Fixing Social Care: New funding, new methods, new partnerships

Dr Eamonn Butler & Paul Saper FCA

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Our latest paper, LCS lead and social care expert Paul Saper with The Adam Smith Institute's Dr Eamonn Butler, argues that that the social care system is broken, unfit for purpose and cannot be fixed by new taxes.


The problems

The paper identifies a number of challenges in the care system:

 - Covid-19 has focused attention on the crisis in residential and nursing care homes for the elderly, although the crisis in adult social care is deep and has been growing for many years.

 - Alongside care of the elderly, half of local government care spending goes on the needs of people under 65 with physical disabilities, mental health or learning problems. Because of rising longevity, the demand for care in each of these groups has grown 3-4% per annum over this century as parents can no longer look after children all their lives.

 - The adult social care system is a lottery and widely perceived as unfair.

 - Most care homes with local authority-funded residents are over 20 years old and no longer up to standard.

 - Too many self-funders in care homes receive a raw deal from providers. While they no longer subsidise local authority-funded residents, they are insufficiently protected by the financial regulators. They have no control over future fee increases, and the margins on the ‘hotel’ element of their care that they are required to pay may be as high as 50% or more.

 - Apart from some carers managed by the best care companies, most live-in carers have only basic qualifications and training.

 - Proposals such as raising public care budgets, raising the asset qualification, or making social care free to all will not work on their own. They do not change the fact that the care system itself is dysfunctional, full of perverse incentives, and badly undercapitalised.

 - Meanwhile, families are unwilling to save for something that only one in three will need. And insurance is not viable while the ‘long-tail’ (risk that some individuals may need many years of expensive care) remains.

 - To bring about effective change for the long term, policymakers must find solutions to the structural, incentive and supply problems in the system. 

The solutions

If we want to address the deficiencies in long term care provision, avoid future crises and ensure equitable care for all, we need to accept the following realities and steps:

 - Huge new investment in care homes is needed. This is unlikely to come from public budgets. Therefore, we propose a new mechanism to bring in long term investors, helping create better-quality, better-value partnerships in more up-to-date facilities.

 - Future sustainability and pressures on public funding, now greatly exacerbated by the Covid-19 pandemic, require new ways of enabling those individuals and families who can make greater provision themselves to do so. This could involve insurance or personal care savings accounts and other options.

 - To make insurance viable and affordable to the many, the state should pick up the ‘long-tail’ costs of those needing many years of care. Involving insurers would also put pressure on providers to restructure and deliver better value for money.

 - Older people enjoy a number of dedicated benefits, some starting even before they reach pensionable age. Making public care budgets sustainable will mean older but wealthier people making more of a contribution to their own generation’s care costs.

 - Public funding and long term care budgets should give much higher priority to younger adults with physical disabilities, mental health or learning problems, whose needs have long been under-resourced.

 - Local authority-funded care at home focuses on price, not quality. It should instead embrace new providers who have developed better delivery technologies, integration with healthcare, and training and recruitment of carers.

 - A more rational and affordable care system will involve disrupting the market, but will deliver better supply, sustainability and fairness in a more functional system. Without a radical overhaul of provision, increases in public funding will not avoid future crises.

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