Wanless review calls for extra money and a new funding system

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Social care for older people in England will require sharp increases in funding to meet the demand for high quality care over the next two decades, according to the findings of a major review commissioned by The King's Fund and led by former NatWest Group Chief Executive, Sir Derek Wanless.

Simply keeping pace with population changes caused by increasing numbers of older people – and not seeking to improve care services or the way they are funded – would require total spending (public and private) on social care for older people to increase from the 2002 level of £10.1 billion (1.1 per cent of GDP) to £24.0 billion (1.5 per cent of GDP) by 2026. Achieving more ambitious goals for social care would mean increasing GDP to 2.0 per cent by 2026.

The review found very serious shortcomings in social care provision and funding arrangements. It recommends that to enable more people to receive care fairly and cost-effectively, there should be more ambition in the outcomes sought for social care and that the current means-tested funding system should be scrapped and replaced with a partnership model. Everyone in need would be entitled to an agreed level of free care, after which individuals' contributions would be matched by the state up to a defined limit. People on low incomes would be eligible for benefits to fund their contributions.

The review argues that reconfiguring services in this way would be cost effective and could provide more community-based care, including better access for those with moderate needs; better support for carers; and improved services for people with dementia.

These recommendations would take several years to implement. There would have to be substantial growth in the supply of services. And, as well as tackling the complexities involved in changing the funding system, a move to a partnership model of funding would also require a wider review of the benefits system. The new system would replace the need for some existing (non-means-tested) benefits paid to older people with disabilities but there is currently not enough data to be definite about how far this could go.

If this more ambitious level of services was being delivered today under a partnership funding model, significantly more older people in England (up to 450,000 more) would be receiving social care services such as home care, day care and care home placements, at any given time, and to a greater intensity. In present day terms, it would be cost effective for up to an extra £4.2 billion of public money to be spent annually on more social care for more older people. Assuming up to £2.5 billion could be offset by savings in the benefits system, the additional overall public spending would be an annual £1.7 billion.

Announcing the publication of his year-long review, Sir Derek said:

'To provide good social care for older people in England in 20 years time and meet people's expectations, we will need to devote a larger share of our national income to social care. At the moment we have a safety net for poorer people but good social care should be about much more than that. We need to ensure that all older people are able to remain as healthy and independent as possible. However, the current system is failing to do this and is too focused on a small number of older people with the most significant social care needs. This will become a bigger problem as the number of disabled people rises significantly in the future.

'But money on its own will not be enough. Additional funding should be linked to a commitment to reconfigure services, demonstrating how value-for-money and fairness can be achieved. To achieve the outcomes assumed in this review, the system needs to be more universal with broader eligibility criteria.'

The report, Securing Good Social Care for Older People: Taking a long-term view, sets out the review's vision of a social care system providing comprehensive, high quality care. It provides an analysis of how social care might be funded in the long term and seeks to trigger a wide-ranging debate on the future of social care and the pace at which the necessary radical changes can be taken forward. The review follows Sir Derek's two reports for the Treasury on future health care spending in the United Kingdom and on public health in England.

Estimating future demand and costs

  • Increasing number of older people with care needs – in the next 20 years, the number of people aged 85 and over in England is set to increase by two-thirds, compared with a 10 per cent growth in the overall population. And trends between 1981 and 2001 show that increases in healthy life expectancy have not kept pace with improvements in total life expectancy. Even the optimistic predictions used in the review forecast that the number of older people with high levels of need will rise by 54 per cent over the next 20 years (compared with a 44 per cent rise for those who will not require care), though this depends on moderate reductions in obesity and other 'lifestyle' conditions and the introduction of effective new treatments and technologies.
  • Failure to meet most older people's needs – budget-constrained public resources are being targeted at a relatively small number of older people with the greatest need. This means many older people with lesser, though still significant, needs are receiving no care at all.
  • Balance of services – although the balance is changing, the proportion of people in care homes is still too high according to the views of older people about where they would prefer to receive their care, and accounting for the costs involved. Overall, the proportion of older people receiving home care in England seems low by international standards.
  • Quality of care – services are often rushed and some people feel that care packages are too small. The quality of care is variable and in places unacceptably low.
  • Better integration between health and social care – while there has been progress in reducing delayed discharges from hospitals, the picture on reducing avoidable admissions is less promising. Five per cent of 'very high intensive health care users' account for more than 40 per cent of inpatient days and people aged 75 and over are nearly seven times as likely to fall into this category compared to the under 65s.

The review examined social and health care policy, services and spending as well as demographic, social and technological trends in order to consider the demands on social care now and in the future. The analysis was used in the development of a model for estimating what level and kinds of services would be needed over the next 20 years and how much they would cost. The model was used to cost social care over three increasingly ambitious scenarios of outcomes:

  • Scenario 1 is the baseline case. It assumes that the patterns of social care services and outcomes in the future will be the same as now, for example, the system is no more ambitious. The driver of higher future costs will be changes in the number of people with care needs. Under scenario 1, total costs of £10.1 billion in 2002 rise by 139 per cent between 2002 and 2026 to £24.0 billion. This is an increase from 1.1 to 1.5 per cent of GDP.
  • Scenario 2 goes further to change what the care system does, and what it provides, so that it achieves the highest levels of personal care and safety outcomes justifiable given their cost. Under scenario 2, total costs would have been £12.2 billion in 2002, and would rise by 142 per cent between 2002 and 2026 to £29.5 billion – an increase from 1.3 to 2.0 per cent of GDP.
  • Scenario 3 uses scenario 2 as a starting point, but also provides some improved social inclusion outcomes and a broader sense of well-being. Under scenario 3, total costs would have been £13.0 billion in 2002 and would rise by 142 per cent between 2002 and 2026 to £31.3 billion – an increase from 1.4 to 2.0 per cent of GDP.

The review also considers the more immediate impact on social care spending of the three scenarios. In 2007 the difference between scenarios 1 and 2 reaches £3.0 billion – this is the estimated extra cost in 2007 of moving to a level of social care which would achieve economically justifiable ‘benchmark’ levels of personal care and safety under the current means-tested funding system.

Funding options – who pays?

There is widespread dissatisfaction with the current means-tested funding arrangements. The complex system is not well understood. Savers and those with modest assets are penalised, differences in the charging systems of local authorities have created a 'postcode lottery' for home care, and implementation of means-testing can create perverse incentives so that financial rules can affect the type of services people receive. In addition, distinguishing needs at the boundaries of 'free' health care, particularly NHS continuing care, and means-tested social care creates considerable anger and distress.

The review assessed a range of possible funding systems for providing the additional money required on the basis of fairness, economic efficiency, user choice, physical resource development, clarity and sustainability/acceptability. Finally, it used the model again to calculate how the 'top-ranking' funding systems affected demand for social care, total costs and the split between private and public contributions. As a basis for comparison, the current means-tested system – where individuals' contributions to the cost of care depend on their income and wealth, with those with assets above a threshold (£20,500) often paying the full costs – was also examined in more detail although it ranked below the frontrunners:

  • The partnership model – providing a minimum guaranteed amount of care free at the point of delivery. The review team set this at two-thirds of the total care package, but it could be varied up or down. Individuals can then make contributions matched by the state (up to a limit): in the review's estimates, every £1 contributed by an individual is matched by £1 from the state until the benchmark (for example, economically justified) care package is achieved (thereafter extra private contributions are not matched). People with low incomes would be helped to make their additional contributions through the benefits system (at an annual cost estimated at £0.8 billion).
  • Free personal care – providing a full benchmark package of personal care without charge or means-testing. This form of universal entitlement now applies in Scotland, although the package of services that would be on offer to older people in England would be more significant than those currently provided in Scotland.

The limited liability model, a hybrid model, effectively a means-tested system for the first three or four years of care and then free personal care thereafter was also considered.

The review concluded that the vast majority of older people would be better off under a partnership model or free personal care. The latter would be most expensive in terms of public funding and also puts the onus on social services in terms of what care is provided.

On balance, the review came down in favour of recommending the partnership model. Its advantages are:

  • it provides a guaranteed minimum level of care, making the system universal and inclusive
  • a significant increase in the number of older people taking up services compared to now – up to 450,000 people – due in part to the reduction in charges as well as attracting those put off by the idea of means-testing
  • it provides incentives for people to save for their social care needs in older age as almost everyone would be required to make some form of contribution. Fewer people would need to sell their assets to pay for care than under the means-testing system
  • as there is a charge under the partnership model, people will feel more empowered to express choices
  • it produces best value-for-money and is sustainable – the system will cost more than means-testing but it provides significant additional value by providing better care packages for more older people
  • it provides clarity about what care people can expect, how much they are entitled to receive, and also how much they have to pay.

Sir Derek said: 'We have considered many alternative funding systems and no single model stands head and shoulders above the rest, although many are better than the current system. It is our belief that the partnership model offers the best and fairest way of supporting older people. It offers better care packages to individuals and significantly more older people would receive support compared with the present arrangements under means-testing. We hope the government gives serious consideration to these recommendations.'

Welcoming the review, The King's Fund chief executive Niall Dickson said:

'This report reveals in great detail how many older people in this country are being let down. The existing system is neither effective nor fair. This is not only damaging thousands of lives, but it is also wasting resources by failing to help older people lead independent lives without the need for more expensive support.

'Let's be clear this is a very difficult time to be calling for more public expenditure, but this is a major opportunity for the government to look seriously again at what remains a neglected area of public life. It will certainly take time to take social care spending up to the levels envisaged, but we hope that both government and Opposition parties will look at this report seriously and commit themselves to embarking on the reforms it outlines. Older people deserve better support than they are currently receiving and these proposals would go a long way to securing better care for them.'

He added: 'The question of how we pay for social care for older people in England has yet to be resolved despite the Royal Commission seven years ago. The partnership model proposed by Sir Derek Wanless may end the stalemate and offer a sustainable way of providing good social care for all.'

Notes to editors

  1. For further information or interviews, please contact the King's Fund media and public relations office on 020 7307 2585, 020 7307 2632 or 020 7307 2581. An ISDN line is available for interviews on 020 7637 0185.
  2. The King’s Fund announced in January 2005 that Sir Derek Wanless, former Group Chief Executive of NatWest Group, would undertake a review into the long-term funding of social care for older people. The terms of reference for the Review were:
    • To examine the technological, demographic and health trends over the next fifteen to twenty years that are likely to affect the demand for and nature of social care in England.
    • In the light of this, to identify the financial and other resources required to ensure that those who need social care are able to secure comprehensive and high quality services.
    • To consider how such services might be paid for bearing in mind the King’s Fund’s commitment to reducing inequalities in health and social care.
  3. Sir Derek Wanless’ report – Securing Good Social Care for Older People: Taking a long-term view – is published today. The report is free to download from the King’s Fund website.
  4. Sir Derek led a team of economists and social care specialists based at the King’s Fund. The review was undertaken in collaboration with the Personal Social Services Research Unit (PSSRU) at The London School of Economics. Dr Julien Forder, senior research fellow and deputy director of PSSRU at the London School of Economics was seconded to the review as project manager.
  5. Sir Derek Wanless has prepared two significant reports for the government on the NHS: Our Future Health: Taking a Long-Term View (April 2002), and Securing Good Health for the Whole Population (February 2004), and has also conducted an inquiry into health and social care in Wales for the Welsh Assembly. He graduated in mathematics from King’s College, Cambridge, and then qualified as a Member of the Institute of Statisticians and a Fellow of the Chartered Institute of Bankers, of which he was President in 1999. He is a banker, having joined NatWest Group in 1970, and progressing to become its Group Chief Executive from 1992 until 1999. He is currently a director of Northern Rock plc and Northumbrian Water Group plc and Vice Chairman of the Statistics Commission. Derek was appointed a Trustee at NESTA in September 2000. Northern Rock is a provider of equity release products.
  6. In June 2005 the King’s Fund published the findings of a year-long inquiry into care services for older people in London. The report, The Business of Caring: King's Fund inquiry into care services for older people in London drew on the experience of older people and their carers, care staff and managers, regulators, and commissioners. The Inquiry concluded that there are major shortcomings in the current care system that disadvantage older people and their carers. The report from the inquiry can be downloaded free from the King’s Fund website.
  7. The government commissioned a review of how to fund long-term care for the elderly through a Royal Commission report in 1999. The Royal Commission on Long Term Care was set up to examine short and long term options for funding long term care for older people. The Commission made 24 recommendations. This included a recommendation that personal care should be free, a proposal that was rejected by the government.
  8. The King’s Fund is an independent charitable foundation working for better health, especially in London. We carry out research, policy analysis and development activities, working on our own, in partnerships, and through funding. We are a major resource to people working in health and social care, offering leadership development programmes; seminars and workshops; publications; information and library services; and conference and meeting facilities.