When is a cap not a cap?

Following my recent post on social care reform, I’ve had some interesting discussions about the ins and outs of different options. In this short follow-up, I want to pick up on one argument that is a bit too complicated to go through properly on Twitter: whether the proposed “cap” can really be considered a cap.

James Lloyd makes the point that in the current system, local authorities have used their market power to push down the price they pay for care. This has meant that care providers charge people who pay privately a higher price to make up for the low profit margins (or perhaps even losses) that they make in their dealings with local authorities. Some people argue that this is a stealth tax levied by local authorities to keep their social care costs down, others characterise it more innocently as “price discrimination”. Either way, if a capped cost system were to be based on the local authority price then it could underestimate what people have actually spent, leaving them spending more than £75k before reaching a £75k cap.

Others have made related points. Sonia Sodha argues that the cap isn’t a cap, because people will still have to pay for their food and accommodation if they go into a care home.

Both James and Sonia are in a sense right: there are limits to what the Dilnot proposals will cover and some people may pay more than the theoretical cap. In fact, such limits apply to any system of social protection, for social care or anything else, and what people actually get in practice is never as simple as a one-line explanation of the offer. If there is too much distance between what a system sounds like to the public and what it means in practice then it risks being unpopular, so this is something worth considering before ploughing ahead with reform.

Given that all systems suffer from this problem to some extent, we want to know whether it is significantly worse under the Dilnot proposals than under other options – and as it happens, we have quite a few options to play with. A number of different reforms to social care have been recommended over the last two decades, most of which were serious and sensible and all of which have foundered due to a lack of political will. The table below takes each of these systems and tries to articulate what it sounds like to the public and what it would mean in reality (assuming local authorities continue to pretend social care costs less than it does).

  What it sounds like to the public What it would mean in reality
Raise the means-test floor
(Tory manifesto, 2017)
You will not be left with less than £x of assets
  • You have to pay top-ups after you hit the floor so you might be left with less than £x
Capped cost model
(recommended by the Dilnot Commission, 2011)
You will not have to spend more than £x on social care
  • You pay the first £(x+ε) of your social care costs
  • After that you have to pay a small top-up
  • You will pay the part of your care home cost that is for food and accommodation
Shared cost model
(recommended by the Wanless Review, 2006)
The government will pay x% of your social care costs
  • The government will pay (x-ε)% of your social care costs
  • You will pay the part of your care home cost that is for food and accommodation
National Care Service
(recommended by the Royal Commission, 1999)
Social care is free
  • Social care is mostly free but you have to pay a small top-up
  • You will pay the part of your care home cost that is for food and accommodation
Current social care system
(since 1948)
The state will pay if you can’t afford to from your income and assets
  • The state will pay most of it, but your family might have to pay a small top-up
National Health Service
(since 1948)
Health care is free
  • An approved set of health care interventions are free
  • You have to pay the full cost if you want things outside of this set

I really struggle to see how the Dilnot proposals are very different in this regard to the other plausible options. The cap tells people they will only spend £x, but in reality they have to spend more than £x; a National Care Service tells people social care will be free, but in reality it’s not free. Under a cap people still have to pay for their food and accommodation if they go into a care home; but they will also have to do this under a shared cost model, leaving them paying much more than the stated percentage of the care home fee.

I don’t mean to argue that a disjoint between how a system is described and reality is harmless. Take the NHS: people think that it means that all health care is free and are scandalised when they are told that the NHS won’t cover the expensive new cancer treatment they have heard about. This causes upset and eats away at trust in the institution, but it is to some degree unavoidable: the NHS can’t pay for high-cost, low-value treatments unless we raise lots more in taxes, but it’s never going to be possible to explain to everyone how NICE technology appraisals work.

It is reasonable to look for a system that minimises this issue, as one of a number of criteria for assessing policy options. It is reasonable to call for local authorities to pay a realistic price for social care, or to demand that government does more to explain the limits of the policies that it proposes. However, in this case, the gap between what a policy sounds like and what it is likely to be in reality does not seem to be a significant factor in deciding between social care funding systems. While debate about the merits of different options is to be welcomed, I do think there is an obligation on those who say “the cap is not a cap” to explain how this can be addressed or how the issue would be less significant under other options for reform. Otherwise it is hard to see this issue as anything but a distraction.

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One thought on “When is a cap not a cap?

  1. James Lloyd

    Thanks for the blog. It’s a good analysis, but I think you are wrong on several points.

    In particular, I do believe the issue of the difference between what councils and individual pay for care – residential care in particular – is much, much more significant for the ‘capped cost’ reforms than the other options for long-term care funding reform you note.

    This is because I disagree with your characterisations regarding “What it sounds like to the public” in relation to the different models, and by the distance between “what it sounds like” and what the “user experience” for the ‘capped cost’ model would actually be.

    Let me illustrate by focusing on some of the main options:

    1. National Care Service – recommended by the 2010 DH social care White Paper (not the Royal Commission, although largely the same).

    Basic principle: Entitlement to public support for care costs should not be determined by your means (income or wealth).

    What it sounds like to the public: State support for social care costs will be the same regardless of your means, just as it is for health care costs. But if you want something better than what the state will pay for, you can always pay more and go privately.

    User experience: “The Council offered me a fully funded place in a care home, only expecting me to pay my contribution toward accommodation costs. However, I opted to go for a more expensive care home, and so they gave me the same cash value toward the fees for my preferred home.”

    Conclusion: very little difference between what people understand, and their user experience.

    NB: The reason I am confident of this analysis is that it reflects public understanding and reaction to the scrapping of means testing for social care by Scotland – which did accept the recommendations of the Royal Commission in 1999. Indeed, although Scottish politicians still talk about ‘free personal care’, the public accepts that in practice this simply means ‘no means testing’ – despite the fact councils in Scotland deliberately over-estimate the value of people’s accommodation costs in order to reduce the financial value of their assessed care costs that the council is expected to meet (but that’s another story).

    2. Shared cost model (recommended by the Wanless Review, 2006)

    Basic principle: everyone should get some support for care costs from the state, proportional to their means.

    What it sounds like with the public: This model was never explored in detail by the government. However, contrary to your characterisation, I don’t think it would ever be presented as “The government will pay x% of your social care costs”, because the % of someone’s assessed social care costs that would be met by the council would only ever be determined by: 1. what someone’s assessed care costs are; 2. their income and wealth; and 3. what the costs of care are in their area. It would be determined on an individual-by-individual basis.

    As such, it was never suggested that the government would announce, for example, “council’s will pay for 50% of your care costs”. More likely, what the public would be told would be something more like “Everyone will get a contribution toward their costs from their local authority, whatever their overall wealth.”

    User experience: “I moved into a care home costing £740 per week, but the Council makes a contribution to my care costs of £200 per week, which is proportional to my income and wealth.”

    Conclusion: the user experience of the model is very similar to what the public would understand.

    3. Capped cost model (recommended by the Dilnot Commission, 2011)

    Basic principle: the state should cap lifetime expenditure on social care costs.

    What it sounds like to the public: “I won’t have to pay more than £72,000 (or similar) on social care fees during my lifetime.”

    User experience: “I moved into a care home costing £740 per week. After I had spent £124,000 on care fees, the council began paying £300 per week toward my care fees.”

    NB: Because of differences in what individuals and the state pay for care, not only would the ‘cap’ not cap people’s costs, it would also mean people would pay much more than the value of the cap before reaching it.

    Conclusion: there is a very substantial difference between “what it sounds like” and the user experience.

    As you note: If there is too much distance between what a system sounds like to the public and what it means in practice then it risks being unpopular.

    In my experience, this difference between the presentation of the ‘cap’ and how it would work in practice would make the ‘cap’ very unpopular.

    I say this because I have since 2011 given presentations on how the ‘capped cost’ model would work to multiple audiences made up of individuals working in local authority social services departments (e.g. social workers, Adult Social Care Directors) and in the care sector (e.g. care home managers, etc.).

    Despite such individuals having significant knowledge of the local authority care system and the operation of the care market, the vast majority genuinely thought that lifetime expenditure really would be capped at £72,000 and no more.

    When I explained to these audiences that it wouldn’t, many individuals were pretty angry and disgusted. Some found it incomprehensible that the government would be trying to push such a funding model on to the care system that was so deceitful.

    So, in my experience, even an ‘informed’ public, when briefed about the operation of the ‘cap’, became hostile to it. In fact, many became concerned as they realised that if the government told the public their lifetime care costs would be capped at £72,000, as professionals in the system, they would be the ones that would have to break it to families that this wasn’t the case at all.

    In this way, I conclude that the risk of the ‘capped cost’ model being unpopular in practice is so high that it would be unwise for the government to proceed.

    This all matters because the principal rationale for the ‘cap’ set out by the Dilnot Commission was to achieve peace of mind in the older population. To achieve this objective, the government has to convince the public that care costs really are capped. Indeed, contrary to what you say, the whole point of the ‘capped cost’ model was what it sounds like to the public, as that is crucial to the policy achieving its objectives.

    However, once it became widely known that in fact, your lifetime care costs wouldn’t be capped at £72,000 (or similar), and that you could continue to spend sums far more than this, any peace of mind in the older population resulting from implementing the model would likely evaporate. In this sense, the ‘capped cost’ model would fail on its own terms.

    As you are probably aware, the other main rationale advanced for the ‘capped cost’ model – it would allow insurance companies to develop new products, such as pre-funded insurance – has also collapsed as the insurance industry has made it very clear they would have no such intention of introducing new products.

    You will notice I haven’t here dealt with the original Conservative Party proposal: Raise the means-test floor (Tory manifesto, 2017). This is because it’s much harder to say how this would play out in practice.

    You characterise it as: You have to pay top-ups after you hit the floor so you might be left with less than £x.

    However, this would be just as true of individuals reaching the current means test asset floors of £14,250-£23,250, except for the fact that in practice, it is my understanding that this is usually fudged, i.e. the council and the care home will usually come to some arrangement, where both offer some flexibility about what they pay/charge. It’s actually a very grey area, and in my experience, even individuals in large care home chains with many homes struggle to say what happens in this situation or what their policy is. So I don’t think your characterisation is therefore on the mark.

    I now want to turn to the issue of how price differences between what councils and private individuals pay for care can be addressed. It’s obviously important to note that because of their buying power, councils will sometimes pay less for beds in care homes than private individuals for exactly the same service.

    In order to close this fee gap, there are three broad approaches the government could explore:

    * Information and transparency;
    * Regulation;
    * Competition.

    Rather than set out the multiple options under these headings, I’m going to refer you to a report I wrote, specifically, Appendix 3 beginning on page 25 of the report here: http://strategicsociety.org.uk/wp-content/uploads/2013/09/Right-Care-Right-Price.pdf

    A couple of over-arching points can be made:
    • There is no clear winning option.
    • Any reform to the care market would have to be undertaken very incrementally, given the dire state of the market currently, and multiple providers exiting the market.

    Overall, I believe, for the reasons that you note, and I have noted in my response, it would probably make sense for the government to ‘fix’ the operation of the care market before attempting reform of how individuals pay for care.

    However, even if the care market were reformed, I still believe there would be big issues remaining for ‘capped cost’, which would still be much more significant than for other models. Put simply, the ‘capped cost’ model is a promise too far when the price of care is determined by the operation of a market. This is what the DH and the care sector eventually realised, and is why the plan was dropped in 2015. Despite the apparent cross-party consensus behind it now, I suspect it will be dropped again.

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