Administering a cap on costs 
The second in a series of ‘posts’ considering the options for the reform of social care funding, subtitled ‘avoiding the obvious’. The Government has announced that it will ‘publish a Green Paper on care and support for older people by summer 2018; these posts will consider the pros and cons of the various options that may be considered.
This second post considers the merits of a ‘cap on costs’ as a component of any social care funding reform and in particular the administrative impact that such a scheme would have on local authorities.
As noted in the first post the 2011 Dilnot Report recommended that the reform of social care funding include a ‘cap’ on the contributions any individual would have to make to their care costs. Once he or she had paid a specified amount, the state would take over responsibility for funding their social care costs. This proposal was adopted by the coalition government and is embedded in the Care Act 2014 (sections 15 – 16).
The Dilnot Commission recommended that the lifetime contribution an individual should make to their care costs should be capped at a maximum of £35,000 however the coalition government indicated that the cap would be set at a significantly higher figure (£72,000). The Commission’s report had stated that any figure above £50,000 ‘could mean that the overall reforms would fail to satisfy our criteria of fairness and sustainability’. This is an important point. There is a long history of social welfare reforms being subverted by the Treasury moving the eligibility bar to levels that ultimately undermine their whole purpose: there is no reason to believe that this will not happen with any future proposals of this kind.
Although the present government has indicated that it no longer intends to bring into force the ‘cap on care costs’ provisions in the 2014 Act, it is unclear whether it has abandoned the idea of a cap per se.
Acknowledging an administrative impact
Whatever the reason for the government’s loss of confidence in the Care Act ‘cap on care costs’ proposals, there has been no indication that the reason concerns the outsized bureaucracy that such a scheme would require.
At a basic level the Dilnot Commission did consider the relative administrative impact of various ways of recording how much an individual had spent on their care costs (to identify the point at which the cap on costs provision was triggered). The options considered were: (a) keeping a record of everything a person had actually spent on their care costs; (b) simply measuring the length of time a person had had eligible needs (ie triggering the ‘cap’ not on expenditure but the effluxion of time); and (c) recording not what they had spent, but what the local authority (based on a ‘full needs assessment’) considered that their ‘needs’ required and then recording this ‘notional spend’. Based on considerations of fairness and administrative impact the Commission recommended option (c). Having done this, it appears to have given no further thought to the wicked bureaucratic detail of what running its favoured scheme would actually entail – apart from referring in its final report to the fact that it would require ‘some additional administration’.
Since the idea of some form of ‘cap on care costs’ would appear still to be an option, it is worth considering the administrative demands that the Dilnot proposal would have made on local authorities.
Duration of record keeping
The first point to appreciate is the length of time for which authorities would need to keep records for each individual who came within the scope of the scheme.
The government proposed that the cap would, in general terms, apply after £72,000 had been spent on social care costs (the jargon being ‘when the taxi meter’ hit £72,000). The figure only applied to social care costs and not to ‘daily living’ costs: it proposed that this element be set at a notional rate of £12,000 pa. Additionally the scheme did not ‘meter’ the actual costs a person was paying for their care – but what the local authority (after a ‘full needs assessment’) considered to be the reasonable cost of meeting these needs. This question will be considered further in a future ‘post’ but most obviously the question arises: “would this be the rate paid by a self-funder (ie £44,000 pa for a care home) or a local authority (ie £32,300 pa for a care home)?” The Dilnot Commission report suggests that it would have been the local authority that decided this question – and so it is safe to assume it would be the lower figure.
Doing the arithmetic therefore a person in a care home would be ‘deemed’ to be paying £32,300 pa minus their notional ‘daily living’ costs of £12,000 pa ie £20,300 pa.
Ignoring the inevitable annual inflation up-rating, it would take over 3½ years for that person to ‘hit’ the cap. During this time over £154,000 would in fact have been spent on the person’s care. When the cap is reached he or she would continue to pay over £230 per week (for their ‘daily living’ costs) and they would cease to be eligible for disability benefits such as Disability Living Allowance or Attendance Allowance or Personal Independence Payments. Less than 10% of those in need of social care spend over £150,000 on their social care costs: a point that must be born in mind when assessing the reasonableness of the bureaucracy its operation would require.
Numbers of people for whom records would need to be kept
A ‘cap on costs’ mechanism – in effect – offers everyone with significant capital a free insurance policy. Once they have had a ‘full needs assessment’ and it has been determined that they have ‘eligible needs’ they will have an account opened by the local authority and the ‘taxi meter’ will start ticking. Such a person can then purchase their care privately and the local authority will record this on their ‘care account’. The amount recorded on the meter will increase at a rate determined by the local authority and will be the amount that it considers to be the reasonable cost of meeting their social care needs – which may be considerably less than the amount they are actually paying and will be further reduced (if in a care home) by the amount attributable to ‘daily living costs’. This will of course give rise to disputes / complaints / ombudsman interventions concerning the amount to be recorded and result in many requests for reassessments when care needs increase. These will be complaints by people with money: well-connected, well-informed and assertive people – a cohort of people with significantly different characteristics to the majority of the people currently eligible for local authority support. Their care accounts will be up-rated for inflation each year and if they move to a new local authority area, their care account will be transferred with them. If the two authorities are using different proprietary ‘taxi meters’ for recording / uprating / adjusting then this will be an additional challenge. The Care Act envisaged that these accounts be retained for 99 years.
Given the ‘cost free’ nature of this ‘offer’ it is not unreasonable to expect almost everyone who may be in need of care (millionaire or pauper) being encouraged to seek a full needs assessment. This could increase the number of people seeking an assessment by about 40% – if not more – and as noted above, for the vast majority the process will be pointless in the sense that over 90% will die before they reach their ‘cap’.
Full needs assessments for purely financial reasons
Although recent data on the proportion of social services expenditure spent on assessment and care management is difficult to access it appears that it is at least 10% of the total adult social services spend. This equates to almost £2 billion: a 40% increase would suggest that from this factor alone the additional administrative cost could be in edging £0.8 billion.
On top of this cost, there will of course need to be funding for a cohort of financial officers whose role will be to open and then update a spreadsheet for every individual in the system, recording their actual or notional care costs expenditure: in excess of a million individuals. Each time there is a deterioration, a reassessment, an increased need or a successful complaint, the spreadsheet will be uprated and each year the revised ‘cap’ will become more distant as it is ‘inflation adjusted’. This will all be done, not to ensure that the person receives appropriate care and support, but to ensure that the taxi meter is properly calibrated in terms of £s&p.
The effect of a cap on care costs will be to divert social services staff away from their professional role in identifying and securing support for those in need, to focus on the bureaucratic task of assessing notional financial entitlements. For social workers it will be another demoralising and de-skilling task. Their training in the complexities of care, personalisation and empowerment will be discarded in favour of fulfilling an auditing role – more in keeping with that of an insurance assessor (albeit that for the vast majority of those being assessed, there will be no financial benefit from the interaction).