Analysing the costs and benefits of social care funding arrangments in England: technical report (PSSRU Discussion Paper 2644)

The funding of long-term care is highly complex and involves a range of different funding sources and funding organisations. It is quite common for a person's care needs to be simultaneously supported by funds from local councils, the benefits system, and their own income and savings. At present, public financial support is mostly subject to a detailed and complicated financial means-test, that assesses in depth applicants own financial situation. Once broad eligibility for financial support is determined, the amount of funding support that a person receives depends largely on the intensity and cost of the support they are assessed as needing. The latter is established after a detailed needs assessment. Moreover, the type of care that a person uses also affects the nature and level of funding support. There are at present, for example, separate funding rules for residential and non-residential care. The upshot is that overall older people end up paying a significant proportion – around a half – of total expenditure on social care out of pocket.

Funding social care services is likely to become more difficult in to the future. Underlying demand for care is set to rise significantly as a result of the ageing population and trends in chronic diseases. The price per unit of care service has been and is likely to continue to rise faster than general inflation. Although there is perhaps scope to improve the use of resources, the pressure to find more money looks to be significant. These resources will need to be raised from public funds, from the pockets of individuals and their families, or from both.

A number of high profile reports have argued the case for reform of the current funding system, including the King's Fund Wanless Social Care Review (Wanless et al., 2006) and an Inquiry by the Joseph Rowntree Foundation (Josepth Rowntree Foundation, 2006). These reports promoted a commitment by Government to produce a Green Paper to investigate these issues.

This report outlines the analytical work that was commissioned by the Department of Health to feed into the development of a Green Paper. It describes the methods and assumptions underlying the model used for analysing long-term funding systems. The paper gives details of potential and actual users of care, their levels of need, and their income and assets. It details the system of support available, the current funding arrangements and benefits system. The report looks at costs and to the degree to which population need is being met. It concludes with an assessment of the current system.