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Social care costs: The Homeys are muddling up two entirely separate topics.

Friday, May 19, 2017 8:42
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From The Guardian:

Dilnot, a former director of the Institute for Fiscal Studies, said that by refusing to implement a cap, the Conservatives would be leaving people without any protection against care costs.

“So people will be left helpless, knowing that what will happen is that if they are unlucky enough to suffer the need for care costs they will be entirely on their own until they are down to the last £100,000 of all of their wealth including their house,” he said.

“I do feel very disappointed for all of us, the millions of people who are very, very anxious about this, and I’m a bit surprised, because what social care is a classic example of a market failure where the private sector cannot do what’s needed…

“The changes just fail to tackle the central problem that scares most people. You are not tackling the big issue that people can’t pool their risks. There is nothing that anybody can do to pool their risk with the rest of the population, you just have to hope that you are not unlucky.

“It is not providing insurance. You could easily have care costs of £300,000 each if you are a couple; you are not able to cover that extreme risk which is what we all want to do faced with anything else which we can insure. That’s the market failure and these changes do nothing to address that.”

Classic bit of Home-Owner-Ism there, the bit that stings is that your wealth includes the value of your house, well duh.

Amazingly, Mr J Hunt takes the non-Homey/free-market position:

The health secretary, Jeremy Hunt, confirmed the Conservatives were planning to abandon a previous manifesto pledge to cap care costs.

Speaking from West Yorkshire, where the Tories will launch their manifesto, he told Today: “We’re dropping it because we don’t think it is fair because you could have a situation where someone who owns a house worth £1m or £2m, and has expensive care costs of perhaps £100,000 or £200,000, ends up not having to pay those care costs because they are capped. And those costs get borne by taxpayers and we don’t think that’s fair on different generations…”

When it was suggested the plans amounted to a death tax delayed, Hunt said: “It is not a tax. We are saying that the assets that you build up over your lifetime should be used to pay for your own care costs.”

Dilnot’s ramblings about “market failure” and “people losing the family home” miss the point, probably deliberately, that there are two completely separate issues here:

1. Taking out insurance against the risk of ending up with expensive long term care costs.

2. Taking out insurance against falls in value of your home/estate.

Re 1, another Guardian article says that the average cost of care is £20,000, i.e. £nil for the vast majority that never need it,  up to £100,000s of £1 million for the few who do.

I’m sure that insurers can cope with that basic idea. You pay in £1,000 a year from the age of 50 onwards (or whatever) and hope for the best. The problem will be who decides whether somebody requires long term care; how much they need etc, and there will be a veritable punch up between the insurance company’s assessor and the GP who makes the call. I can’t see that GPs are going to appreciate wasting hours defending and justifying each and every claim.

That’s not “market failure”, it is just too many unknowns. Insurance companies don’t want to put themselves at the whim of government employees (yes I know GPs are technically self-employed). So the only agency who can sort this out is the government itself by providing low-cost, compulsory  mass insurance i.e. taxpayer-funded ‘public’ services. And as we know, the best source of revenue to fund this is LVT, which completely goes against Homey principles, they want it to be funded with more taxes on workers and businesses.

Re 2, clearly, the taxpayer should not be called on to subsidise the value of other people’s assets, in particular their homes. In an ideal world, land values would be taxed away with LVT, so homes would largely fall out of the “wealth” equation. That leaves other assets (which in an ideal world would not be subject to Inheritance Tax), if people could get insurance against long term care costs, they wouldn’t need to worry about those assets being sold to pay for care, be definition.


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