Page last updated at 07:26 GMT, Wednesday, 29 July 2009 08:26 UK

How will long-term care be funded?

Money Talk
By Simon Mitchell
Adams & Remers Solicitors

Elderly woman's hands doing cross word
The government has outlined the issues with long-term care funding

The issue of funding of social care for the elderly is firmly back on the agenda.

The government's Green Paper, published earlier this month, discusses the creation of a new social care system in England.

The systems currently in place in Wales, Scotland and Northern Ireland are not affected by this paper and advice from your local authority should be sought if you live outside England.

As one in three people over the age of 65 will need residential or nursing care at some point, the issue of how this care will be funded is increasingly relevant, especially as the average spending on care fees is £40,000 for a woman and £20,000 for a man.

Sources

Currently in England, if you go in to a residential or nursing home, the existing system allows you to try to claim funding from two sources - your local authority or the National Health Service.

These options are based around the idea that everyone, apart from those who cannot afford it, must contribute towards the cost of their care as the state cannot afford to do so fully

If no funding is available from these sources, you have to pay the costs of your care from your own pocket.

Local authorities can provide funding, but only if you pass a means test. In practice, this means that if you are worth more than £23,000, you will not be eligible for local authority funding.

However, not all assets are taken into account to work out how much you are worth. For example, the value of your house will be ignored if you have a spouse or civil partner who continues to live there or if any other relative aged over 60 lives there.

Even if you are worth less than £23,000, the local authority will expect you to make a contribution towards the cost of your care.

You need to be careful if you give assets away, as the local authority has the power to disregard the gift so that the gifted assets are still included when calculating your worth.

'Lottery'

The NHS is responsible for paying for your care where you have a primary health need - in other words, where your health needs are serious enough. There is no means test, so funding is available to anyone based only on health needs.

Simon Mitchell of Adams & Remers Solicitors
Simon Mitchell says that everyone will need to be aware of the debate

From October 2007, the NHS is required to use a framework of national guidance to assess if someone is eligible for funding.

However, local health authorities continue to interpret the guidance in different ways so that funding in one part of the country may not be available elsewhere - the so-called "postcode lottery".

If you disagree with the NHS's decision, you can ask for it to be reviewed and could ultimately appeal the decision. It can be a long process, but the right of review survives the death of the resident.

NHS Funded Nursing Care is a limited form of NHS funding for which you may be eligible if you live in a nursing home where you receive nursing care from a registered nurse employed by the home. The rate of funding is currently £106.30 per week and is not means-tested.

The government's new proposals, particularly in view of the economic climate and demographic changes, address the fact that the current system is going to be too expensive to fund in the future. As a result, the Green Paper makes various proposals.

Everyone assessed as having a care need would have part of their care costs - between a quarter and a third - paid by the state but would have to pay for the rest of their care costs themselves. Those less well off would have a higher proportion of their care costs, or possibly all of them, paid by the state.

Another option is paying into an insurance scheme which could cover the additional care costs over and above those paid by the state.

Anyone who could afford it would pay a lump sum - perhaps up to £20,000 - either on retirement or on death in return for which care costs for everyone would be covered by the state.

Accommodation costs, such as food and lodging expenses, are excluded from the proposals and would still be funded privately by each individual as a deduction from their estate when they die. The state may step in for those people with low income or assets, although it remains to be seen at what level.

Consultation

These options are based around the idea that everyone, apart from those who cannot afford it, must contribute towards the cost of their care as the state cannot afford to do so fully.

Some ideas involve making payments towards care costs that might never be needed in the future.

The question of who should and who should not pay the lump sum in another of the options also risks creating a feeling of discrimination in those who deemed able to afford the payment.

The new proposals have been put out for consultation until November, although they are unlikely to become law before the General Election.

Whatever the future for the care system, the Green Paper invites us all to contribute to the debate, but the onus will increasingly be on each of us to plan ahead to ensure that we can afford the care we may need in our retirement.

The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.



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