Funding Options For Long-Term Care

Following the Government's long awaited announcement of the establishment of a Royal Commission to examine long term care, Harriet Clarke and Gillian Parker, of the Nuffield Community Care Studies Unit at the University of Leicester, report and analyse the results of their recent survey into funding options for the care of older people.

In December 1997 Frank Dobson, Secretary of State for Health, fulfilled a Labour manifesto commitment when he announced the establishment of a Royal Commission to examine short-term and long-term financing options for the care of older people. The Commissions membership has expertise in finance, housing, and health and social care, and their principal aim is to advise on the development of a 'fair funding system' for long-term care services. They are expected to make their recommendations within the next 13 months.

Researching Attitudes and Behaviour

An assessment of public attitudes and potential behaviour is an essential element in considering the feasibility of different funding options The research reported here consisted of two surveys of these issues conducted by the authors in conjunction with the research institute, Social and Community Planning Research (SCPR). Stage one involved a survey of public attitudes among a nationally representative sample of 950 men and women, aged between 25 and 70, across England and Wales. This explored public beliefs about state, family and individual responsibility for older people's care. The fieldwork was conducted between October and .December 1995. Some of the original sample were revisited at stage two (N=102) to examine their financial behaviour in the light of their expressed attitudes. They were selected on the basis of whether they felt that the state should pay for care for all (pro-state); the state should provide a basic or means-tested service, with people expected to pay some of the costs themselves (mixed economy); individuals should pay (pro-individual); or that they were inconsistent in their attitudes (inconsistent).

The Role of the State

The national attitudes survey found widespread support for the view that the state should be primarily responsible for meeting older people's care needs. Most stage one respondents (89%) agreed that 'the state should be responsible for providing care for elderly people' (see Table 1). Respondents' beliefs; about the 'best way' to pay for such care largely reflected their attitude to provision, 24% supported comprehensive care provision, whilst 48% favoured a basic level of state services which could be supplemented by those who could afford to do so; just 24% preferred a means tested approach and 2% felt that people should always make their own arrangements.

As with the provision of care, most respondents saw a strong role for the state in ensuring that people have an adequate retirement pension: 43% said that the state should be largely responsible and only 6% believed that it should be mainly down to individuals (Table 2).

Awareness and understanding of different pension plans was varied. Almost all our stage two sample had heard of the state basic pension, company pensions and private pension plans, but almost a quarter had not heard of the State Earnings Related Pension (SERPS). Most (63%) felt that they would definitely receive the State Basic Pension, often referring to having 'paid in' though tax; and National. Insurance. However some qualified this by expressing an awareness that state pension provision could change. Others were unclear about eligibility, and were ambiguous as to whether they understood the State Basic Pension as a universal. contributory or means tested benefit.

Table 1

The State should be responsible for providing care for elderly people'

Respondents who: % of sample
Strongly agree 56
Somewhat agree 33
Neither 5
Somewhat disagree *
Strongly Disagree *;
Don't know/refused
Base (100% -) 950

Table 2

Who should be mainly; responsible for ensuring that people have an adequate retirement pension"

re of sample
Mainly the state 43
Mainly employers 11
Shared equally 38
Individuals 6
Other
Don't know/refused 2
Base (100% =) 950

* denotes less than 1%

Tax and spend priorities

Our nationally representative sample expressed little support for increased taxes to pay for care services or retirement income. Respondents were asked to say whether they would like to see more or less state spending on public services, and were told if they said 'much more' spending this might require a tax increase to pay for it. Overall, more state spending on care for older people was supported (86%). which is slightly less support than we found for health (88%), and more than for `old age pensions' (78%). However, respondents appeared least willing to be taxed more for care services: 31% supported spending 'much more' on health, compared with 21'% for old age pensions, and 20% for the care of older people. A third of respondents agreed that the state cannot afford to provide adequate care for all older people, whilst just over half disagreed. This suggests the public believe more spending on care is necessary, but that cuts in other areas or greater efficiency could cover the cost.

Saving for Old Age

We went on to examine respondents attitudes towards saving for specific purposes. Stage one respondents were asked what the most important reason for saving should be for a couple in their 40s, a couple nearing retirement with adult children, and a retired couple with money to invest having just moved to a smaller home. They were asked to choose between three reasons: `to leave to their children', `for their own old age', or 'to pay for care which their elderly parents might need in the future'. Over three quarters of respondents felt that saving for one's own old age was a first priority in each case, whilst saving to support parents financially was least often prioritised. Older respondents (55-70) were most likely to see saving for one's own old age as a priority for a couple in their 40s, which may indicate their awareness of the long-term nature of adequate retirement planning.

At stage two, respondents were asked to choose from a list of statements the one closest to how they felt about saving and investing for the future. This question suggested that just 10% were 'purposefuI' savers. However, most of the 56 respondents who currently had some savings behaviour other than pensions were 'long term' (five years plus) savers.

Use of Housing Assets

Increased levels of home ownership amongst older people has highlighted the means tested nature of state support. Only 19% of stage one respondents felt that an elderly person living alone, who wished to leave the house to a relative, should have to sell their house to pay for residential or nursing home care (Table 3). However four fifths of this group felt a person who sells their home should not receive better care than someone who cannot pay for themselves.

Table 3

Should an elderly person living alone who wishes to leave their home to a relative, but needs to go into a residential, or nursing home, be made to sell their house to pay for care costs?

Respondents who said: C/o of sample
Yes 19
No, 73
Other/Depends 3
Can't say/refused 5
Base (100%=) 950

At stage two, 79 respondents lived in owner occupied households. and 12 other respondents thought that they would buy a home in the future. This group were asked whether they felt that their generation bought their homes expecting to be able to pass them on to children or other close family. The majority (52) thought that this was the case, with 35 disagreeing. Many of those who believed that their generation did not think in this way referred to homes being sold to pay for care. Others thought children could be more independent nowadays than in the past, and that they were more financially secure. However over half the home-owners said they personally did not buy their home with this expectation, and of the 34 who did, five said they no longer thought that way.

We found a greater willingness to support the protection of assets from means testing when the question was less direct. Respondents were asked to suppose that they had a house to pass on and that they needed to go into residential or nursing home care. Here 65% said that they would expect the state to pay for their care, and only 32% said they would not.

Long Term Care Insurance

Long-term care insurance (LTCI) was explained to stage one respondents who were told that it could cover the cost of any special help or care which people might need when they are elderly. Just half (51 per cent) knew of its existence, though older respondents (55-70) were more likely to claim knowledge (61 per cent) than those who were younger.

Table 4

Should people be able to buy long-term care insurance?

Respondents who said % of sample:
Yes 75
No 11
Depends 9
Don't know 2
Refused *
Base (100%=) 950

Over three-quarters believed that people should be able to purchase LTCI, and just 11 per cent gave a firm 'no' as their response (Table 4). Younger respondents were most supportive of availability, with 92 per cent of 25-39 year olds responding `yes'. Most of those hostile to LTCI (9 per cent of the total) believed that it was: the state's responsibility to pay for care, with some of this group feeling that they had already made provision for care needs through taxation and national insurance. The reasons given by those who felt that people should be able to buy insurance most often referred to safeguarding or protecting the future, and to freedom of choice for the individual. Compulsory private cover for all was very unpopular, with 80 per cent staunchly opposed to a legal requirement to buy, and just 14 per cent supportive of such a policy.

A definition of pre-funded LTCI was given to our stage two respondents, who were then presented with an approximate cost of a policy based on their age and sex. Half the sample thought such cover was a `good idea', but, as could be expected, pro-state respondents were significantly more opposed and pro-individual respondents more in favour. Only 6 respondents said they would currently take out such insurance, with many feeling it to be simply not affordable.

Next we presented respondents with different risk figures for admission, to residential and nursing home care at the age of 85, to see if information about risk would alter their answer. The rider `if you could afford it' was included to remove cost from the equation. The current risk figure of one in four was presented first, and, for those who still said that they would not take out insurance, we proceeded to one in two and three in four. At a risk of one in four, 47% said that, knowing these risk figures, they would take out LTCI if they could afford it. The `pro-state' sub-group were significantly less likely to say that they would take out insurance at this risk level. Only 5% changed their mind to say they would purchase insurance when the risk increased to one in two, and there was no further change at the risk of three in four; this suggests that over half the stage two sample were resistant to insurance at current risk levels, and just under a half are resistant at substantially inflated levels of risk.

Stage two respondents were also asked to express a view on the partnership proposal put forward in the Government's 1996 consultation paper. They were told that an insurance `partnership' scheme would allow someone who had bought a private policy for £6,000 at retirement to pass on £60,000 of assets if the need for care arose. Just over half the sample thought this a `good idea', and just under half thought that they would be able to afford such a policy when they retired. Perhaps we should not be too surprised that people appear to be more prepared to spend assets they hope or expect to own in the future (e.g. a pension lump-sum), than they are to purchase insurance or save for their care in old age currently.

Conclusion

The Royal Commission faces a difficult task, reviewing how the responsibility for meeting care costs should be apportioned between the state and the individual. This research has found that a large majority of the public believe that the balance of responsibility for care should lie with the state, and that a minority believe that fulfilment of such responsibility is beyond the capacity of the public purse. Whilst few are willing to be taxed more to pay for care services, it would seem that even fewer are willing (or able) to plan on an individual basis, or feel comfortable with the use of housing assets to fund care needs.

Harriet Clarke and Prof. Gillian Parker
The project was funded by the Economic and Social Research Council as part of its Economic Beliefs and Behaviours Programme, Award number L122251022.
The final report is available from the Nuffield Community Care Studies Unit, University of Leicester,22-28 Princess Road West, Leciester, LE1 6TP, Tel: 0116 2525424 (Price: £4.50, including postage and packaging)