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![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/soci
al-care-funding-paper-may13.pdf
Center One Resources
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Long term care - is private insurance possible in the UK?
- 1. Long Term Care– Is Private Insurance Possible? Laurence Kleerekoper 17 October 2013
- 2. Agenda topics Who needslong term care insurance anyway? Public expectations of the state UK’s current efforts to implement the Dilnot recommendations. Funding solutions in other countries Center One Resources 2
- 3. Ageing Population inthe UK UK Population aged under 16 and 65 and over Millions 18 Projections 16 14 Under 16 12 10 8 65 and over 6 4 2 0 1971 1981 1991 2001 2011 2021 2031 Source: ONS, Measuring National well-being, Social Trends 42 – population, January 2012 Center One Resources 3
- 4. Ageing Population inthe World Elderly (aged 60 and over), as a percentage of the population in 2010 and 2040 South Africa India Indonesia Mexico Brazil U.S. Australia 12.1% 15.4% 20.9% 21.7% 2010 22.6% 26.0% 2040 27.3% Russia 28.4% U.K. 28.8% China 29.1% France Canada 30.4% 31.0% South Korea 38.7% Germany 39.0% Italy Japan 30.4% 42.9% Source: UN Population Division, World Population, 2011 Center One Resources 4
- 5. ONS projections Period andCohort expectation of life at birth, 1985-2035, UK Chart Title 100 95 90 Age 85 Males- Cohort 80 Males - Period 75 Females - Cohort 70 Females - Period 65 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 60 Source: ONS 2010-based Period and Cohort Life Expectancy tables Center One Resources 5
- 6. Is LTC aninsurable 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? Center One Resources 6
- 7. How would youfind 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? Center One Resources 7
- 8. Assessing the risk Theoccurrence risk Dependency duration risk Cost of care risk Center One Resources 8
- 9. The occurrence risk Prevalenceof males failing activities of daily living (out of 6) in the UK population 60% 50% 40% 2 ADLs 30% 3ADLs 4ADLs 20% 10% 0% 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 Age Source: ELSA Wave 4 data Center One Resources 9
- 10. What does carecost? Private nursing home care costs £736 per week Private sector residential care costs £522 per week Local authority residential care costs* £1,007 per week * Not directly comparable to the private sector costs which are derived differently. Source: PSSRU Unit Costs of Care 2012 Center One Resources 10
- 11. How long dopeople need care? It’s called long term care for a reason But actually the greatest cost arrives over a short period Percent surviving out of new entrants to residential care 120% 100% 80% 60% 40% 20% 0% 0 3 6 9 12 15 18 21 24 27 30 33 36 39 Month Source: PSSRU discussion paper 1675 August 2000 Center One Resources 11
- 12. Who is affected? Figure1: Numbers of local authority-supported and privately funded older people (65+) and younger people (18-64) receiving domiciliary and residential care. Center One Resources 12
- 13. Increasing dependency People aged65 and over who need at least daily assistance from another person will rise from 1.0 million in 2010 (11% of the population) to 1.9 million in 2030 (14% of the population) Source: Ready for Ageing?, House of Lords Select Committee on Public Service and Demographic Change, Page 58, see footnote 258 Center One Resources 13
- 14. When is statebenefit paid? Typically, when are care services delivered? In the dependent person’s home OR 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: Center One Resources 14
- 15. Local Authority EligibilityCriteria Banding 2013 Critical Number of Local Authorities 3 Substantial 130 Moderate 16 Low 3 Source: DOH Minimum National Threshold Discussion Document – June 2013 Center One Resources 15
- 16. Activities of DailyLiving Activity Washing Dressing Moving Description being able to wash and bath unaided, including getting into and out of the bath or shower; being able to put on, take off, secure and unfasten all necessary items of clothing; being able to move from room to room; Transferring being able to get on or off the WC, in and out of bed etc; being able to eat food unaided; Feeding Continence being able to control bowel or bladder functions. Center One Resources 16
- 17. Current System inthe UK Assets (including house for residential care) Individual contribution State pays Income and assets as necessary Nothing Income except £22pw. 20% of assets over £14,250 Income except £22 pw personal expenses allowance Remaining costs (up to local authority rate) £23,250 £14,250 £0 Remaining costs (up to local authority rate) Center One Resources 17
- 18. What’s taken usso 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/soci al-care-funding-paper-may13.pdf Center One Resources 18
- 19. 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 Center One Resources 19 report on Funding Reform and draft “Care and Support
- 20. Lifetime cost ofcare (UK) £300k Expected future lifetime cost of care for people aged 65 in 2009/10, by percentile (2009/10 prices) £250k £200k £150k £100k £50k £0k 0% 20% 40% 60% 80% 100% Source: ESHCRU/PSSRU microsimulation model Source: Dilnot Report 2011 - The Report of the Commission on Funding of Care and Support Center One Resources 20
- 21. Main Dilnot recommendations Lifetime carecosts 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 Center One Resources 21
- 22. Impact of cappedcost model 100% Indicative asset depletion 80% 60% 40% The current system means that some people of moderate wealth can end up using over 80% of their assets paying for care Current system £100k A cap limits the amount that they could lose £75k The lower the cap, the greater the level of protection £50k 20% £25k 0% £0k £100k £200k £300k Assets on going into care Source: Department of Health analysis £400k £500k
- 23. The capped costillustration 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 Current Percent £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% £0 £0 0% 0% £17,000 or less Source: DOH Consultation document – Caring for our future 2013 Center One Resources 23
- 24. The new deal– Dilnot lite? From April 2016, The upper asset limit increases to £118,000 Lifetime care costs capped at £72,000 Contribution to daily living costs in residential care of £12,000 p.a. Deferred payment agreements (noone need sell their family home to buy into a residential care home) Center One Resources 24
- 25. Private sector options Howcan 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? Center One Resources 25
- 26. Housing wealth inthe UK Source: acadametrics House Price Index Center One Resources 26
- 27. France – Socialpartnership Allocation 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) Center One Resources 27
- 28. France – Socialpartnership Need is measured by 6-point AGGIR scale 15 items in the ADL list, which simplify to 6 GIR groups Paid to all over 60 in GIR 1 to 4, but copayment 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 Center One Resources 28
- 29. France – thecase for reform Trends in the APA and central government's share since 2002 In blue (left bar for each year): total expenditure. In green (right bar for each year): state participation. Source: Financing long-term care for frail elderly in France: The Health Policy Journal (2013) Center One Resources 29
- 30. The whole story? Whogets the benefit? Who pays? Center One Resources 30
- 31. Discussion Thank you forlistening Center One Resources 31