Funding social care: the role of deferred payment agreements
The social care system faces a crisis. Over a million people have unmet care needs, a risk against which individuals can’t currently insure. The Government put £2 billion towards social care in the budget – but short term measures should not be limited to handing out more local authority grants. The Government must also tap into the housing wealth of people going into care homes.
One possible way to achieve this is through the provision of deferred payment agreements (DPAs). This arrangement allows a care user to defer their residential care fees until they pass away or sell their home. The council then recoups this cost through a claim on the participant’s housing equity.
Local authorities have voluntarily provided these products for years, but since implementation of the Care Act 2014, England’s councils have been required to offer DPAs to people with non-housing assets of less than £23,250 and no dependents living in their home.
Despite the regulatory change, uptake of deferred payments has remained low. NHS Digital data suggest that in 2015-16 only 3,600 DPAs were taken out – close to the amount issued before the ‘universal’ deferred payment scheme was implemented. A lack of awareness among users is undoubtedly a part of the story. However, in a new analysis of the English Longitudinal Survey of Ageing, Reform finds that constrained eligibility is the main reason for low uptake, with only 45 per cent of elderly self-funders able to take out a DPA.
In this context, why not expand eligibility? The concern with such a move is that it would extend support to people who can afford to pay for care entirely from their savings. Before the universal deferred payment scheme was introduced, the then Minister of State for Care and Support, Norman Lamb MP, argued that individuals with savings of more than £23,250 were “quite wealthy” and should be expected to run down their accumulated assets to pay for care.
Contrary to these concerns, Reform finds that elderly individuals with non-housing assets of up to £100,000 are still very vulnerable. This group is poorer than the general over-75 population in terms of income, is in risk of severe asset depletion if they incur residential care costs, and is generally unable to fund the average cost of care (£76,300) through their savings. Extending DPA eligibility would give these individuals greater choice in how they pay for care.
Reform’s analysis indicates that raising the means test to £100,000 would increase eligibility from 45.0 per cent to 62.6 per cent of self-funders. Implementing this policy may put pressure on local authority budgets for the first few years, but it would also be cost-neutral in the medium run, as councils eventually recover these loans.
This measure alone will not be sufficient to answer the challenge of how to pay for the social care of an ageing population. But fundamental reform of the funding system– which is now currently under consideration from the Government – could take years to implement. In the interim, ministers would do well to unlock the considerable housing wealth held by many going into residential care.