Dilnot: buy private insurance to pay for elderly care

All but the poorest pensioners will have to cover up to the first £50,000 of any care home bills that they incur, either through saving, buying insurance or releasing cash from the value of their homes.

Under the plans, the state would then step in to cover any bills above this level for care home accommodation, adaptations to property, and home help.

The proposals are expected to be included in long-awaited recommendations from a commission led by Andrew Dilnot, the economist and broadcaster appointed to draw up a blueprint for reforming England’s creaking social care system for elderly and disabled adults.

However, a political row is looming amid signs that the Coalition is preparing to delay a final verdict on whether to implement the reforms. Ministers fear a public backlash and a mounting bill for the Treasury.

England’s ageing population has put residential care and home help services under unprecedented pressure at a time when council budgets are shrinking.

An estimated 800,000 older people are not receiving the support they need to carry out everyday tasks such as washing and dressing while the burden of care often falls on the so-called “sandwich generation” in their 50s and 60s.

An estimated 20,000 people a year are forced to sell their homes to pay for care, while one in 10 faces care home bills totalling more than £100,000.

Mr Dilnot will recommend an “integrated package” of measures intended to remove the “fear” that many people have over how they will meet the costs of being looked after in old age.

Speaking before publishing his report next Monday, Mr Dilnot, said: “There is a widespread feeling that the care and support system we have at the moment in England doesn’t work. It is felt to be unfair. Nobody understands it. People want to see change.”

His reforms will recommend “a partnership between the individual and the state” that allows people to protect their assets and receive the care they need. The plan is expected to include:

:: A “cap” on the amount that individuals are required to pay so that no-one faces “catastrophic” costs and loses almost everything they own. The cap is expected to be set at between £30,000 and £50,000 and could be £35,000.

:: The government will then pay any costs above the level of the cap, requiring an estimated £2 billion more from the Treasury each year. The Chancellor, George Osborne, is reported to be reluctant to meet this commitment.

:: A single set of rules will be introduced to assess the help that elderly people should receive in attempt to end the “postcode lottery” in social care. Currently, individual councils are free to decide which pensioners are frail enough to require help.

:: Encouragement for individuals to save, perhaps through their pensions, to build up a pot of money to spend on care if necessary.

:: A more generous threshold for means-tested support to help the poorest. At the moment anyone with assets of £23,250 receives no help with care home costs.

A key aspect of the Dilnot Commission’s plans is the belief that placing a cap on the bills that individuals face will create a market in private insurance products.

Insurers will know that they will not have to meet unlimited costs, even if someone spends many years in an expensive nursing home, if a cap of £35,000 or £50,000 is introduced.

Industry experts estimate that a typical 50 year-old could buy insurance for care costs of up to £50,000 with a one-off premium payment of about £17,000.

Separate insurance schemes could allow people to “top up” council grants to enable individuals to move into more desirable and expensive care homes. Mervyn Kohler, from Age UK, the leading charity for the elderly, said private insurance schemes would give “peace of mind”. He urged the Coalition to back the plans, warning that failure to act would condemn tens of thousands of “frail, vulnerable people” to a broken care system.

Chris Horlick, managing director of care at Partnership, which offers insurance to cover the cost of care home places, said he believed savings schemes and critical illness cover could also be created to meet care costs under the plan.

However, other firms have warned Mr Dilnot that few people are likely to take out insurance schemes unless they are made compulsory. Oliver Thomas, director of Bupa Care Homes UK, said: “We know from our own previous experiences in long term care insurance that people don't buy such products it if they don't think they'll need them.”

Dr Ros Altmann, director general of the over-50s group, Saga, warned ministers they must not delay the reforms. Investing in social care services will mean hospitals do not have to cope with elderly people who have been let down elswhere in the system, she said.

"If we don't take this chance, we will be walking into a care crisis and it will overwhelm our health service as well," she said.