Written evidence submitted by the Adam Smith Institute [ASC 019]

Response to the Committee’s questions

By Dr Eamonn Butler, Adam Smith Institute and

Paul Saper, ASI Fellow, LCS Health and Social Care Research Trust.

Q. How has Covid-19 changed the landscape for social care funding?

A. Covid-19 has demonstrated the benefits of collaboration in drug development which has potential savings for social care funding.

The UK is a poorer country than it was before the pandemic hit early last year. Yet even when the economy was stronger, we were not spending enough on social care. Our 1.5% of GDP spend was more in line with Mediterranean countries, where fewer women work outside the home, while our social structures are more like other northern European countries where spending on social care is 1.8-1.9%of GDP.

Furthermore, new developments in bio-sciences and healthcare analytics (by companies like Illumina, GRAIL, and Pacific Biosciences in California and Oxford Nanopore in the UK) including ‘liquid biopsies’ that can detect cancers much earlier, will result in longer life expectancy, some of which will not be dementia free. This will put an increasing financial burden on health and social care budgets. Not only should we be prepared for further pandemics of infectious diseases, but we should be planning for future epidemics of the diseases of advanced age, rather than reacting after the fact.

The UK’s Covid -19 experience teaches us that our highly successful vaccine research, development, manufacturing and rollout strategy can provide a model for the advancement of therapies that could greatly reduce the cost of social care for dementia sufferers, who increasingly make up the overwhelming majority of service users.

Eli Lilly, Biomed and others are developing compounds to slow the progression, or postpone the onset, of dementia, while Axsome Therapeutics hopes to create treatments to reduce agitation and challenging behaviours in Alzheimer’s disease patients, allowing them to be cared for longer within the family. If patients could remain with their families for just a few months longer such initiatives would significantly reduce the estimated £26bn cost (to families and taxpayers) of caring for the UK’s 850,000 dementia sufferers, while improving quality of life for both the patients and their carers both at home and in care homes as well.

The UK needs to gain access to these new drugs sooner rather than later, just as it did so successfully with vaccines. We need to negotiate agreements with the companies (primarily in the US) who have drugs under development, as we did with AstraZeneca, Novavax, Janssen, Moderna and others. We need to participate in trials and, the collection and analysis of clinical data, where our abilities are internationally respected, we need to provide manufacturing capacity in order to secure essential supplies, and accelerate our approval procedures.

The UK can be trusted with intellectual property. A Commonwealth approach involving e.g. Australia, New Zealand, Canada and India would afford research expertise, manufacturing capacity and large and diverse populations for trials.  Just as the UK supported domestic and international R&D in new mRNA technologies, enabled mass trials to take place, helped fund the development of new drugs and funded three UK manufacturing centres for vaccines so it should for drugs that can mitigate an epidemic of dementia and other diseases of old age.

Q. How should additional funds for social care be raised?

A. Enable people to save and insure for more of their future needs

This question begs an earlier one: are we getting the best possible quantity and quality care from what we spend already? Unfortunately, the answer is a firm no. Our present care system is dysfunctional, inconsistent, unfair and fraught with perverse incentives. Local-authority care focuses on price, not quality. Families are unwilling to save while they are uncertain what they will receive for their money and how the rules might be applied in the future. While people save for retirement, they believe that healthcare is covered by the NHS and are largely unaware of the changing definition of what constitutes medical need, for which they are covered, and social care, for which they are not.

The scale of the post-Covid public debt, and the many other pressures on the public finances, make government spending an unreliable source of additional funds for social care. We need to develop new ways of enabling and encouraging individuals and families to make greater provision for themselves, through insurance, personal care savings accounts or other options, many of which already work in other countries.

To make insurance viable for the many, and to bring a more professional value-for-money focus into the system, we suggest that the state should pick up the ‘long tail’ costs of those needing many years of care. Insurance is unviable without this risk-sharing. If more public funding is needed, we must think radically. Older people enjoy a number of specific benefits such as Attendance Allowances, lower NICs and Winter Fuel payments, which are funded by those of working age. It is reasonable to expect older but wealthier people to make more of a contribution to their generation’s care costs. A rise in NICs for the over-50s, for example, and abolition of the over-60s exemption, may be part of an equitable solution.

For details on these options, please see our submission to the Committee’s earlier enquiry.

Q. How can the care market be stabilised?

A. Promote partnerships between the state, insurers and individuals.

We favour a new partnership between the state, insurers and individuals, leading to cost sharing and a more stable market. Part of this, as above, would involve the state encouraging insurance options by meeting the cost of extended care-home episodes — say, six years or longer.

The risk-spreading involvement of insurers would help stabilise the self-pay market. We envisage that insurers would charge one premium for a whole service, including care and hotel costs. They would insist on having clear contracts with known future costs, meaning that clients would no longer be presented with unexpected cost increases after moving in. The involvement of insurers would also put an upward pressure on quality and a downward pressure on fee levels (e.g. by requiring clients to choose from an approved list of providers, as healthcare insurers do). This would also reduce costs for the government as and when it did step in.

There also needs to be an upgrading of those homes in which the service users are predominately funded by local authorities. Three-quarters of the homes are over 20 years old and no longer up to standard, including some in unsuitable converted hotels and guest houses. Around 300,000 beds do not fully meet the standards laid down in the 2001 legislation but have been allowed to carry on ever since. It is unlikely that taxpayers would be willing to underwrite the large sums required to replace our care home estate when only a third of them will need social care at all, and government infrastructure spend has other more pressing priorities. New approaches are therefore needed.

We believe the solution can be found from what has been achieved successfully incrementally in recent years in the provision for younger adults (persons under 65 years of age) with a physical or learning disability. Accommodation is provided by housing associations who borrow money in the City’s (regulated) social housing finance market to develop supported living purpose built apartments and shared houses.

In similar fashion, life funds and the pension industry (with very much lower target investment returns than private equity investors) would also be willing (if encouraged) to finance building of new care homes to let to local authorities (singly or in combination) on long term leases with amortised repayments, secure in the knowledge that rents were effectively guaranteed by a government agency. They would also be reassured that leading Independent operators (for-profit and not-for-profit) would be engaged to manage the homes: adult care should be delivered by providers whose expertise is in care rather than property management. The successful division of expertise will result in higher standards and better value for money all round — and no doubt a bigger role for the voluntary sector, since the element of risk capital in the enterprise would be significantly reduced.

Q. How can quality/innovation be incentivised?

A. Encourage local authorities to contract with new providers

In addition to the innovations described above, the most serious deficiency in terms of quality and innovation is found in local-authority care at home. This is presently contracted on the basis of hours or number of inputs, with the focus on price rather than outcomes. There is no incentive to integrate health and social care, as happens in other countries.

Instead, local authorities should contract with the new generation of providers such as Telenor Health (Norway) in Europe, Aerotel in Israel and Teladoc Health, Amwell, MD Live, Up Health-Cloudbreak and others in the US — who have successfully expanded their products, who exist worldwide, who have developed more sophisticated caregiver training and recruitment, and who successfully employ AI (including integration with, for example Alexa and Siri) in order to promote easier self-monitoring and care delivery. AI in particular will close many information gaps and assist where human resources are limited. Reduced hospital admissions and re-admissions will be another benefit.

An arbitrary boost to care budgets and minor changes to the existing system will not help long term sustainability, nor boost quality and innovation. We need fresh thinking, based around new partnerships in new markets.

END

April 2021