning the room, providing food and doing laundry. This is because these costs are a normal part of everybody’s life, regardless of whether they have a care need or not. At the moment, people in Wales who have savings or own a house worth more than £22,000, and whose partner or spouse is not living in their home, have to contribute to the costs of their accommodation.
The UK Government is proposing a universal deferred payment mechanism for residential care and accommodation costs. This means that when someone chooses to go into a care home, they will not have to pay the full costs immediately. Deferred payments are already offered by many local authorities as a way for people to allow the cost of care and accommodation in a care home to be charged upon their estate when they die, rather than having to sell their home immediately.
The Assembly Government believes that the option to defer payment for care and accommodation costs should be available to everybody. This is an issue on which the Welsh Assembly Government could decide to introduce legislation tailored to the circumstances of Wales.
Being fair to people who have saved
We know that people feel strongly about the idea that they have to pay more if they work hard and save than if they choose to spend all their money and don’t bother to save.
A nationally or locally determined funding system
One of the main questions we need to resolve is whether people should get the same level of financial help with their care and support wherever they live in Wales, or whether it is acceptable for people in different parts of Wales to get different amounts of assistance even if they have the same needs.
Most people in Wales who replied to our earlier consultation told us that they want a national (all-Wales) system, but that there needs to be a degree of flexibility to allow local authorities and others to design services locally. In this way they can respond to what people need in an area, reflect local circumstances and encourage innovative approaches to service delivery.
One option would be for the Assembly Government, or the UK Government, to decide centrally how much funding people should get. A system could be set up where everyone who had the same level of need received exactly the same funding wherever they lived in Wales. Or we could have a national system that gave people slightly different amounts depending on where they lived in Wales to take account of the different costs of care and support across the country.
