New Long-Term Care Reforms Due To Be Announced

Posted on: 15 July 2009 by Gareth Hargreaves

A shake-up of long-term care could result in a fairer system for people who need to enter nursing homes according to David Budworth.

Having to sell the home of elderly parents or relatives to pay for their long-term care is a big worry for many families. However, under government proposals expected this month, tens of thousands of families could be saved this trauma each year.

A Green Paper discussion document is to suggest a range of measures that would let pensioners hang on to their properties when they need care in a nursing home. Options mooted include a one-off payment at retirement or death, or compulsory insurance paid throughout a career.

Phil Hope, the social care minister, says: “This is a really important opportunity to reshape the care system. We know the system is complex, that it is unfair, that you get different services in different parts of the country and that the funding is unfair — that someone who has worked hard all his or her life and bought a house has to sell it if he or she needs to go into a care home.”

Questions are already being raised, however, about whether the reforms will be the panacea that many people desire. Alex Edmans, of Saga’s care funding service, says: “I think that many people would be resistant to the idea of paying a lump sum at retirement. Care is a big issue, but only one in four people ends up having to move into a nursing home. It would probably have to be compulsory for it to work, which would create a lot of resentment. And I don’t see how local authorities would be able to fund a scheme that allowed people to delay a payment until death.”

Nor is a compulsory insurance scheme likely to go down well with voters who already expect to pay higher taxes after the next election.

What is not in doubt is that an overhaul of the rules is long overdue. Every year tens of thousands of older people are forced to sell their homes to fund long-term care. The costs can be high: the average care home charges about £25,000 a year, while fees at a typical nursing home are £35,100 a year, according to Saga.

Many pensioners expect the NHS to pick up the bill, but any help is means-tested and, in most cases, the test includes the value of any home. The local authority can insist that a property be sold to meet the bills, even if the person going into a home has only limited savings.

Michelle Mitchell, of Age Concern and Help the Aged, says: “Unless we act now the care system will crumble even further as our society ages. We need a fairer way to pay for care, but we also need to make sure that care is of better quality and more widely available, for rich and poor alike.”

In England and Northern Ireland, everybody receives some help towards nursing care, which is defined as care carried out by a registered NHS nurse. But anyone with assets of more than £23,000 has to pay all accommodation and personal costs, such as help with washing, cooking and meals. Where the assets are worth less than £14,000, the local authority meets most care expenses. People with assets of between £14,000 and £23,000 get some help towards the cost of their personal care. A different system applies in Wales, where anyone with assets in excess of £22,000 must pay all accommodation and personal costs, though everyone who needs it receives some help towards nursing care.

In Scotland everyone is entitled to some money for nursing and personal costs, but if the personal assets exceed £22,500, the older person must pay all the accommodation costs.

Even if the Government’s proposals win support, any reforms are likely to be some way off. But there are already measures that you can take to cut your nursing home bill.

Home Exemption

When assessing care needs, councils must disregard your home if your spouse or civil partner is still living there, a relative aged 60 or over still occupies the property, a disabled relative under 60 lives there, it is the main home of a child under 16 or if you are in care temporarily. The council can also decide to ignore property if it is occupied by someone who gave up his or her own home to be a carer. If none of these applies, the property that was your main home must be disregarded for the first 12 weeks of care.

Families that cannot sell within that 12-week period can take out a loan from the council to cover the fees until the sale goes through. However, the council may not be willing to lend enough to cover the full bill.

Local councils are not, by law, allowed to charge interest on care-fee debts while the person is alive. However, they can start charging interest 56 days after he or she has died.

Investment Bonds

Savings in an investment bond sold by a life insurance company are usually exempt from the means test, but any income from the bonds is not.

However, you must not appear to have taken out a bond to avoid nursing home fees. If you do take out a bond shortly before going into care, it will almost certainly be included in the means test.

The bonds can also have high charges and the underlying investments have often performed poorly.

Discretionary Trusts

An established route to exclude your home from a long-term care assessment is to put it in trust. Capital held in a trust will typically not be taken into account, and the council cannot make a claim on it, although income paid out by a trust is included.

A life-interest or discretionary trust tends to be used for this arrangement, but the legal and tax consequences are complex and constantly changing. It pays to take expert advice.

As with investment bonds, you would need to put your home into trust long before you go into care to avoid being challenged by the Revenue. Nor should there be any indication that you have set up the scheme to cut your care bill.

Compensation Awards

Income and capital from a wide range of compensation payments are exempt from the means test. These include payments made as a result of personal injury or accident.

Care Insurance

Long-term care insurance is only offered by Partnership Assurance and can be very expensive as a result. Chris Horlick, of Partnership Assurance, says: “Pre-funded long-term care insurance failed to take off because people don’t want to pay for cover that they may never need.”

Care Annuities

More popular are immediate-needs annuities, which are also called care-fee annuities. You buy these when you require care. In exchange for a lump sum, the annuity guarantees to meet all, or some, of your long-term care needs for the rest of your life.

The average cost of a long-term care annuity is usually four or five times the cost of annual care. The average fee is £80,000, according to Partnership Assurance, one of the biggest companies involved in selling care-fee annuities, alongside AXA PPP.

Janet Davies, of Symponia, the care fees specialist, says: “The downside of these schemes is that the investment can be lost if you die soon after the annuity is set up. However, capital protection can be included to cover situations where the elderly person dies shortly after buying the annuity.”

Your View

Older people in England could be asked to take out insurance to pay for long-term care in their old age. Is this a good idea?

The idea one of a number of options expected to be proposed by ministers in a green paper due on Tuesday on reform of funding of residential and home-based social care.

Under the present English system anyone with a home or savings of £23,500 or more is not given state funding for a care home, or help from social services.

This often means they are forced to sell the family home to pay for care. The Tories, who intend to draw up their own care plans, said ministers had "broken promises" on the issue.

Have you or your family faced any difficulties paying for long-term care? Have you had to sell your house or use your savings to pay for it? Would you agree to take care insurance?

Let us know by discussing this subject in the 50connect forums.

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