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Topics discuss the main drivers of the need for funding of social care, including residential care, in older life, and touch on some of the difficulties of measuring and projecting these costs. Topics include a brief look at the UK’s current efforts to implement the Dilnot recommendations and efforts to reform LTC funding in France..
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Long Term Care – Is PrivateInsurance Possible?
Laurence Kleerekoper17 October 2013
Agenda topics
Who needs long term care insurance anyway?
Public expectations of the stateUK’s current efforts to implement
the Dilnot recommendations.Funding solutions in other
countries
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Ageing Population in the UK
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UK Population aged under 16 and 65 and over
18
16
14
12
10
8
6
4
2
0
Projections
Under 16
65 and over
1971 1981 1991 2001 2011 2021 2031
Source: ONS, Measuring National well-being, Social Trends 42 – population, January 2012
Millions
Ageing Population in the World
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Elderly (aged 60 and over), as a percentage of the population in 2010 and 2040
South Africa
India
Indonesia
Mexico
Brazil
U.S.
Australia
Russia
U.K.
China
France
Canada
South Korea
Germany
Italy
Japan
12.1%
15.4%
20.9%
21.7%
22.6%
26.0%
27.3%
28.4%
28.8%
29.1%
30.4%
31.0%
38.7%
39.0%
30.4%
42.9%
2040
2010
Source: UN Population Division, World Population, 2011
ONS projections
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Source: ONS 2010-based Period and Cohort LifeExpectancy tables
Period and Cohort expectation of life at birth, 1985-2035, UK
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
2021
2024
2027
2030
2033
60
65
70
75
80
85
90
95
100
Chart Title
Males- CohortMales - PeriodFemales - CohortFemales - Period
Age
Is LTC an insurable risk at all?
Is needing LTC a risk or a stage of life?
Is LTC risk sufficiently well defined?Can we assess the risk of a group
needing LTC?
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How would you find a premium?
Build a multi-state model, like a disability model◦prevalence rates◦transition rates
Build an inception/annuity model◦inception rates◦annuity rates
how much is paid? how long is it paid for?
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Assessing the risk
The occurrence riskDependency duration riskCost of care risk
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The occurrence risk
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50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 900%
10%
20%
30%
40%
50%
60%
2 ADLs3ADLs4ADLs
Source: ELSA Wave 4 data
Prevalence of males failing activities of daily living (out of 6) in the UK population
Age
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What does care cost?Private nursing home care costs
£736 per weekPrivate sector residential care
costs £522 per weekLocal authority residential care
costs* £1,007 per week
10
Source: PSSRU Unit Costs of Care 2012
* Not directly comparable to the private sector costs which are derived differently.
How long do people need care?
It’s called long term care for a reason
But actually the greatest cost arrives over a short period
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Source: PSSRU discussion paper 1675 August 2000
Month
0 3 6 9 12 15 18 21 24 27 30 33 36 390%
20%
40%
60%
80%
100%
120%
Percent surviving out of new entrants to residen-
tial care
Who is affected?
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Figure 1: Numbers of local authority-supported and privately funded older people (65+) and younger
people (18-64) receiving domiciliary and residential care.
Increasing dependencyPeople aged 65 and over who need
at least daily assistance from another person will rise from
1.0 million in 2010(11% of the population)
to1.9 million in 2030
(14% of the population)
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Source: Ready for Ageing?, House of Lords Select Committee on Public Service and Demographic Change, Page 58, see footnote 258
When is state benefit paid?Typically, when are care services
delivered?
In the dependent person’s homeOR
In a residential OR a nursing home
Who determines when they need care?What level of care qualifies for a
payment from the state?Local authority has a four point scale:
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Local Authority Eligibility Criteria
Source: DOH Minimum National Threshold Discussion Document – June 201315
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Banding 2013 Number of Local Authorities
Critical 3
Substantial 130
Moderate 16
Low 3
Activities of Daily LivingActivity Description Washing being able to wash and bath unaided,
including getting into and out of the bath or shower;
Dressing being able to put on, take off, secure and unfasten all necessary items of clothing;
Moving being able to move from room to room;
Transferring being able to get on or off the WC, in and out of bed etc;
Feeding being able to eat food unaided;
Continence being able to control bowel or bladder functions.
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Current System in the UK
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£0
£14,250
£23,250
Income except £22 pw personal expenses allowance
Income except £22pw. 20% of assets over £14,250
Income and assets as necessary
Individual contribution
Assets (including house for residential care)
State pays
Nothing
Remaining costs (up to local authority rate)
Remaining costs (up to local authority rate)
What’s taken us so long?
‘I don’t want [our children] brought up in a country where the only way pensioners can get long-term care is by selling their home.’ (Tony Blair, addressing Labour Party Conference) 1997
http://www.kingsfund.org.uk/sites/files/kf/field/field_publication_summary/social-care-funding-paper-may13.pdf
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Good intentions 1999 – Sutherland report “With respect to old
age” 2002 – Wanless review of NHS spending 2005 – Green paper “Independence, Wellbeing
and Choice” 2005 – Wanless review of future social care
funding 2009 – Green paper “Shaping the future of care
together” 2010 – White paper “Building the National Care
Service” 2011 – Dilnot Commission report “Fairer Care
Funding” 2012 – White paper “Caring for our future”,
Progress report on Funding Reform and draft “Care and Support Bill”
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Lifetime cost of care (UK)
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Expected future lifetime cost of care for people aged 65 in 2009/10, by percentile (2009/10 prices)
Source: Dilnot Report 2011 - The Report of the Commission on Funding of Care and Support
Source: ESHCRU/PSSRU microsimulation model
£250k
£300k
£200k
£150k
£100k
£0k
£50k
100%80%60%40%20%0%
Main Dilnot recommendations
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Lifetime care costs capped at between £25,000 and £50,000
The upper asset limit increased from £23,250 to £100,000
Contribution to daily living costs in residential care of £7,000 to £10,000 p.a.
Deferred payment (no-one need sell their family home to buy into a residential care home)
National standard eligibility criteria for care provision by the local authority
Impact of capped cost model
The current system meansthat some people ofmoderate wealth can endup using over 80% of theirassets paying for care
A cap limits the amountthat they could lose
The lower the cap, thegreater the level ofprotection
Source: Department of Health analysis
Currentsystem
£25k
£50k
£75k
£100k
0%
20%
40%
60%
80%
100%
£0k £100k £200k £300k £400k £500k
Assets on going into care
Indic
ati
ve a
sset
deple
tion
The capped cost illustration
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Illustration of how much people with modest wealth in residential care might pay now and after DOH reforms have been implemented
An older person's contribution to care costs before reaching the cap
Initial Assets Contribution Amount Percent
Current£72,000
cap Current£72,000
cap
£250,000 £177,000 £72,000 71% 29%
£200,000 £173,000 £72,000 87% 36%
£150,000 £127,000 £67,000 85% 45%
£100,000 £79,000 £45,000 79% 45%
£70,000 £50,000 £30,000 71% 43%
£50,000 £31,000 £17,000 62% 34%
£40,000 £21,000 £12,000 53% 30%
£17,000 or less £0 £0 0% 0%
Source: DOH Consultation document – Caring for our future - 2013
The new deal – Dilnot lite?
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From April 2016, The upper asset limit increases to
£118,000Lifetime care costs capped at
£72,000Contribution to daily living costs
in residential care of £12,000 p.a.Deferred payment agreements
(no-one need sell their family home to buy into a residential care home)
Private sector options
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How can individuals plan to meet the shortfall between state funding and the true cost of their care?◦Equity release schemes◦Immediate needs annuities◦Disability linked annuities◦Personal care savings bonds◦Other pre-funded options?
Housing wealth in the UK
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Source: acadametrics House Price Index
France – Social partnershipAllocation Personnalisee
d’Autonomie (APA)More than 1 million people have
received APA benefit each year since 2006 (in 2009 61% at home, 39% in residential care)
In parallel with a private insurance market (around 3 million policyholders)
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France – Social partnershipNeed is measured by 6-point AGGIR
scale15 items in the ADL list, which
simplify to 6 GIR groupsPaid to all over 60 in GIR 1 to 4, but
co-payment for all but the lowest income groups
Unlike USA, income from private LTC policies is not taken into account
Average APA benefit was around €400 per month after co-payment
Cost of residential care in France averages around €2,500 per month
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France – the case for reform
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Source: Financing long-term care for frail elderly in France: The ghost reformHealth Policy Journal (2013)
In blue (left bar for each year): total expenditure. In green (right bar for each year): state participation.
Trends in the APA and central government's share since 2002
The whole story?Who gets the benefit?Who pays?
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Discussion
Thank you for listening
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