Reflecting on Dilnot

Guest blog post from Oliver O'Connor, Independent health finance consultant and former Special Adviser to the Irish Minister for Health

One of the most dangerous things for public confidence is the fear of a spiral of loss of control. Even the fear of it, before the reality. Thus, a debt spiral is frightening, as is an inflation spiral, as is a tax spiral (or its corollary, a public spending spiral). No-one likes higher debt, higher inflation or higher taxes, but they can be managed, where there is a clear sense of control by a floor or a cap. “We’ll fall, but only this far.” “Alright, so.”

It’s an interesting way to look at the big, macro issues of confidence in the economy or the state of the Eurozone.

But it’s relevant for another area that’s been in the news in 2011, and will be again in 2012: the funding of social care.

July saw the publication of the Dilnot Report of the Commission on Funding of Care and Support, chaired by Andrew Dilnot, with Lord Norman Warner and Dame Jo Williams. It provides a succinct, intelligent suggestion for reform of a social care system that has been in place, since 1948.

The fear of a downward spiral and loss of control can be very personal in relation to social care: both for the person needing care and their families wanting to offer support. There is anxiety and fear of a loss of control in relation to one’s medical condition. There is anxiety in relation to care standards. There is anxiety about a loss of control and a downward spiral in relation to family finance – for both an elderly relative and supporting adult children.

Medical science and practice continues to advance to manage the first. The focus is never quite off care quality standards, especially where they fail. By and large, it’s known what has to be done, it’s just a matter of doing it. The problem there is not structural.

It’s hard to argue that in relation to financing. As Dilnot pointed out, the risk of a catastrophic descent in savings and income and of stress on adult family members still remains within the system of financing adult social care in England and Wales, a system that shares the cost between State and individuals. People are attached to their independence, their houses, their income, their life patterns, their communities. All these can be lost.

This makes adult social care more sensitive than, say, the actuarial debate about the adequacy of pensions provision. It actually affects fewer people for sure, but for those it does, it may well cause much greater fear and anxiety than pension provision, because of the spiraling factor. Indeed, none of us know whether we will be among the one in twenty (or fewer) who will need residential care sometime when we are over 65. A lot more than that 5% of over 65 year olds rightly worry about long term care; and their grown up children may well do so too.

This is the sort of structural problem that many politicians would like to address. A problem waiting for solution since 1948. As Dilnot said, “the only major area in which everyone faces significant financial risk, but no one is able to protect themselves against it.”

But then, it’s often the case that the sensitivities of this type of issue lead politicians to tread very carefully. Disturbing even a flawed system can sometimes be worse.

However, the Report said, “We have consulted widely throughout our work and believe there is now consensus that fundamental reform is urgently needed.”

One of the most sensitive issues is how to structure the individual’s contribution to cost and in particular, how to take account of wealth embedded in housing assets. The present system already, and not just implicitly, requires an individual to draw down their housing asset wealth to pay for care.

A White Paper is due from the Government in 2012, taking up the challenge set out by Dilnot and earlier reports.

However the balance is struck between State and individuals’ costs of care, it is important to address fears of the downward spiral directly in seeking public understanding for, and confidence in, any changes. The Dilnot Commission suggested an explicit monetary cap on an individual’s contribution of £35,000. There are clearly a lot of elements that go to make up such a one-figure cap.

I was part of the work in Ireland to design a new scheme for shared financing of the cost of nursing home care (not all social care) between the State and individual. While it is still early days – implementation began in 2009 after four years policy work – and it’s not without teething problems, one of the most important points of departure we took from early on was to design it in terms of promises to individuals that clearly addressed some of the major fear factors. We called it the ‘Fair Deal’ scheme. At the time of launch, the Government and Minister for Health, Mary Harney, explicitly said to individuals:

– Under this scheme, you will have to make a contribution to the cost of care
– Everyone will make a contribution according to their income and assets
– However, you will not be forced to sell your house
– You will not be forced to mortgage your house
– Your adult children will not have to pay for your care
– You will not have to contribute any more cash income than you actually have
– Your cash contribution will not exceed 80% of your disposable income
– You will have choice of how you pay for portion of your contribution based on your housing asset
– That portion will not exceed 15% of the value of your home

Basically, it provides a cash contribution plus an optionally-deferred amount of 5% of house value for a maximum of three years.

There are plenty of technical details of course and there was even a need to introduce new mental capacity legislation to allow for a charge on the estate for deferred contributions.

Every country has to make is own arrangements or change them, as appropriate for each one’s circumstances. A solution in one country may or may not work in another. There are often important cultural and technical differences.

But a key part to building public confidence on social care reform in any country is to set out explicitly what are the fundamental commitments from the State to the individual, and vice versa, in a way that explicitly addresses anxieties and fears. And put in a language that everyone can understand, while backed up with technical policy and actuarial work.

This is the approach of ‘start as you mean to finish’. What do you want to come out of the complex policy formulation process?

It’s one way that understandable anxiety about disturbing– or better, reforming – flawed systems can also be lessened.

In this way also, the Dilnot Commission’s claim about a consensus for urgent fundamental reform could be proven true, and made real. And sooner rather than later.

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