The Nuffield Trust – Written evidence (SOC0031)

1. Overview

1.1. The Nuffield Trust

The Nuffield Trust is an independent health charity. We aim to improve the quality of health and social care in the UK by providing evidence-based research and policy analysis and informing and generating debate. This submission draws on our portfolio of work around social care, with particular prominence given to our research into the Japanese long-term care system and our current research into the German long-term care system. While we recognise that the concern around social care funding extends across the entire population, the focus of our work has been on older people and so the following response has centred on this population. We welcome the recent announcement that the forthcoming green paper will also consider social care for working age adults with care needs.

1.2. Summary

There is growing consensus that the social care system in England is in a state of crisis. The system is poorly understood by the public and confusing to those trying to access it; decision-making and eligibility are opaque; local variations in access and quality are widely felt to be unfair; and costs are not distributed across the population. The last eight years of austerity have exacerbated what was already an inadequate system and successive cuts to local authority budgets have resulted in a system that services only those with the very lowest means and very highest needs. Levels of satisfaction with social care have been declining since 2007, and in 2017 dissatisfaction with publicly funded social services increased by 6 percentage points to 41 per cent.[1] It is estimated that 26% fewer people were accessing care in 2016 compared with 2010[2]. An estimated 6.8 million people are providing informal care to fill the gap in services[3] and carers are increasingly feeling the effects of declining support[4]. The forthcoming green paper will be the last in a long succession of attempts at reform. It is critical that this opportunity for significant reform is not lost and that, instead, it is the first positive step on the way to developing a sustainable, fair and appropriate system.

2. What are the funding challenges for social care in England, and how can they be overcome?

2.1 Between 2009/10 and 2016/17, spending on adult social care in the UK as a whole fell by 9.9% and funding per head in England fell by an average of 1.6% per year[5]. At the same time, demand for care has risen as a result of our ageing population, longer life expectancy and increased prevalence of long term conditions. Local authorities have had to make difficult decisions and access to social care funding is now restricted to those with the very highest needs and lowest means. The challenges are set to grow as our population continues to age: by 2040, around one quarter of the UK population is projected to be over 65 years old and 8% will be 80 years old or more[6]. Based on current spending and population projections, a funding gap of £18 billion will open up by 2030/2031[7]. The implications for the funding challenge are stark: by 2040, for every 2 working-age adults in the UK, there will be almost 1 person over 65 years of age[8].

2.2 At present, only people with assets of under £23,250 are eligible for any form of state support. However, there is very poor understanding among the public that social care is not free at the point of use. Many assume it to be part of the NHS and it comes as a shock when they find it is not. Few people make provisions for their future care needs, despite estimates that around 10% of us will face catastrophic care costs[9], and there are few financial products available on the market.

2.3 Because of the reduction in funding available for care, local authorities have reduced the fees they pay to care providers. At the same time, the National Living Wage[10] and the 2017 ruling on ‘sleep-in shift pay’[11] are putting further pressures on providers. As a result, 48 councils reported the closure of home care providers and 58 councils reported closure of one or more nursing or residential home providers in the 6 months leading up to April 2018[12]. Furthermore, around one in five care homes were rated ‘inadequate’ or ‘needs improvement’ by the CQC[13]. Many providers admit to cross-subsidising by charging self-funders more for the same service as they charge councils[14]. Aside from being inequitable, this can exacerbate geographical variation as providers in deprived areas have more limited options for raising income than their counterparts in affluent areas.

2.4 Some financial relief has been provided to local authorities in the form of the Improved Better Care Fund, the precept, and two one-off adult social care grants. The most recent injection was the £240m announced by the Secretary of State on 2nd October 2018. While these protected cash injections into the system have certainly been welcome, they provide only temporary relief and have not sought to tackle long-term pressures – 78% of directors of adult social care report being concerned about their ability to meet the statutory duty to ensure market sustainability within existing budgets[15]. Freedoms afforded to local authorities to raise the precept have also been criticised for exacerbating geographical variation with more affluent areas able to raise higher amounts than those in more deprived areas[16].

2.5 Overcoming the funding challenges requires a long-term approach that clearly and decisively addresses the issues of underfunding, variations in access and quality and inequitable financial burden. Any funding solution will need to be able to pump the needed funding into the system in the immediate future whilst also being sustainable into the longer term. Numerous suggestions have been put forward in the past[17] but have failed to gain traction. In order to bring about the required change to both the funding and delivery system of social care, cross-party co-operation is essential. The first challenge, however, will be in engaging the public in a genuine debate about expectations around social care and clearly articulating the problems that exist in the current system. A funding solution needs also to be considered not in isolation but within the wider context of the provider market and the workforce.

3. Why have successive governments been reluctant to address challenges in the delivery of social care?

3.1 Despite a series of reviews and even legislation[18], successive governments have failed to tackle the issue of social care. Poor public understanding of the system[19] means that new proposals for reform are often met with public disapproval as there is an assumption that any new proposal indicates a reduction in the current offer. Negative public perceptions – often fuelled by ill-explained media coverage – make social care highly political territory and cross-party support for any proposal has remained elusive. New proposals are often put forward as part of election campaigns[20] at a point in the electoral cycle when there is minimal incentive for cross-party cooperation. The political climate and negative media coverage of the issues have crowded out the opportunity for a balanced public debate.

3.2 The most significant reform to the social care system (the Care Act 2014) demonstrated a degree of cross-party cooperation in setting out new rights and responsibilities. However, the implementation of the promised cap on lifetime care costs and a new system of means-testing was, at first, delayed[21] and then subsequently abandoned largely because of the financial environment[22].

4. How can a sustainable funding model for social care, supported by a diverse and stable market, be created?

4.1 In our view, any new funding model must: i) raise sufficient money in the immediate term to address current problems ii) be sustainable in the long-term and iii) enable the fair distribution of costs across the population. It is also important that the funding model is not seen in isolation but as a key component of a review of the entire system – which should examine stability of the provider market, the workforce and the role of prevention services – and how it works alongside the NHS and other services. It is critical that a newly reformed sector must offer certainty to providers and local authorities in the long term. At present, uncertainty over demand and funding means that local authorities cannot accurately plan how much care to purchase, at what price, and this undermines their ability to develop workforce plans to support the market[23].

4.2 Critically, discussion about the future model of funding and delivery must be underpinned by an accurate projection of future care need. Currently, the true level of unmet and under-met need is unknown but recent estimates point to 1.4 million people[24], with indications that increasing numbers of people are offering informal care to fill in the gaps[25]. Establishing an accurate measure of likely future demand (including the needs of carers) is essential to inform the design of a sustainable system.

4.3 The creation of an appropriate and stable provider market requires a sustainable workforce. Jobs in social care are typically low paid and of low status and so the sector suffers from high turnover and high rates of vacancies. While many leavers do return to the sector (67% of the workforce is recruited from within the sector)[26], other sectors, such as retail, often offer more attractive wages. Reform of social care must therefore address recruitment and retention issues by both raising the status of care work and offering competitive wages for the workforce[27]. This should be accompanied by investment in training and continued professional development. Employers who invest in the training of their staff report on average lower turnover rates, with one in five care workers leaving as opposed to nearly one in three[28].

4.4 The end of free movement of labour from the European Economic Area (EEA) after Brexit is likely to exacerbate workforce pressures. The recent review carried out by the Migration Advisory Committee (MAC) suggests that there should be no provision for migration of less qualified and lower paid workers after Brexit unless this is agreed as part of a deal with the EU. It also makes clear, though, that “unless working in social care becomes more desirable to UK workers, chiefly through higher wages, migrant workers will be necessary to continue delivering these services.”[29] Simple modelling carried out by the Nuffield Trust last year shows that without further EEA migration or more success in domestic recruitment, a gap of 70,000 between the number of workers required and those available will emerge by 2025/26.[30]

5. How can the cost of the provision of social care be fairly distributed?

5.1 Ensuring fairness in any funding model for social care is both vitally important and fraught with difficulty. The current system is undoubtedly unfair in many ways – there is no risk pooling and there are very few options to protect individuals against catastrophic costs. There are undoubtedly multiple ways of addressing the question of fairness, and our work looking at models in other countries can offer some insights into how this question has been addressed elsewhere. Below, we draw attention to how costs are distributed in Japan and Germany – the two countries we have studied.

5.2 Japan has adopted a system funded through blend of social insurance (into which citizens pay from the age of 40), general taxation and direct user charges (which are means-tested and paid up to a monthly cap). As such, funding is split between the state and private individuals. Benefits received are based solely upon need but direct contributions are means-tested to ensure that the wealthy pay more. The choice of 40 as the age at which people start to make contributions was carefully chosen as a point in people’s lives when they are likely to be financially established but also at the point when their older relatives would be needing care, so they would be able to see, directly, the benefits of their contributions. Clarity about how much people contribute and what benefits they are entitled to has been achieved through establishing a rigid national eligibility assessment and fixed monthly benefits[31].

5.3 In Germany (which operates a social insurance system for long-term care), people are required to start making contributions as soon as they enter employment. Like in Japan, the benefits received are solely needs-based. However, the German system is designed to offer a basic level of provision and there is an expectation that individuals will make a financial contribution to their care either via private funds or through supplementary private care insurance. The poorest in society are able to draw on social assistance payments to top up their care. In both Japan and Germany, contributions are shared with employers so that the burden is not solely on individuals. In addition, in both countries, retired people continue to pay social insurance contributions. While contributions for working age adults are shared with employers, the retired pay the full premium. This helps to address concerns about intergenerational fairness.

5.4 A persistent cause of unfairness and confusion within the English system is the distinction between health and social care needs, which can be a particular issue for people with dementia, who may be left ineligible for NHS-funded care and thus liable for all their care costs. Germany has recently enacted reforms to address a similar imbalance in its own system and has incorporated psychological issues into its needs assessment[32]. In Japan, the scope of long-term care is very wide and includes elements that would be classed as ‘health’ in England – this helps to reduce the fragmentation between the two systems. A further point of interest in the German system is that people with no children pay higher premiums in recognition that they will be less able to rely on informal family support and more likely to require formal support.

6. What lessons can be learnt from elsewhere in the United Kingdom, or from other countries, in how they approach social care?

6.1 While our previous answers have drawn on our research into other countries’ systems, below we draw out explicitly the main lessons we feel are relevant to England[33]. It is important to note that while international systems may provide England with ideas for policy transfer, approaches implemented elsewhere will need to be carefully considered and adapted to the English social, political and cultural context. We would urge the Committee to encourage a wider public debate about expectations for a care system and what ‘fairness’ means to people both across geographical areas and between generations.

6.2 Funding flexibility: Japan’s blend of funding mechanisms offers a degree of flexibility in its ability to raise income. A system (e.g. Germany’s) based entirely on social insurance payments is heavily reliant upon economic stability. However, social insurance offers a high degree of transparency and clarity to citizens as it is clear where their contributions are going. Crucially, both Japan and Germany built on the social insurance mechanisms they already had established for health. England has no precedent of health insurance so adopting such a system would need investment in new infrastructure and may not be so readily accepted by the population.

6.3 Public buy-in: The Japanese government gave considerable thought to securing buy-in from the public, through: a) careful consideration of the age from which people contribute; b) making the system deliberately generous at launch and ensuring that benefits were highly visible; c) designing a progressive system with those most able to pay shouldering the largest contributions; d) ensuring clarity and transparency around benefits and contributions to enhance public understanding; and lastly e) recognising that the process of public engagement and reform would take many years (planning began in 1994, legislation introduced in 1997 and implementation in 2000).

6.4 Managing demand: The Japanese government embedded a range of levers to manage demand, and have utilised them to help to stabilise growth in costs. Implementing a national-level eligibility criteria means that it can be adjusted relatively easily in response to rising demand. Capping residential care home places at 3% of the 65+ population has also helped to limit costs, although this policy has resulted in long waits for places. The direct user charges (known as co-payments) have been adjusted several times, increasing to 30% for the very wealthiest service users in the latest round of reforms. The three-yearly reviews of the system have also resulted in regular increases in insurance premiums to keep pace with rising demand.

6.5 Stabilising the market: The introduction of LTCI in Japan was designed to develop an active competitive market, which currently consists of mostly small, for-profit and not-for-profit companies, social enterprises and charities. A national fee schedule, which is reviewed every three years (and resembles the ‘tariff’ in the NHS), offers providers some certainty while allowing the government to control overall expenditure. The fee schedule has been flexed to incentivise home and community-based providers and discourage more expensive institutional care.

6.6 Supporting the workforce: In designing the system, policymakers in Japan had sought to shift caring duties away from families to the state, but they now point to the social care workforce as the number one sustainability challenge. With no strong tradition of immigration, Japan is severely limited in its ability to fill vacancies and this serves as a warning for England as we move towards Brexit. Germany faces similar workforce pressures and has sought to partially address this issue through greater support for informal carers. New employment laws brought in in 2017 enable people with caring duties to work more flexibly while maintaining job security and income stability.

6.7 Thinking long-term: Importantly, Japan’s reforms were not narrowly focused on the funding mechanism but on creating a whole-systems approach to caring for an ageing society, with prevention taking centre stage. Municipalities are given a share of a ring-fenced budget (3% of the total LTCI budget) to deliver a locally-focussed integrated care strategy for the entire older population, including those not eligible for LTCI care. Both England and Japan have reduced the state-funded service offer but have adopted markedly different approaches. In England, eligibility criteria have been raised to target only those deemed most in need, and in recent years local authorities have faced a stark choice between investing in prevention and protecting services for the most vulnerable. In contrast, Japan has invested heavily in communities and voluntary sector initiatives as part of a key strategy for keeping the LTCI system sustainable, by reducing and delaying the need for long term care services.

6.8 The green paper represents an opportunity to mark a step change away from previous short-termist solutions, and to establish a fair, appropriate and sustainable system of social care. We urge this committee to underline the urgency of this issue and to encourage cross-party cooperation and genuine public engagement.

9 October 2018

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