Cost of ‘cap and floor’ model

Ahead of the 2017 general election, the Conservative Party manifesto proposed three major changes to the approach to means testing under the current system:

  • raising the means test to a single floor of £100,000, thereby abolishing tariff income and ensuring that users always retained at least £100,000 in assets
  • including the value of a user’s own home within the means test for those in both residential and domiciliary care: currently, the home is included in the means test for residential care only, not domiciliary care
  • introducing a cap on the lifetime costs of care, although the level of the cap was not specified.

The additional cost would in part be paid for by introducing means testing for the winter fuel allowance.

We estimate that the introduction of the cap and floor model would cost an additional £3.2bn in 2015/16. In addition, we estimate that while the number of people provided with publicly funded domiciliary care falls, this fall will be less than the increase in the number of people receiving publicly funded residential care. The remainder of this chapter explains how we arrive at this figure.

Number of eligible people

Although these changes would affect all adults, the majority of people aged 18–64 who need care do not have significant assets or savings, so qualify for publicly funded care under the current system. Changes have therefore been modelled for people aged 65 and over, and estimates have been made of the cost of providing these additional services.

An estimated £7.7bn was spent providing services to people aged 65 and over in 2015/16 (Table 1). Of this, £2.7bn was spent on domiciliary care for 248,385 people, including people with a direct payment at an average annual cost of £10,898 per user. And £3.4bn was spent on residential care for 156,840 people, at an average annual cost of £21,664 per user. The remaining £1.5bn was used to cover the cost of other activities including commissioning services, and providing means and eligibility assessments.

Table 2: Estimates of activity and costs of social care in 2015 for people aged 65 and over, 2018/19 prices

People

Direct payment users

43,055

Domiciliary care 

Publicly funded

205,330

Privately funded

100,746

Care home residents 

Publicly funded

156,840

Privately funded

149,671

Expenditure on older people’s publicly funded social care

Total net spend

Domiciliary care

£2.7bn (£10,898 average per person)

Residential care

£3.4bn (£21,664 average per person)

Assessment and other

£1.5bn

Total

£7.7bn

Note: PSSRU numbers for publicly funded adult social care are lower than activity numbers of 873,000 that are quoted by NHS Digital for 2015/16, which is for all adults. In addition, PSSRU uses the number of individual social care users on a specific day (the last day of the financial year), while NHS Digital refers to the number of individual users over the course of the whole year.

Estimating the number of people eligible for publicly funded social care

To estimate the total number of people eligible for publicly funded social care in England, we used data from the English Longitudinal Study of Ageing (ELSA). This contains information on financial and estimated housing assets of the older population, as well as information on need for social care. We used the ELSA records of activities of daily living (ADLs) to estimate social care need. If respondents reported to be struggling with two or more ADLs then we include them as having a need for social care.

We then separated people into one of 10 groups based on their assets, each of which are affected differently by this cap and floor approach. These groups and their numbers for 2015/16 are recorded in Table 3. As no value for the cap was proposed in the Conservative Party’s manifesto, £75,000 has been used as a close approximation to the figure included in the Care Act 2014. The total amount paid by councils will also depend on an individual’s income. For estimates in this report, we apply the same assumption used by the 2013 impact assessment for introducing a cap – that people will still be required to pay a contribution towards their cost of livingthat are equal to their income.

Calculating how many people use social care

In Table 3 the population has been separated into two groups, as housing assets are excluded from the means test for domiciliary care, but included for residential care.

Table 3: ELSA numbers for assets and need for social care

Assets included

Eligible, current system

Eligible, Conservative offer

% of England population (65+)

% of England population (65+) with ≥2 ADLs

Number of people (thousands) (65+) with ≥2 ADLS

Financial only

<£14,250

Publicly funded domiciliary care

N/A – under this new model, there is no circumstance where only the financial savings are considered for the means test.

51.8%

13.9%

1,402

£14,250–£23,250

Some funded domiciliary care

6.1%

1.3%

129

<£23,250

57.9%

15.2%

1,531

>£23,250

Not eligible

42.1%

6.6%

662

Total

100.0%

21.8%

2,192

Financial and housing

<£14,250

Publicly funded residential care

Publicly funded domiciliary and residential care

12.9%

5.2%

519

£14,250–£23,250

Some publicly funded residential care

Publicly funded domiciliary and residential care

1.4%

0.5%

54 

<£23,250

14.3%

5.7%

572

£23,250–£100,000

No public funding until assets fall to £23,250

Publicly funded domiciliary and residential care

18.0%

4.5%

451

<£100,000

32.3%

10.2%

1,023

£100,000–£175,000

No public funding until assets fall to £23,250

No public funding until assets fall to £100,000

23.5%

4.6%

459

>£175,000

No public funding until assets fall to £23,250

Capped privately funded social care at £75k

44.2%

7.1%

710

Total

100.0%

21.8%

2,192

By comparing the figures in Table 3 with PSSRU’s estimates for use of social care for 2015, we estimate that, of those people aged 65 and over with high need (two or more ADLs) and who are eligible for public funding, 16.2% use domiciliary care services. Of these same people, 27.4% are care home residents. For the modelling, we assumed that the remaining 56.4% do not use publicly funded services, relying instead on informal care, purchasing private services or receiving no care.

Of people aged 65 and over with high need who are not eligible for public funding, we estimate that 15.2% use privately funded domiciliary care services, 9.2% are privately funded care home residents, and 75.5% receive informal care or no care.

Table 4: Share of people 65 and over with two or more ADLs who have their needs met through official channels (PSSRU estimates)

% share

Domiciliary care

Publicly funded (including direct payment users)

16.2%

Privately funded

15.2%

Care home residents

Publicly funded

27.4%

Privately funded

9.2%

Users of domiciliary care

The single value for the asset threshold, or ‘floor’, has very different implication for users of domiciliary and residential care. Under the current system, only financial assets are considered in the means test for domiciliary care, while housing assets are included in the test for residential care. The proposal will include housing assets in the means test for both types of care, while raising the threshold significantly to £100,000.

Using ELSA, we estimate that 1.5 million people aged 65 and over have financial assets worth less than £23,250, excluding the value of their house, and need help with two or more ADLs (see Table 3). These people are currently eligible for public funding for domiciliary care. Including housing assets in the assessment and increasing the threshold to £100,000 would reduce the number of eligible people to 1 million.

Under the current system, 16.2% of people aged over 65 in need of care and eligible for public funding use domiciliary care. We assume that this ratio will remain the same, even as the number of people who are eligible changes. So, of the 1 million people who are eligible and in need of care under this model, 156,840 people would receive publicly funded domiciliary care. We estimate that the average annual cost for these people would be £10,898 per person (see Table 2), so the total cost of publicly funded domiciliary care would be £1.8bn (Table 5). This is smaller than the current estimate of £2.7bn.

Table 5: Costs of domiciliary care under the Conservative offer, 2018/19 prices

Financial and housing assets

Eligible

Number of people in need (thousands)

% use

Costs (£m)

<£14,250

Publicly funded domiciliary and residential care

519

16.2%

917

£14,250–£23,250

Publicly funded domiciliary and residential care

54 

95 

£23,250–£100,000

Publicly funded domiciliary and residential care

451

798

Total publicly funded

1,023

1,810

£100,000–£175,000

Capped privately funded social care at less than £75k

459

15.2%

442

>£175,000

Capped privately funded social care at £75k

710

189

Total cost of cap

1,169

630

Total cost

2,440

The government would, under this model, also introduce a cap on the total private cost that an individual would pay for social care over the course of their life. We have assumed this lifetime cap may be set at around £75,000. In its impact assessment, Parliament analysed a similar cap. The proportion of people whose lifetime care costs exceeded £72,000 was estimated to be 16%. In order to estimate a cap for social care costs, we assume that, at any given point in time, 16% of the population in need of social care have lifetime costs of more than £75,000.

Using ELSA, we have estimated that 710,000 people have total assets of over £175,000. On average 15.2% of these will be using domiciliary care, of which 16% will have reached lifetime costs of £75,000 or more and are now eligible for public funding. Again, this is at an estimated cost of £10,898 per year – totalling £189m.

In addition, the floor of £100,000 means that anyone with assets of between £100,000 and £175,000 will not reach the cap to costs before they reach the floor. Therefore, they would become eligible for publicly funded social care costs before they have paid up to the level of the £75,000 cap. Here we assume that social care users have assets that are uniformly distributed between £75,000 and £100,000. With this assumption, on average 42% of the social care costs for people in this group will be funded by the government (this is the uniform average between 16% and 100%). From ELSA, we estimate that there are 459,000 people in need of social care with assets between £100,000 and £175,000. Of these, 16% have already hit their cap in care costs. As this group hit the floor, 42% of costs will be publicly funded. And 15.2% of people use privately funded domiciliary care, of which the state will fund 58% (16% + 42%). This will cost an estimated £442m.

The total cost of the cap for domiciliary care is therefore £575m, meaning that the domiciliary care under the Conservative Party offer will cost £2.4bn – around £270m less than it does currently (£2.7bn).

Users of residential care

For potential residential care home users, the Conservative Party manifesto offer is much more generous. Under the current system, anyone with total assets (including housing) of less than £23,250 is eligible for publicly funded residential care; under the proposed model that limit increases to £100,000. Using ELSA, we estimate there are 572,000 people aged over 65 in need of social care who have less than £23,250 in assets including housing – there are 1 million with assets under £100,000. This almost doubles the number of people who would be eligible to receive publicly funded residential care should they need it. The costs associated with this change are depicted in the first three rows of Table 6.

Again, we assume that the proportion of people who need care and are eligible for public funding who use a care home does not change from the current rate. This is 27.4% of the relevant population, suggesting that 280,437 people would receive publicly funded residential care. At £21,664 per person, this would cost a total of £6.1bn (Table 6).

Table 6: Costs of residential care under the cap and floor option, 2018/19 prices

Financial and housing assets

Number of people in need (thousands)

% use

Costs (£m)

<£14,250

Publicly funded domiciliary and residential care

519

27.4%

3,078

£14,250–£23,250

Publicly funded domiciliary and residential care

54

320

£23,250–£100,000

Publicly funded domiciliary and residential care

451

2,678

Total publicly funded

1,023

6,075

£100,000–£175,000

Capped privately funded social care at less than £75k

459

9.2%

533

>£175,000

Capped privately funded social care at £75k

710

227

Total cost of cap

1,169

760

Total cost

 6,835

We make the same assumptions on the cost of the cap as in the case of domiciliary care: that 9.7% of people in need of social care use privately funded residential care. This leads to a total cost of the cap of £760m. Compared with the current system, which saw £3.4bn spent on residential care in 2015, the Conservative Party option would cost £6.8bn per year.

Changing the offer of publicly funded social care can lead to behavioural changes in its users. In Scotland, the introduction of FPC created unexpected levels of increased demand for domiciliary care. The Conservative Party option is generous to potential residential care users. We might therefore expect its introduction to create additional demand for publicly – and to some extent privately – funded residential care. Demand is assumed in the base case to be 27.4% of eligible people with need for publicly funded care, and 9.2% for privately funded care. So, for example, if demand for both of these services was to increase by 10% (to 19.2% and 37.4% respectively), the costs of providing residential care would increase by £2.2bn from £6.1bn to £8.3bn, while the cost of the cap would increase by £800m from £760m to £1.6bn.

The risk of increased demand for publicly funded services should be considered when evaluating options for funding social care.

All users of social care

Combining the fall in spending on domiciliary care with the increase in costs for residential care would see the total cost of public spending rise by £3.17bn, or 41%, from £7.7bn to £10.8bn (Table 7).

It is clear from this analysis that changing the size of the floor or cap would have a significant impact on the number of people eligible to receive public funding, and therefore the affordability of the social care system. Changes to this system will have implications for public finances, as well as the finances of social care users and their wellbeing and access to care. To properly understand the effects of a modified ‘cap and floor’ system, the sort of analysis performed here must be repeated in each possible case.

Table 7: Estimated change in costs from the Conservative Party offer, 2018/19 prices

Current system

Cap and floor system

Estimated change

Domiciliary care

£2.7

£2.4

-£0.3

Residential care

£3.4

£6.8

£3.4

Assessment and other

£1.5

£1.5

Total

£7.7

£10.8

£3.2

Note: ‘Assessment and other’ costs are costs associated with the financial assessment anyone must undergo if they apply for public funding. In addition, there are costs associated with care reviews and case management.


††††† Those with assets between £14,250 and £23,250 are expected to make some contribution to their care. This contribution, or ‘tariff income’, is calculated on the basis of £1 per week for every £250 of assets above the £14,250 minimum.

‡‡‡‡‡ Direct payments (which are generally not paid for long-term residential care at present) plus publicly funded domiciliary care.

§§§§§ Figures do not sum due to rounding.

¶¶¶¶¶ Figures do not sum due to rounding.

****** Under the current system we have estimated that 572,000 people over the age of 65 have more than two ADLs, and financial assets (including housing) of less than £23,250. These people are eligible and in need of social care and, according to PSSRU's estimates, 156,840 people use publicly funded residential care; therefore, 27.4% of publicly funded social care needs are met through residential care.

†††††† Eligible service users may elect to fully fund their own care, but we are not able to estimate the extent of this.

‡‡‡‡‡‡ In practice, it may be the case that more of this 16% are in residential care than in domiciliary care; however, we have no data on which to substantiate this. We therefore apply the 16% to both types of user.

§§§§§§ 16% will have their social care costs covered by the lifetime cap.

¶¶¶¶¶¶ People with assets of £100,001 will essentially have 100% of their costs covered by the floor.

******* Numbers from the table do not add up due to rounding.

††††††† 27.4% of 1,023,000 people.

‡‡‡‡‡‡‡ Some older people, ineligible for fully funded care, may have been putting off entering a care home due to fear of high costs. The fact that catastrophic costs would be limited may reduce these fears and encourage uptake of privately funded residential care.

§§§§§§§ Figures do not sum due to rounding.

Previous Next