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• The £86,000 social care cap is more about protecting the wealthiest than fixing social care.
  
• £86,000 cap is not the maximum families will spend on care – they will have to spend well over £100,000 before reaching the cap.
  
• The new proposed cap will still take most of the assets from families in areas with lower property values, while helping the wealthiest families keep most of their assets.  

The headline is that nobody will have to spend more than £86,000 on their care.  The reality is very different. The proposed new care cap will significantly help the wealthiest families to protect most of their assets, especially those living in regions of the country with high property values. However, people in areas with lower house prices, and with no other assets, including the ‘Red Wall’ constituencies with average family homes costing around £150,000, may still have to spend all of that value before the new rules deem they have reached the cap.

It is certainly true that elements of the proposed reforms are more generous than the current system.  In particular, the increase in the means-test threshold from £23,250 to £100,000 is a significant improvement. However, this was already part of the 2014 Care Act measures, legislated for seven years ago which have still not come into force.  Furthermore, the new means-testing rules added to the Health and Social Care Bill at the last minute, and their interaction with the £86,000 cap rules, add more complexity and offer less protection for those with lower value assets than the 2014 Care Act and Dilnot measures. Even if the care cap did do what has been claimed, there are many other features of the care crisis which are not addressed by this reform, but this note focusses on the issues relating to the cap.

Here are some of the reasons why the cap is not a maximum and people will actually have to spend far more than the supposed £86,000 before the new system helps them.

1. £86,000 cap only covers what are considered to be the actual ‘care’ costs. The new rules mean £10,000 a year of care fees are counted as Daily Living costs, so if you pay £30,000 care home fees, only £20,000 counts towards the cap. Pensioners living on less than £10,000 a year still have to find this extra money.
2. £86,000 cap only counts the fees your council considers you ‘should’ pay for care. If the ‘local authority rate is £26,000 a year, but your care home charges £30,000 year for your care home, then another £4,000 is excluded from the cap calculation, and only £16,000 of the £30,000 annual fees count towards the cap.
3. Any money spent on care before your needs are assessed by the local authority as substantial enough, will not be part of the cap. If you pay for care before you are considered sufficiently incapacitated, none of those payments will count.
4. All your care spending before 2023 will not count towards your cap. Only the spending on care after this legislation starts in 2023 is included.
5. The new means test rules will see families with lowest assets losing far more even when they have less than £100,000. The latest changes to the means-test rules even further disadvantage those with lower value homes or assets.

The main advantage of the cap is that people who live in a care home for many years (which Dilnot estimates to be around 10% of those needing later life care), including dementia patients, will no longer face unlimited costs. This, of course, means the cap will protect those with most wealth. People needing care for many years, whose main asset is their home in a part of the country without high house prices, still lose nearly everything before the state takes over paying for their care. These families lose a substantially higher proportion of their wealth than those living in similar homes in areas with higher property prices. In addition, people living on State Pensions under £10,000 a year still have to pay £10,000 a year even when their assets are under £100,000, so even the £20,000 minimum is not the lower threshold. Here are some examples of why the cap is not what it seems.

 

The £86,000 cap only covers what are considered to be the actual ‘care’ costs. You will have to pay £10,000 a year out of your pension or private income to cover the ‘daily living costs’. This is a flat-rate deduction, regardless of your actual income. The full basic State Pension is only about £7,500 a year and the full new State Pension is around £9,500 a year, so many pensioners are living on much less than £10,000 a year.

Here is an example.

• You move into a care home that costs £30,000 a year.
• The rules deem £10,000 of this is not actually ‘care costs’ and is for daily living.
• So you pay £30,000 a year, but only £20,000 a year goes towards the cap.
• It will mean living in the care home for over 4 years before you reach the cap.

£86,000 ÷ £20,000 = 4.3 years

(although the average stay in care homes is only around 2.5 years).

• During that time, however, you have paid £129,000 in care fees, but £43,000 of that money is disregarded, so you actually have to spend £129,000 before the calculation says you have spent £86,000 and state help starts

£43,000 + £86,000 = £129,000

 

The £86,000 cap also only counts the fees your council considers you ‘should’ pay for care. If your care home charges you more than the local authority approved rate, only the amount the council says is its appropriate rate is counted towards the cap. You may choose a higher charging care home because a less expensive one is far away from loved ones you need to be near, but if your council believes you should be paying £26,000 rather than £30,000, the extra £4,000 won’t count towards the cap. So, of the £30,000 you are paying, £14,000 does not count and it takes longer to reach the cap.

Here is another example:

• You pay £30,000 a year but the local authority approved rate is £26,000
• It will not count the extra £4,000 a year towards the cap
• It will also deduct the £10,000 a year for bed and board.
• So, only £16,000 a year counts towards the cap.

£30,000 – £4,000 – £10,000 = £16,000

• If you are in the care home for 3 years, you will have spent £90,000  (£30,000 a year for 3 years), but the cap rules consider you have spent only £48,000 so far.
• Since only £16,000 a year counts, it will take over 5 years to reach the cap.

£86,000 ÷ £16,000 = 5.375 years

• You actually have to spend £161,250 in care home fees (an additional £75,250) before the cap calculation says you have spent £86,000.

£30,000 for 5.375 years = £161,250

 

Any money spent on care before your needs are assessed as substantial enough, will not count towards the cap. To begin accruing care spending towards the cap, the council will have to assess your needs and determine whether you are sufficiently incapacitated. Only those assessed as having substantial needs are expected to have their care spending count towards the £86,000 cap. In the year 2019-20, official figures show that only 41% of applications for care by the over 65s were accepted. Out of the 1.4 million people who applied for help with care needs, only 548,000 were approved. Some of these will have been considered to have assets higher than the current £23,250 means-test threshold, but others may have been told they were not yet sufficiently unwell to qualify.  If you feel you need help to live safely in your own home, but are said to have only ‘moderate’ needs, then payments for a home carer will not count.  Equally, if you feel you cannot manage at home, but the council considers you should really be able to manage on your own, then all the money you pay will not count towards the cap. People will need ongoing assessments as their health condition worsens, to see whether they have yet met the council’s criteria. This is already a problem with the current system and many people who need care are denied it.  They are then at greater risk of falls or illnesses because they did not have the earlier interventions they required. This could well cost more to the NHS over time, and also means more hardship for frail elderly or disabled citizens.

Clearly, £86,000 is not actually a cap on the amount you will have to spend on your care before the State takes over paying for you.   And even after it takes over, you will still be asked to keep paying £10,000 a year, or more towards your care home fees, out of pension or other income.

 

Any money spent on care before 2023 will not count towards the cap. People already in a care home, or who need care over the next couple of years, will not benefit from this new policy. Even if they can prove they have spent over £86,000 in the past, the cap only starts from the future date on which the legislation comes into effect.

The above examples highlight why the £86,000 cap is not what it seems and why families will have to spend far more than this, before the State takes over their payments. The Government says nobody will be worse off, however the new system offers protection from unlimited costs to the wealthiest, but leaves those with lower value assets at risk of losing almost everything. This seems to be the opposite of levelling up.

Today’s system has no cap at all, which means the wealthiest families have to just keep on paying fees, which could run to several hundreds of thousands of pounds, with no upper limit. Introducing a cap means the State paying towards their care at a point well before the current system would require. This does improve the situation relative to the dreadful problems of today’s system but does not resolve the unfairnesses of social care.

 

The new means test rules will see families with lowest assets losing far more even when they have less than £100,000. The changes to increase the means-testing asset threshold will enable people to keep more of their assets than the current means-test.  Currently, they receive no state help until their assets fall below £23,250, so the new £100,000 threshold is more generous.  However, the relative disadvantage for the less wealthy has increased due to recent changes to the interaction of the new cap with the increased means-test threshold. The original Dilnot reforms and the Care Act 2014 measures were adjusted at the last minute, introducing new conditions, which will leave Red Wall constituents even worse off relative to the wealthiest families. This caused a rebellion among Conservative MPs and I hope the new Bill can be amended to remove the latest change, which was supposedly designed to save costs to the Exchequer over time. The costs savings will all come from the least wealthy.

Once assets are worth under £100,000, the local authority begins paying towards care fees and once below £20,000 (currently the figure is £14,250) they pay all the fees. However, this does not cover the £10,000 daily living costs, nor ‘excess’ fees you are paying above the council rate. This is not a new reform and was always in the Dilnot report and the 2014 Care Act measures. The difference added by the Government is that council payments towards your care fees will not count towards the £86,000 cap. Under the new proposals, it will take even longer to reach the point when the local authority takes over and you will continue to drain your resources for longer.

Perhaps another example will help.

• You are paying £30,000 a year in actual costs but, as in the previous examples, only £16,000 of this counted towards the cap as £10,000 is deducted for bed and board and a further £4,000 a year because you are paying above the council approved rate.
• Let’s say that after 3 years in the care home, your assets fall below £100,000.
• In cash terms you have already spent £90,000 (£30,000 a year for 3 years)
• But you are deemed to have spent just £16,000 a year so you will have used up only £48,000 of the £86,000 cap (£16,000 x 3 = £48,000).
• Until you are considered to have spent another £38,000, you will not reach the cap. (£86,000 – 48,000 = £38,000)
• Let’s say the council starts paying £5,000 a year towards your fees, so you are now having to pay £25,000 a year (and still £14,000 of this does not count towards the cap).
• Under the original proposal, the entire £16,000 a year would be added to the £48,000 you have already spent towards the cap.
• You would, therefore, reach the £86,000 cap after a further 2.25 years.
• However, under the new provisions, only £11,000, instead of £16,000, out of the £30,000 you are paying will count towards the cap each year, because the £5,000 a year paid by the council no longer counts.
• So you must keep paying for another 3.45 years before you hit the cap.
• Those who are least well off and get down to their last £100,000, have a worse outcome with the new system, while those with much higher value assets are unlikely to be impacted as they will not get down £100,000 before hitting the £86,000 cap.

 

Other problems arise as well. People may have to move into a different care home if their income or assets don’t cover the extra £14,000 a year that is excluded from the cap. Even once your assets are below £20,000, you are still expected to pay the £10,000 yearly living costs and any extra. If an elderly person has to be moved to another care home, their life can be endangered.  These issues are important to understand. The £3.6billion of extra funding going to help establish the cap and higher means-test threshold will most benefit those who have greatest wealth.

The measures in the Social Care White Paper are a start and the Government deserves credit for at last producing its White Paper. However, the measures will not resolve the care crisis. The reforms perpetuate unfairness in the current system and leave many failings in social care unaddressed.  They also do nothing to help individuals plan to set aside funds for future care needs and the public money being allocated is far too little to make meaningful differences in areas such as staffing and prevention.