GrumbleSmiles

“Oh what a tangled web we weave, when first we practise to deceive”

This quotation from Sir Walter Scott, sums up well the outcome of the political debate in the run up to the 2010 election, on funding of elderly care in future.  The “web” is made up of significantly different proposals from each political party, varying in cost from £20,000 to £8,000, to 50% of something.  The “tangle” is because the proposals are all based on different timescales and cover different services.  The “deception” is that none of them are properly costed nor do they take full account of the huge future growth of the older and frailer elderly population.

Let’s look at what we can agree on:-

We are in the worst economic situation for nearly a century – overburdened with National debt.

We have a failing social care system – in terms of quality and cost.

The NHS is already struggling with health care under the pressure from increasing numbers of older people.

There is an approaching, demographic wave which will double the number of older frailer people.  Nobody disputes these issues but an election is no time to face up to the truth!

All politicians want to offer something for nothing.  Free or part free social care is the latest carrot being dangled in front of the electorate.

Relatives do not want or are simply unable to cope with looking after mum or dad – but would like a legacy when their parents die (most older people would agree with that).

There is more than enough money locked up in unearned assets of un-mortgaged property.  Now is the time to cash in these life savings for a positive new life in later life.

We need honesty to confirm that the state can’t afford to pay for a universal benefit for all.  Innovative new options are needed for older people to secure their own future.

So, what are the party political proposals:-

Labour is offering a one-off £20,000 lump sum which only pays for the care element of residential care costs and is paid as a legacy hence the name “Death Tax”.  The positive thing about this is the deferred payment which is relatively easy to accept – presumably it becomes a first charge on your estate.  This is just like accepting a higher level of inheritance tax, which would be especially attractive to the wealthy who are liable to IHT.  For people on the margins of IHT or with wealth below £325,000, they might be inclined to dispose of their money to avoid having to pay.  No doubt there would be a whole bureaucracy (like the Court of Protection) set up to control early disposal of assets.  The £20,000 price tag seems reasonable value – although it would have to be compulsory for all, to keep the figure that low.  This universality fits with the original ethos of the NHS and presumably means that even people with pre-existing health conditions would receive the offer when they reach pensionable age.  That is a very good deal for wealthier disabled and chronically ill people who currently have to pay for themselves.

The big downside of this approach is that it only covers costs after an initial two year period in residential/nursing care and thereafter it only pays half the cost.  It also does not cover housing and hotel services, which makes up 50% of the costs of social care.

So effectively this is a co-payment scheme which explains why it is so cheap at £20,000 when compared to the current lifetime care insurance market.  In that sense it is quite clever really, so it is a pity it was pilloried so much by the Conservatives.

So let’s look at their idea:-

The Conservative proposal is for a voluntary insurance scheme which covers all costs including housing.  Set a £8,000 it sounds too good to be true.  Certainly if you think that it costs £30,000 plus per annum for an average stay of 2 years for the 1 in 20 people who eventually need residential care it is a very reasonable bet.  Even more so if you end up staying in care for longer, perhaps with dementia or some other chronic illness.  Presumably if you have a pre-existing condition at retirement, the offer would not be open to you.

If the scheme is voluntary how do you avoid self-selection where only those whose health condition suggests they need care, take it up?  If this were to happen the cost to the Government would be much higher.  Also, who decides when your entitlement to care begins – Social Services already have to ration care now based on budget limitations.  So presumably you would have to be in “critical and substantial need” to qualify for financial support.

On the face of it this looks like an offer you can’t refuse – a steal – it is a fraction of what the insurance industry now charges for critical illness insurance.  That is why it might work.  The take-up could be quite good albeit, it would have to be entered into when you first retired and didn’t need care, and then only after a medical to prove it.  Disabled and chronically ill need not apply you’re already part of “broken Britain”.

Summary

Ironically the Labour and Conservative proposals both have merits and could work well together; a cheap £8,000 voluntary offer now or a £20,000 compulsory charge when you die.

There is another option not being considered in the current debate:-

Keep the status quo – which by default has already been decided by the Labour Government by passing the issue to a Commission to decide during the next Parliament.  But why will the final decision by any easier in the run up to the next election.  It’s never going to be easy and it is hard to imagine political consensus holding for very long on such a big issue.  Strong leadership is what is needed along with straight talking and the widespread agreement of elderly people.

The status quo issue leaves people with over £23,000 in the bank, having to fend for themselves, and ultimately paying for care out of the sale of their home if they have no more financial resources.  It’s a gamble as to whether this is a better option for individuals than the ones currently being proposed.  The odds are 20 to 1 in favour of you never having to go into residential care.

Given that most people block out of their minds that they will ever get ill until it happens and that the current state funded nursing and residential homes are not a choice people would willingly take, the Government staying out of the way may be most peoples’ preferred option.

The status quo is however not acceptable for those people with very limited resources (less than £23,000).  They have no alternative but to rely on social service support which is often poor quality and only available as a last resort.  To make matters worse, the number of over 80s are going to increase dramatically by 2020 and the pressure on all care services will increase exponentially.  So the Government has to do something for the group with least resources which will exacerbate the feeling that those who haven’t saved all their lives are still getting everything for nothing.  This widely held but often hidden resentment can only grow and lead to the conclusion that there is no point in saving for your retirement.

Concluding Remarks:-

Clearing the Cobwebs Away

The White Paper on social care was launched by Andy Burnham, 30 March 2010 and heralded as a new way forward for social care.  Well, it’s the start of a long journey to reach consensus on a clear direction and a properly funded strategy.  There will be many options to be evaluated, much consultation still to be done and no doubt many hopelessly optimistic bubbles to be burst along the way.  There is not even an agreement yet on the ultimate destination we need to get to, or by when, nor is there any real understanding of the overall cost.  Except that like the Millennium Dome, the Olympics and the Afghan War, the end up cost will be many, many times more that which was envisaged at the start of the first proposal.  Further more, the cost of delay and prevarication will be counted in lives lost, uncared for, and unfulfilled, while we wait for the course to be charted and the resources to be mustered. 

Yet the reality is that the resources are already in place, and the talent of our older generation only needs to be unleashed.  The key to open this treasure chest is honesty.  The nest egg that the baby boomer generation have effortlessly been saving all their lives is the equity they have gratuitlessly accumulated in property ownership.  The inflated value of their homes is their salvation but it’s not a message they want to hear.  They had hoped the “gravy train” of free education, free health care and endless affordable consumption would go on forever.  Now it would only be honest to tell them that free health care for life was a mirage and there is a price to pay in the end.  The good news for elderly home owners, is that that nest egg can now be cashed in to secure a better future in later life.  Sadly that means their children (who with increased longevity are not children at all) will have to make their own way in life OR grannies and grandads can come and live with them!

So with that said.  Honesty now out on the table.  Let’s get on and start planning to help ourselves.  The state certainly doesn’t have the money, and would not spend it well if they did.  Universal health care is just another way of the Government gathering in our money and deciding our future for us.  The best form of personalised budget is for the state to get out of the way and leave us to determine our own lives.  There is a role for the state in helping those who don’t have resources and the ones in greatest need, but in our property owning democracy that is now the minority.  It’s a significant minority nonetheless, which is all the more reason for the Government to concentrate its efforts on helping them rather than imagining it can please all the people all of the time.

A Commission after the election may well be the opportunity needed for calm and reasoned discussion on the issues and ideas that have been raised.  It will give time for the demographic and economic facts and their implications to be more clearly explained to the older generation and their siblings.

There does need to be a new dawn of reality.  The Commission should be charged with providing a new and positive vision of later life.  The options can be so much better for older people than the ones presently available.

The leadership needs to come from elderly people themselves using all their talents and resources to take charge of their own futures.

Maybe this “grumble-smiles” blog can be a platform for ideas and discussion on the way forward.  There won’t be one way for all, more likely there will be thousands of small steps which collectively will lead to a new life in old age.

So what is the direction and what are some of the first steps:-

Start with economic honesty and forget a universal system.  Expect the majority of homeowners to help themselves.

Encourage them to do this by promoting a big expansion of free well-being and preventative health service in the community.

Re-establish day centres/social clubs accessed by free transport.  Make living in the community an easier and preferable option for most people.

Make equity re-lease a respectable option (regulate it) (reverse mortgages) stair-case down to rent.

Promote attractive housing and care options that entice older people to trade down and release equity through selling large under-occupied houses.

Make community living an attractive alternative to isolation and living on your own.

Fund projects that promote volunteering to keep elderly better occupied and helping each other.

Enable people to work part time, tax free, rather than forcing everyone to carry on working by pushing pension age back to 70.

Have you got more ideas to pass onto the Commission ?