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Monday, July 4, 2011

Dilnot report: Where's the money

Andrew Dilnot said the cap would provide "peace of mind" in an era of longer life-expectancy where people felt “powerless” to plan for high elderly care costs.
The economist – tasked with recommending an overhaul of elderly care funding - said the current system was “broken” because people now feared living longer.
Under proposals to be presented to the Government today, he said the state should take over funding individuals’ care costs after they had contributed £35,000.
The assets threshold at which people should start paying for care should also be raised from £23,000 to £100,000, Mr Dilnot said.
He also recommended a separated cap on the amount care homes are allowed to charge residents for food and accommodation.

Speaking on Radio 4’s Today programme, Mr Dilnot said: “I think the system is broken and at the moment people are frightened about something they ought to celebrate. We should be delighted that we’re expecting to live longer and longer.
“The risk of high care costs is the one big risk that all of us face where we have no way of preventing the extreme risk. If we have a healthcare problem, the NHS looks after us. If our house burns down or you have a car crash, then we will have taken out private insurance. Here the state doesn’t cover you and the private sector won’t.
“So at the moment people face an uncertain risk and it makes them very very frightened and they feel powerless.
“What we are proposing is that we set a cap of £35,000. If your costs are more than £35,000, the state will kick in.”
Under the current system, anyone with assets of more than £23,250 – including their house – is required to meet the full cost of their care in old age.

It is designed not just to reduce people's fears about losing their house and savings but to persuade the financial services industry to come up with products which will help people plan for the possibility of needing care in their old age - not just insurance policies but also equity release schemes and plans to allow people to get less out of their pension when well and more when in need.

What he has not cracked - although he has tried - is the political problem.

As the newspaper coverage of this report shows, people tend to focus not on the good news - the costs that are capped - but on the bad - the costs below the cap or so-called "hotel costs" which are not covered by the cap.

The fear for ministers is that if they drive the Dilnot plan through they will be blamed for the bad and given no credit for the good while ending up having to find £2-3bn extra to pay for it.

What all this may reveal is that, once again, voters will the ends but not the means.

In other words, people believe that they should get free care when old (after all, goes the argument, health care is free) while not be willing to pay for it through taxes when working or through their savings after retirement.

Thus - as I posted on Friday - their challenge to Dilnot's backers will be "tell us where you'd find the money".

One modest proposal campaigners for the elderly may wish to consider - how about inviting politicians to stop giving wealthy pensioners winter fuel allowance, free TV licences and free bus passes?

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