A Stable Footing for Long Term Care

Dr Eamonn Butler & Paul Saper FCA

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A Stable Footing For Long Term Care proposes a number of solutions including a Dilnot Mark II approach to meeting surging demand in social care. The approach outlined is easier to understand, less administratively burdensome and more likely to kick start the development of new insurance products. The paper offers a new source of funding to replace the obsolete stock in our care homes and enhance the care of our ageing population; it tackles head on as well who should pay for all this; and it calls out the existing mess in our home care provision where commissioners often do not have the knowledge of what they are buying with public money.

Written by Dr Eamonn Butler (Director of the Adam Smith Institute) and Paul Saper (Director of LCS International Consulting) the paper draws on decades of experience in the policy and commercial consulting space.


  • Although the existence of the future funding crisis in adult social care is widely acknowledged, its scale is greatly underestimated. Factors in supply and trends in demand both fuel this crisis.
  • On the demand side, the demographic trends are understood. But care budgets cover not only the needs of the elderly; they also the needs of younger people with physical and intellectual disabilities, whose numbers are increasing.
  • More women participate in the economy, making it harder for them to care for relatives. Many family carers are themselves elderly and limited in what they can do. And families are more dispersed, with fewer people living near their elderly relatives. Meanwhile, inefficiencies and perverse incentives force more people with social care needs onto the NHS, leading to unsustainable budget pressures.
  • On the supply side, it is difficult to induce people to save for something that only one in four of them will need. And insurers are unwilling to step in because of the ‘long-tail’ risk that some individuals may need many years of expensive care.
  • The system is a lottery and widely perceived as unfair. The old mechanism by which self-pay residents subsidised public provision is, increasingly, no longer working.
  • Care at home often flouts employment and wage legislation, and many of those hired as live-in carers have low skills and few qualifications, risking poor quality care. A crackdown on this seems inevitable, meaning that other care options will have to be provided
  • Nearly all care homes with local authority-funded residents are at least 20-25 years old and no longer up to standard. We need a new mechanism to encourage pension funds, insurers and other long-term investors to invest in this segment of the market. If this were combined with efficient management delivered by independent for-profit or non-profit providers, chosen by the investing institutions and the local authorities, the latter would have access to lower-cost and better-quality provision than is currently available and allow them to phase out obsolete stock.
  • We recommend that government creates the conditions for a long-term care in- surance market by the state agreeing to pick up the long-tail costs of those who insure themselves after, say, six years. This would make insurance products viable and affordable so that individuals would be able to pool their risks and insure themselves, just as they do in other areas of life. Moreover, bringing in the insurance sector would bring more order into the market, as the insurers would be responsible for meeting the costs.
  • At present, care at home is contracted on the basis of hours or number of inputs, with the focus on price rather than outcomes, and with no encouragement to integrate health and social care. This cannot continue in its present state and local authorities should look in future to contract with the new providers (who are waiting to come to the UK) who have developed technology platforms and more sophisticated caregiver recruitment, along with training plans that are the stuff of transformational change. Developing insurance products for long term care will also be a catalyst for network building and increased use of technology in this sector. We foresee that commissioners, who currently know what they are getting elsewhere in terms of quality standards, will want the same level of knowledge for the home care sector.
  • Older people enjoy a number of benefits, from free TV licences and Winter Fuel Payments, to lower rates of National Insurance before they reach pensionable age. These, and the pensions Triple Lock, should be reviewed, and the Personal Income Tax Allowance adjusted, so that older but wealthier people make more of a contribution to their generation’s care costs.
  • A more rational and affordable care system will involve disrupting the market, but deliver greater supply, sustainability and fairness. Tinkering with the present system will not solve the looming crisis. What we need are new partnerships in a new market.
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