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Paying for an ageing population – options for funding long term care in an era of spending cuts

27th July 2010
The Commission on the funding of care and support long-term announced by the Coalition Government  should not consider paying for care solely through general taxation, says think tank Policy Exchange today in its latest report Careless: Funding long term care for the elderly.
 
The report says that free personal care funded out of general taxation, as was introduced in Scotland in 2002, could cost the Government up to £106 billion each year – the equivalent to funding a second NHS.  It recommends instead that the Commission considers three specific funding models: the King’s Fund partnership model; a social insurance model as used in Europe, and a hybrid model whereby the State guarantees some level of care, but people are required to top-up for their long term care through insurance or annuity backed products.
 
The report also found that the NHS already spends about 4% (£4.23 bn) of its budget on social care.  The largest tranche of public funding for social care is however routed through local authorities (£7.21 bn).  Careless strongly recommends that the Commission considers merging this social care budget with the NHS - as the services are largely interdependent.
 
The report argues that this reform will be crucial if costs to the NHS are to be kept under control in an era of tight funding.  As State funded long-term care services have tightened, the burden has resulted in a rise in NHS spending on elderly care.  There was a 67% increase in NHS spending on long-term care between 07/08 and 08/09. If local authorities (whose budgets are not ring-fenced) are to face spending cuts of 25%, the upward trend in NHS spending on long term care would be expected to continue. 
 
Henry Featherstone, author of the report and head of Policy Exchange’s Health and Social Care Unit, said:
 
“Most people think that paying their taxes and National Insurance will guarantee them free care in old age, but that is not the case. 
 
“Funding long-term care was a huge issue at the General Election. But despite nine major reviews in the last fifteen years, the current system remains unfair, bewilderingly complex and penalises homeowners.  We now have an opportunity, and the time, to properly think through and implement a fundamental reform of the way that we pay for long-term care of the elderly - to make the system clearer and fairer, and able to meet the future demands of an ageing population.”

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