The funding of long term care in England

Abstract

Recent reform of long term care systems in many developed countries has involved a move away from means-tested, pro-poor systems, often with a mixed quality of services, to more universal and more generous arrangements. At the same time, some of the factors linked with these reforms, such as the ageing of the population, also pose difficult questions about its long term financial sustainability (even before reform). Increasing coverage and quality and also coping with increased demand and a rise in the unit costs of services is a significant challenge. These are issues which the recent (2010) White Paper, Building the National Care Service has sought to address.

The presentation will outline the current social care system in England and briefly describe some of the arrangements used in other countries. It then considers the future impact of those factors which are likely to contribute to the growth in long term care demand and costs in an unreformed system. Within this context, the main part of the analysis will be of the equity and efficiency implications of new funding arrangements for long-term care in England. The taxonomy of funding options includes: levels of state coverage from progressive to universal; and different financial contribution sources, from out-of-pocket payment, voluntary and compulsory insurance, to general taxation.

A dynamic microsimulation model was developed and used to analyse and assess different funding reform options, focusing particularly on their distributional effects. The results of the modelling help us to assess whether the proposed reforms are likely to produce the net benefits, and indeed ‘winners and losers’, that policy makers expect. We also consider the limits of microsimulation modelling in this regard.

Given the projected increased public expenditure requirement (of a more generous care system increasing cost drivers), coupled with the difficult fiscal climate currently, the White Paper essentially deferred answering the hard question of how to pay for care.  The presentation ends with some thoughts about how this debate could be moved forward.