Demographic change and paying for the true cost of social care
Submitting Institution
City University, LondonUnit of Assessment
Business and Management StudiesSummary Impact Type
SocietalResearch Subject Area(s)
Medical and Health Sciences: Public Health and Health Services
Economics: Applied Economics, Econometrics
Summary of the impact
Research by Professor Les Mayhew and Professor Ben Rickayzen at City
University London on the question of how the public sector and the private
market might jointly establish a better way of funding long-term care for
the elderly has influenced policy thinking and development within the
Treasury, the Department of Health, the Dilnot Commission, the actuarial
profession and among ministers and parliamentarians. Evidence is provided
here that shows that their research on population ageing has had an impact
at the highest levels in Whitehall. In addition, Mayhew's work on
integrated health and social care for Brent Council has helped to
transform services at local level and provides a model that could be
replicated more widely.
Underpinning research
The number of older people in the UK is increasing and the number of
people in the age category 85 and over is predicted to double between 2010
and 2030. The cost of providing the elderly with social care is uncertain
and can be very high. The problem with the current system of funding care
and support is that funding has not kept up with demand and so people face
high costs and can lose most of their assets. Since 2002, Mayhew (at City
since 2002, now Professor) and Rickayzen (at City since 1994, now
Professor) have conducted research into the costs of health and social
care combined with those of disability. The resulting body of work
considers ways of tackling these challenges.
Rickayzen and Walsh (2002) considered how to estimate accurately the
future cost of long-term care (LTC) in the UK by developing a multiple
state model to project the number of people with disabilities over the
next 35 years, thereby identifying implications for the future demand for
LTC for the elderly. The projections suggest that the implications for the
number of elderly people requiring LTC could be ameliorated by a reduction
in the proportion of older people who are severely disabled. Karlsson et
al. (2006) computed cost projections for LTC for older people in the
UK. They considered how demand for LTC will evolve and to what extent
there will be sufficient supply to meet demand. For formal care, this
requires an estimate of how much the public purse and hence taxpayers will
be burdened with LTC costs. The costs and impacts of any reforms to the
current system were considered by evaluating the LTC funding system in
other countries. Karlsson et al. (2007) showed that importing
systems into the UK from Germany and Japan, which have compulsory
insurance systems, or from Sweden, which has a wholly tax-funded system,
would prove far more expensive and imply much higher taxes. The
researchers showed that the demand for LTC would grow to the end of the
projection period in 2040, resulting in a heavier tax burden if the system
was not reformed and consequently a significant need for care could go
unmet. They recognised that the distribution of wealth and income was such
that systems operating elsewhere would not be suitable for the UK where a
"mixed system" of public and private funding would be more suitable.
Very few insurance companies have offered pre-funded LTC insurance in the
past and none does now. This means that people are unable to protect
themselves in advance of having a care need. Providers withdrew from the
market for pre-funded LTC policies because there was very little demand or
them from consumers. Because the LTC costs can be very large and
uncertain, the premiums therefore tended to be too expensive for most
people. Mayhew and Rickayzen began to think how more affordable products
could be created for a wider market and for a range of personal
circumstances. One of these products, disability-linked annuities (DLAs),
combined classic pension annuities with disability risk (Rickayzen, 2007).
A disability-linked annuity works by reducing the income from an otherwise
flat annuity (say by around 10%) but then doubling or trebling income at
the point of developing a care need (e.g., failing three activities of
daily living) or of reaching a certain age (e.g., 85).
Building on their early work, Mayhew and Rickayzen identified six
different types of products which may emerge from the financial services
sector to help people make a contribution to their long-term social care
and support costs: equity release, 'top-up` LTC insurance, immediate needs
annuities, DLAs, accelerated life insurance and long-term care bonds
(LTCBs). They assessed the cost and market potential of each and created
for the first time a financial services product map based on individual
income and wealth. This product map is being widely reported in Government
evidence. Of the six products, DLAs, LTCBs and top-up insurance have since
received considerable interest from government and industry. LTCBs (now
known as Personal Care Savings Bonds, or PCSBs), for example, were
designed to encourage people on a low income with few assets to contribute
to their future LTC needs (Mayhew and Smith, 2013) and top-up insurance
was designed to fill the gap between state provision and actual LTC costs
(Mayhew, Karlsson, and Rickayzen,2010).
During 2009 and 2010, Mayhew was able to demonstrate how the research
could be put into practice at both macro and local levels. In January
2010, he was commissioned by the Prime Minister's Strategy Unit to
investigate the broader question of the impact on the wider economy of
increased longevity, healthy ageing and the ability to work longer. Using
a purpose-built demographic-economic model, he identified the scale of the
problems facing public expenditure along with potential strategies for
managing the problem (Mayhew, 2011). Mayhew was appointed as lead
evaluator of the Brent Integrated Care Coordination Service after helping
Brent Council to secure a £1.6M grant from the Department of Health. Using
novel modelling techniques, he demonstrated that early intervention and
integrated health and social care could avoid unnecessary hospital
admissions and lead to significant savings (Mayhew, 2009).
References to the research
Mayhew L. (2011). Increasing Longevity and the Economic Value of Healthy
Ageing and Longer Working. In J. Stillwell & M. Clarke (Eds.), Population
Dynamics and Projection Methods. (pp.165-192). New York: Springer.
Mayhew L. & Smith D. (2013). Personal
Care Savings Bonds (A Report for the International Longevity
Association). London: The International Longevity Centre — UK.
Research was published in journals that apply a stringent peer-review
process prior to accepting articles for publication, and backed by EPSRC
grant [EP/C522974/1 ] `Paying for Long-Term Care'.
Details of the impact
Mayhew and Rickayzen's research has had a significant influence on the
funding system for social care and support in England. Their work has
affected the development of policy and practice with regard to social care
provision. It has (i) led to improvements in access to social care at a
local level; (ii) provided a model that could be replicated more widely;
(iii) provided the basis for private finance to make a contribution to
long-term care; (iv) had an effect on the quality and cost-effectiveness
of health and social care services; and (v) stimulated policy debate
within central government, local government and the insurance, pensions
and health care sectors by providing stakeholders with fundamental
actuarial research.
In 2008, Mayhew and Rickayzen's research came to the attention of the
Prime Minister's Strategy Unit (PMSU) and Mayhew and Rickayzen were
appointed to the Department of Health's Private Finance Working Group,
which was investigating existing and new private products for funding LTC
with the aim of increasing their adoption. Mayhew was later commissioned
to investigate the market potential for customised LTC insurance products.
A key finding was that many more women than men are in institutional care,
but are less able to afford it. This finding was later cited in the
Department of Health's influential report on protecting adults in social
care which was aimed at NHS commissioners, health service managers and
practitioners with the aim of assisting them with preventing and
responding to neglect of patients in vulnerable situations [1].
The academic-practitioner collaboration of the Private Finance Working
Group generated the Green Paper `Shaping the future of care together'
(July 2009). The Paper established the principle of a public/private
partnership in which disability linked annuities, equity release and
top-up insurance would play a part. The preferred option contained within
the Green Paper was based on the concept of a 'National Care Service`,
which was effectively taxation-based. This was then re-affirmed in the
White Paper, `Building the National Care Service' in 2010 [2].
Mayhew was then invited to undertake a second, broader study by the PMSU
on the economic impacts of increasing longevity and healthy ageing. This
generalised the impacts of pensions, health care and social care on the UK
economy and proposed various strategies for coping with the imminent
ageing `bulge'. The report was widely circulated at senior levels in
Whitehall and presented to senior officials. It is also referenced in
`Building a Society for All Ages' with a foreword from the Prime Minister
(HM Government, 2009b, pp. 15-16): "[Mayhew] shows the economic returns
that healthier, more active later lives could bring in terms of
significant savings in the costs of health care, social care, pensions
and benefits" [3].
In the Spring of 2010, public debates in London and Edinburgh were
organised by The International Longevity Centre (ILC-UK), the leading
think tank on longevity and demographic change in the UK; and the
Actuarial Profession, the professional body which represents actuaries in
the UK. Both organisations have acknowledged the researchers' contribution
to solving the long-term care funding problems of an ageing population
[4]. Various emails testified to the impact of the ILC-UK presentations
including one from the Director General of Information Services at the
House of Commons saying that it would be of considerable interest to
Parliamentarians and would be made available to them in briefings [5].
Mayhew and Rickayzen's research came to the attention of the City of
London Corporation, the local government body for the City of London.
Mayhew was commissioned to prepare a report setting out his proposals,
published in 2009 as `The role of private finance in paying for long-term
care in an ageing society'. The findings were presented, in a seminar to
politicians, insurers and care providers and were reported in the media.
The report assisted with the City of London Corporation's response to the
Government Green Paper mentioned above [6].
From 2005 to 2009, Mayhew advised Brent Council on its 'Integrated Care
Co-ordination Service`, a £1.6M pilot funded under the 'Partnerships for
Older People Projects`, to show how early intervention and working with
the private sector could improve lives and reduce the costs of health and
social care. The results were presented to Phil Hope, then Minister of
State for Care Services with senior health officials and members of the
Council in attendance. Christabel Shawcross, Brent Council's Assistant
Director for Community Care at the time of the pilot, said: "The
benefits and savings came to the health service, but we are fairly
convinced that this will help social services too in the longer run by
enabling people to stay longer in the community" [7]. The project
was quoted in a House of Lords report as providing a model to be
replicated more widely [11].
In July 2010, the newly-elected coalition Government established the
Commission on Funding of Care and Support, chaired by Sir Andrew Dilnot.
Mayhew was invited to a private meeting with Sir Andrew in September 2010.
Mayhew and Rickayzen's research was used by the Commission in its report,
which specifically mentions the term 'disability-linked annuities' that
Rickayzen originally coined in 2007. Additionally, the Dilnot report
explicitly refers to tax issues which had been highlighted by Rickayzen
[8]. In October 2010, Mayhew and Rickayzen were asked to present their
findings from Mayhew et al. (2010) to the Department of Health's
Social Care, Local Government and Care Partnerships Directorate.
In May 2011, Mayhew and Joules Constantinou, Head of Marketing at Gen Re,
the global re-insurance company, led a debate at the Actuarial
Profession's Health and Care Conference. Mayhew and Rickayzen's research
influenced thinking within the actuarial profession and was cited in the
profession's response to the House of Commons Health Select Committee's
consultation paper 'Inquiry into Social Care` in October 2011 [9]. Mayhew
was appointed to the Office for National Statistics' expert advisory panel
on population projections and its research is cited in an Office for
National Statistics study on the impact of changing longevity on long-term
care expenditure [10].
Mayhew has also been asked to present his ideas to other influential
bodies and individuals, including personal briefings to Rt Hon Stephen
Dorrell MP, Chairman of the House of Commons Health Select Committee, in
February 2011 and Norman Lamb MP, Parliamentary Private Secretary to
Deputy Prime Minister, in April 2011. Mayhew presented long-term care
proposals in a televised debate hosted by Policy Review TV, sponsored by
Partnership Assurance in March 2011 and at a House of Lords meeting
chaired by Lord Lipsey entitled, `If not Dilnot, what?' [11]. In November
2012, he gave spoken evidence to the House of Lords' Select Committee on
Demographic Change and Public Services [12]. In 2013, Mayhew addressed the
Society of Later Life Advisors at Westminster, sharing the platform with
leading MPs. Later in the year he became a member of an industry-led group
advising the Department of Health on private sector financial products.
In 2013, Mayhew launched a paper at the House Lords on PCSBs at an event
chaired by Baroness Greengross of the ILC-UK. The concept received much
praise from actuaries, the insurance industry, local authorities, and
older people's representatives for its simplicity and innovation [13].
PCSBs have since been presented to Ministers and a paper is being
published by the Geneva Association, an international think tank on
insurance. National Savings and Investments has also affirmed its interest
in helping to develop PCSBs further. Mayhew is working with independent
think tank Demos on a new family of affordable equity release products
designed to help people pre-plan their care and he has recently presented
his initial ideas at fringe meetings cat all the main party conferences.
The debate over long-term care costs continues unabated following the
Government announcement of the £72k cap and the introduction of the Care
and Support Bill in Parliament in 2013. Now a new debate is emerging about
the possibility of integrating health and social care services to which
Mayhew and Rickayzen's research is also contributing. Their research has
had a profound impact on both debates for over a decade and there is
strong indication that this will continue to be the case in the years to
come.
Sources to corroborate the impact
- Department of Health, (2011). Safeguarding
Adults: The role of health services, 14th March
- HM Government (2009a). Shaping
the Future of Care Together Green Paper, presented to Parliament
by the Secretary of State for Health, Cm7673 (July)
- HM Government (2009b). Building
a Society for All Ages, A Government strategy paper presented to
Parliament by the Secretary of State for Work and Pensions (July), pp.
15-16
- International Longevity Centre — UK (2010). The
Economic Value of Healthy Ageing and Working Longer, with
discussion. A publication based on the ILC-UK and Actuarial Profession
joint debates, supported by Prudential plc
- Pullinger, John (2010) Director General, Information Services, House
of Commons, testimony and feedback dated 2nd December,
available on request
- Luder, Ian (2009). Funding
a solution for care: Private finance could help pay for long-term care,
The Guardian, 23rd September
- Brindle, David (2009). Brent
care scheme for older people is top of the Popps, The Guardian,
9th September
- The Dilnot Commission (2011). Fairer
care funding: the report of the Commission on Funding of Care and
Support, London: Stationery Office, July
- House of Commons (2011). Health
Select Committee's 14th Report — Social Care, List of additional
written evidence, published 13th February
2012
-
Office for National Statistics (2011). The
effect of lengthening Life Expectancy on future pension and Long-Term
Care expenditure in England, 2007 to 2032, Health Statistics
Quarterly, No. 52, Winter 2011
- House of Lords (2011). If
not Dilnot, what? Seminar chaired by Lord Lipsey (29th
May 2012); Policy Review TV, Care
Solutions, Providing for Self Payers, A Policy Review TV Analysis
Programme held at 1 Birdcage Walk, Westminster London SW1
- House of Lords (2012). Ready
for Ageing? Report by the Select Committee on Public Service and
Demographic Change, published 14th March, pp. 66-76
- Steen, Aimee (2013). Care
bond pitched as LTC funding solution, Financial Times, 26th
June