Submission to the Dilnot Review of Social Care Financing in the UK 2011-12

1. Submission
to
Commission
on
Funding
of
Care
and
Support
from
Oliver
O’Connor
Special
Adviser
to
the
Minister
for
Health
and
Children,
Ireland,
2001-­‐2010
28
January
2011
Summary:
From
an
incoherent
system,
Ireland
introduced
a
new
scheme
for
financing
long
term
residential
care
in
2009,
providing
for
a
new
way
of
sharing
costs
between
the
State
and
individuals,
while
not
substantially
altering
the
proportions
of
State
and
individual
cost.
It
involves
a
scaled
co-­‐payment
according
to
means
by
the
individual,
with
the
State
meeting
the
balance
of
cost.
The
means
test
assesses
assets,
including
the
principal
private
residence,
but
provisions
for
a
deferral
of
contributions
related
to
house
asset
value
mean
that
no
person
has
to
sell,
mortgage
or
rent
their
house
to
pay
for
care
–
an
explicit
policy
goal.
Many
protections
are
included
in
the
legislation.
A
significant
element
of
choice
for
users
is
also
built
in.
All
nursing
homes,
public
and
private,
that
meet
quality
standards
and
value
for
money
may
take
part.
It
was
vital
to
start
the
policy
process
with
clear
propositions
for
the
public
and
equally
vital
to
iterate
and
refine
these
throughout,
while
keeping
the
essentials
clear.
Policy
design
and
implementation
took
several
years,
and
significant
political
commitment
overcame
some
initial
negative
reaction.
Introduction
1. I
was
Special
Adviser
in
the
Government
for
Ireland
for
Ms
Mary
Harney,
T.D.,
from
January
2001
to
September
2010,
focusing
on
policy
involving
finance,
economics
and
budgetary
matters.
She
was
Tánaiste
(Deputy
Prime
Minister)
up
to
September
2006,
and
Minister
for
Enterprise,
Trade
and
Employment
to
September
2004.
From
then
until
January
2011,
she
was
Minister
for
Health
and
Children.
I
offer
this
input
to
the
Commission
on
a
personal
basis.
2. The
challenge
of
long
term
care
provision
and
financing
is
common
to
all
developed
societies.
Britain
and
Ireland
share
many
common
traditions
and
cultures
in
terms
of
health
and
social
care
provision.
This
paper
is
a
summary
of
some
of
the
policy
choices
and
decisions
made
in
substantially
re-­‐designing
the
system
of
long
term
care
in
Ireland,
in
particular,
the
sharing
of
cost
between
the
State
and
individuals.
I
hope
the
Commission
will
find
some
of
these
reflections
useful
in
its
recommendations
for
policy
for
England.
This
paper
itself
is
not
written
as
a
recommendation
for
policy,
based
on
data
and
analysis
of
British
care
systems;
it
does
not
directly
offer
a
view
on
the
three
questions
posed
in
the
call
for
evidence.
Situation
prior
3. Ultimately,
the
focus
of
our
reform
of
financing
was
long
term
residential
care,
clearly
more
narrow
in
scope
than
the
work
of
the
Commission.
This
was
a
choice
for
several
reasons:

2. 2
a. By
January
2005,
when
we
started
our
work,
the
‘system’
of
long
term
residential
care
was
incoherent.
Basically,
over
the
years,
a
dual
State
role
had
arisen,
first,
by
the
provision
of
State-­‐funded
and
operated
public
nursing
homes
under
a
general
health
statute
of
1970,
for
which
every
person
was
‘eligible’
to
apply
for,
irrespective
of
means.
In
1990,
a
system
of
means-­‐tested
part
subvention
for
private
nursing
homes
was
also
created.
Both
because
of
funding
constraints
and
because
of
choice
by
some
families,
the
stock
of
public
nursing
home
places
was
not
sufficient
to
meet
demand.
People
who
could
not
get
a
public
nursing
home
place,
or
did
not
find
one
convenient
to
their
needs,
went
to
private
nursing
homes
and
applied
for
subvention.
In
public
nursing
homes,
the
co-­‐payment
required
was
80%
of
the
basic
rate
of
State
old
age
pension,
for
all
persons,
irrespective
of
their
means.
In
the
private
nursing
home,
means-­‐tested
subvention
amounted
sometimes
to
about
one-­‐third
of
the
cost,
with
the
individual
having
to
pay
the
rest
to
the
nursing
home.
Over
one-­‐sixth
of
people
received
no
subvention.
Clearly,
there
was
a
substantial
inequity
between
persons
in
public
and
private
nursing
home
places.
Those
who
felt
they
had
no
option
but
to
use
a
private
place
felt
particularly
aggrieved.
Indeed,
this
gave
rise
to
litigation
against
the
State,
some
of
which
is
still
before
the
Courts
and
is
contested
by
the
State.
Finally,
it
was
advised
by
the
Attorney
General
in
late
2004
that
the
charge
for
public
nursing
homes
places
(80%
of
pension),
was
itself
illegal,
i.e.
it
had
been
levied
by
health
agencies
ultra
vires.
This,
and
an
unsuccessful
legal
attempt
to
validate
it
retrospectively,
caused
us
(the
Minister,
Department
of
Health)
to
review
the
entire
financing
system
for
long
term
residential
care
from
the
bottom
up
in
January
2005.
b. It
was
also
the
case
that
data
on
home
based
care
was
even
less
complete
than
on
residential
care;
the
sharing
of
costs
was
somewhat
different
(in
that
there
was
no
subvention
scheme)
and
it
was
only
in
2005
that
a
systematic
provision
of
‘home
care
packages’
for
older
people
was
commenced.
c. From
a
public
financing
position,
it
was
felt
better
to
address
one
area
first,
see
how
a
new
system
worked,
review
it,
while
preparing
analysis
and
thinking
on
financing
long
term
care
needs
in
general,
using
the
experience
gained
from
the
residential
care
side.
Process
of
work
–
starting
with
the
end
in
mind
4. While
we
set
up
an
interdepartmental
Committee
in
January
2005
to
gather
data
and
process
the
necessary
analytical
work
for
all
aspects
of
social
care,
at
all
times
the
impetus
and
driving
force
was
to
achieve
clear
statements
for
citizens
and
potential
service
users.
These
propositions
were
achieved
at
the

3. 3
end,
but
many
were
present
from
the
beginning,
leading
to
the
system
design.
In
short,
they
were:
a. There
will
be
a
clear
and
modern
clinical
assessment
of
medical
need
for
residential
care
applied
consistently
for
the
whole
country.
The
assessment
will
be
done
efficiently.
b. Most
people
can
and
should
be
cared
for
at
home.
Residential
care
is
for
people
with
high-­‐dependency
needs.
c. There
is
no
age
discrimination
or
qualifying
age
in
the
scheme.
d. While
the
State
will
continue
to
meet
most
of
the
overall
cost
of
care
(about
66-­‐70%),
there
will
be
a
contribution
to
the
cost
of
care
from
individuals.
e. Your
contribution
will
vary
according
to
your
means.
Once
you
make
your
contribution,
the
State
will
pay
the
rest.
You
will
not
be
exposed
to
price
increases
by
a
nursing
home
provider.
f. There
will
be
an
utterly
fair
and
transparent
means
test,
covering
both
income
and
assets.
g. You
will
not
have
to
sell
your
home
to
pay
for
care.
You
will
not
have
to
mortgage
your
home.
h. Your
family
will
not
be
means-­‐tested
or
be
required
to
contribute
to
the
cost
of
your
care.
i. You
will
not
have
to
deplete
your
savings
fully.
j. You
will
have
a
choice
of
nursing
home
provider.
k. All
nursing
homes,
public
and
private,
may
be
part
of
the
scheme
on
an
equal
basis.
The
same
explicit
standards
of
care,
and
independent
inspection,
will
apply
to
all.
l. There
is
no
obligation
use
the
scheme
on
the
part
of
a
nursing
home
or
on
the
part
of
an
individual.
If
people
want
to
fully
pay
for
care
independent
of
the
State,
they
may
do
so.
5. Some
of
the
policy
thinking
for
the
scheme
was
informed
by
a
substantial
policy
framework
document
produced
by
the
National
Economic
and
Social
Council
called
‘The
Developmental
Welfare
State”.
This
analysed
modernised
welfare
and
State
support
in
general,
and
described
a
concept
of
‘targeted
universalism’
–
that
is,
a
universally
available
service
with
different
levels
of
contribution/access/prioritisation
based
on
individuals’
needs.
6. Ultimately,
new
policy
ground
was
broken
by
the
Nursing
Home
Support
Scheme,
referred
to
also
as
‘the
Fair
Deal’,
in
a
number
of
respects:

4. 4
-­‐ the
scaled
contribution
according
to
means,
eliminating
discontinuities
and
flat
charges
for
the
poorest
and
wealthiest
alike.
The
contribution
is
80%
of
assessed
disposable
income
(plus
an
imputed
5%
of
the
value
of
assets,
with
a
disregard
of
the
first
€36,000),
capped
by
the
cost
of
care.
This
was
similar
to
the
old
public
scheme,
where
a
person
whose
sole
income
was
the
State
pension
was
asked
to
contribute
80%
of
it
to
the
cost
of
care1;
the
inclusion
of
assets
was
a
feature
of
the
Subvention
scheme.
-­‐ the
use
of
‘any
willing
provider’
which
met
standards
and
value
for
money,
in
a
comprehensive
way,
and
choice
for
patients;
-­‐ the
inclusion
the
principal
private
residence
asset
in
means
testing
and
choice
to
defer
the
relevant
contribution
arising.
The
first
of
these
two
received
attention
in
the
realms
of
policy-­‐formation
debate,
but
the
latter
(the
treatment
of
the
house
/
land)
was
one
that
the
public
paid
most
attention
to,
since
it
went
to
the
heart
of
sharing
of
cost
between
State
and
individual,
and
there
is
strong
cultural
attachment
to
home
ownership.
The
problem
of
selling
or
mortgaging
a
home
and
had
been
one
of
the
disliked
elements
of
the
Subvention
Scheme.
Treatment
of
the
house
asset
7. As
mentioned
above,
since
1990,
there
was
a
means
test
for
the
private
nursing
home
Subvention
Scheme.
This
test
included
the
principal
private
residence
of
the
person
applying
for
subvention.
For
the
sake
of
simplicity,
in
the
case
of
a
single
person,
a
notional
income
of
5%
of
house
value
was
ascribed
to
the
house.
Thus,
when
the
average
house
price
was
€200,000,
the
means
test
would
assume
the
individual
received
a
rental
income
of
€10,000
a
year,
or
€192
a
week.
This
was
broadly
the
level
of
the
State
old
age
pension
in
the
mid-­‐
to
late
2000s.
The
weekly
cost
of
care
varied
regionally
from
about
€650
a
week
to
€1,000
a
week.
A
subvention
of
approximately
€300
per
week
was
often
available;
only
in
a
minority
of
cases
was
an
‘enhanced’
subvention
reaching
€600
a
week
given.
Some
people
received
less
than
€300,
some
received
no
subvention.
Clearly,
it
left
a
substantial
funding
gap
for
the
individual
–
one
which
realistically
could
only
be
met
by
relatives
or
by
selling/mortgaging/renting
the
house.
By
contrast,
a
person,
of
whatever
means,
who
got
a
public
nursing
home
place
was
charged
around
€120
in
total
(by
reference
to
the
prevailing
rate
of
State
pension).
8. In
our
review,
it
was
judged
that
it
would
be
inefficient
and
inequitable
not
to
take
account
of
the
value
of
the
principal
private
residence.
Inefficient:
1
Very
few
people
in
the
over-­‐65
age
cohort
have
substantial
incomes;
the
average
income
is
only
about
10%
higher
than
the
old
age
pension
itself.
However,
some
persons
may
receive
no
financial
support
for
nursing
home
care;
in
simplified
terms,
any
person
with
assessed
disposable
income
over
€65,000
approximately
would
get
no
financial
support
for
nursing
home
care,
at
a
price
level
of
€1,000
per
week
–
80%
of
€65,000
being
€52,000

5. 5
because
clearly,
house
asset
values
(even
having
fallen
now
substantially
since
2007)
represented
a
store
of
wealth
which
was
destined
otherwise
for
inheritance
–
why
should
it
not
be
used
for
a
pressing
need
for
the
generation
owning
it?
If
this
source
of
wealth
were
not
used
to
finance
care,
another
source
would
have
to
–
inevitably
falling
on
the
working
generation
(those
who
would
inherit
the
asset
later
intact).
Using
the
store
of
wealth
in
housing
would
be
less
distortionary
on
economic
activity
than,
for
example,
additional
tax
on
labour,
consumption
or
investment.
Inequitable:
because,
once
there
is
any
means
test
for
care
(as
distinct
from
a
service
free
at
the
point
of
use
for
all,
a
policy
position
taken
by
some),
it
is
compelling
that
no
asset/income
should
be
exempt
ipso
facto;
otherwise
an
inherent
unfairness
would
be
built
in,
and
opportunities
for
avoidance
or
wealth
re-­‐organisation
would
be
created
for
those
in
a
position
to
do
so.
9. However,
there
was
a
strong
political
position
taken
by
the
Minister
and
Government
from
the
outset
to
meet
a
traditional
and
deep
concern
on
the
part
of
older
people
not
to
have
to
sell
or
mortgage
their
house
once
they
went
into
residential
care.
10. We
were
also
conscious
that
there
was
an
evident
degree
of
mistrust
for
commercial
equity-­‐release
products
offered
by
banks,
notwithstanding
that
they
were
used
by
some
people.
People
were
fearful
of
total
asset
depletion.
It
was
not
going
to
be
possible
to
force
everyone
to
use
such
a
device.
Difficult
issues
like
the
role
of
the
State
in
pricing
and
interest
rates
arose,
if
the
State
effectively
created
a
reliance
in
its
own
scheme
on
commercial
equity
release
products
(some
of
this
reasoning
also
applied
to
constructing
a
scheme
that
relied
on
commercial
long
term
care
insurance).
11. The
conclusion
arrived
at
was
the
following:
a. In
the
means
test,
a
5%
imputed
income
value
annually
from
the
house
would
be
added
to
other
disposable
cash
income.
b. To
give
reassurance
about
total
depletion,
the
5%
value
was
capped
at
three
years’
value:
i.e.
a
maximum
of
15%
house
value
(this
was
chosen
because
the
average
length
of
stay
in
a
nursing
home
was
2.5
years).
c. The
person
would
have
a
choice:
to
pay
this
portion
of
the
contribution
upfront
(through
e.g.
sale,
mortgage,
family
contributions)
or
to
defer
it
and
have
the
State
collect
it
from
the
person’s
estate.
d. We
had
to
create
a
legal
mechanism
to
put
this
charge
on
the
estate,
which
entailed
also
enacting
much-­‐modernised
mental
capacity
legislation
and
protection
for
both
the
person
in
care
and
any
care
representative
making
that
the
‘charge’
decision.
e. The
house
valuation
was
professionally
carried
out,
but
could
be
appealed
by
the
person
after
the
passage
of
some
time.

6. 6
f. The
joint
ownership
by
spouses
of
houses
was
recognized,
as
was
the
position
of
adult
dependants
(generally,
people
with
disabilities)
living
with
parents.
The
collection
of
the
deferred
contribution
from
estates
was
itself
deferred
until
after
the
death
of
a
spouse
and
of
any
adult
dependant
reliant
on
that
home.
g. There
is
an
interest
rate,
set
at
the
Consumer
Price
Index,
to
take
account,
somewhat
imprecisely,
of
the
cost
of
funding
to
the
State.
Furthermore,
the
Department
of
Finance
had
to
calculate
the
upfront
cash
cost
of
the
scheme
relating
to
deferrals.
12. It
took
a
degree
of
political
skill
and
courage
to
introduce
this
concept.
Irish
people
share
with
British
people
a
strong
attachment
to
their
family
home.
It
was
first
approved
and
announced
by
Government
in
December
2006.
There
was
initially
a
vigorous
political
and
media
reaction
against
it.
The
legislative
and
administrative
process
took
quite
some
time
subsequently.
The
scheme
was
enacted
in
2009
and
commenced
in
October
that
year.
While
media
comment
was
very
negative
initially,
service
users’
views,
in
practice,
seem
to
be
positive,
particularly
because
of
the
element
of
choice.
Under
the
social
partnership
model
then
used,
representative
bodies
were
invited
to
make
comment.
Organisations
like
the
Irish
Farmers’
Association
engaged
on
the
farm/inheritance
issues
and
the
details
of
legislation
were
drafted
accordingly.
Statistics
will
become
available
increasingly
on
the
choices
individuals
make
with
respect
to
payment
upfront
or
deferral.
13. There
are
variations
and
details
applying
to
the
scheme,
in
relation
to
spouses
(basically,
assessment
and
ownership
of
assets
is
deemed
to
be
half
share,
so
that
the
5%
of
total
house
value
could
in
fact
be
2.5%
if
a
spouse
lives);
and
in
relation
to
farms
and
small
businesses.
These
are
set
out
fully
in
the
Frequently
Asked
Questions
document
attached.
Provider
arrangements
14. It
may
also
be
worth
noting
briefly
some
features
of
the
provider
side.
There
was
widespread
private
nursing
home
provision
in
Ireland
before
this
scheme
–
about
63%
of
the
19,416
beds
were
in
the
private
sector.
Typically,
the
individual
made
arrangements
directly
with
the
private
nursing
home,
but
a
practice
also
arose
whereby
the
State
purchased
beds,
so-­‐called
‘contract
beds’.
This
gave
rise
to
a
further
anomaly
whereby
two
patients
in
the
one
nursing
home
could
be
paying
radically
different
contributions
to
the
cost
of
their
care,
depending
on
whether
they
were
in
a
public
‘contract’
bed
or
fully
private
bed
(with
no
distinction
in
accommodation
type
or
care
level).
15. In
the
new
scheme
the
State
contracts
with
all
private
providers
who
want
to
be
part
of
the
scheme.
A
contracting
agency,
the
National
Treatment
Purchase
Fund
(NTPF),
bargains
with
all
providers
on
a
bed
charge
basis.
There
is
no
national
tariff,
since
prices
vary
regionally,
reflecting
premises
costs
and
some
degree
of
labour
availability.
The
NTPF
pays
per
bed
used,
not
to
have
general
capacity
available.
It
might
be
remarked
that
the
NTPF
has
very
strong
pricing
power
over
providers
in
this
scheme.
Indeed,
it
is
a
near-­‐monopoly

7. 7
buyer,
but
it
is
constrained
to
act
reasonably
as
a
public
body,
and
as
such,
it
is
also
accountable
to
the
Oireachtas
(Parliament)
through
the
Minister
and
Department
of
Health
and
Children’s
Accounting
Officer,
and
is
subject
to
potential
judicial
review
of
its
administrative
decisions.
16. It
is
to
be
noted
also
that
the
NTPF
does
not
yet
pay
a
separate
State
body,
the
Health
Service
Executive,
for
State-­‐run
long
term
care
beds
in
this
way,
although
the
new
system
has
required
all
public
nursing
homes
to
publish
their
actual
costs
per
bed
(interestingly,
those
costs
are
higher
in
the
public
sector
generally,
even
though
all
nursing
homes
are
required
to
meet
the
same
standards
of
care
and
physical
accommodation
standards).
Recent
recommendations
from
an
expert
group
have
recommended
much
more
extensive
use
of
payment
for
output/outcomes
in
the
public
sector.
This
would
mean
that
public
nursing
home
beds
would
then
be
bargained
for,
and
purchased,
in
the
same
way
as
private
beds
are
already.
17. There
have
been
some
disputes
about
the
package
of
care
the
NTPF
will
pay
for,
and
it
is
clear
that
some
private
nursing
home
operators
offer
their
patients
more
than
the
NTPF
will
pay
for
(e.g.
in
the
area
of
social
activities)
–
and
pass
on
charges
to
patients
accordingly.
It
is
an
important
policy
objective
to
keep
the
package
of
purchased
care
adequate
for
the
patients’
needs
and
not
to
allow
a
significant
divergence
to
grow
between
those
who
can
afford
top-­‐ups
and
those
who
cannot,
within
the
one
home
particularly.
Conclusion
18. To
address
the
issue
of
cost-­‐sharing
between
the
State
and
the
individual,
it
was
vital
to
start
with
some
clear
propositions
for
the
public
to
guide
policy
development,
to
iterate
and
refine
these
while
addressing
the
complexities,
and
to
come
out
with
simple,
clear
propositions
at
the
end.
There
are
some
policy,
even
philosophical,
choices
that
the
analytical
process
can
not,
and
will
not,
of
itself
make.
Starting
propositions
are
decidedly
necessary.
19. The
cost
to
the
State
of
funding
long
term
residential
care
was
not
substantially
altered.
Under
the
previous
and
new
arrangements,
it
still
meets
about
two
thirds
of
the
total
cost
–
it
was
about
€1bn
in
2005
terms
for
approximately
22,000
people
in
care.
There
was
an
additional
timing
cost
to
the
State
in
funding
the
upfront
cash
provision
for
deferred
contributions,
which
depends
on
the
choices
made
by
individuals
deferring
or
not
–
possibly
in
the
order
of
€100m.
20. However,
the
private
contribution
portion
was
made
more
rational
and
fair
across
all
individuals
and
all
personal
circumstances.
Some
people
paid
the
same
–
effectively,
those
whose
income
was
effectively
the
State
pension
and
who
did
not
have
any
significant
assets.
Some
would
pay
less
–
those
whose
private
contributions
to
the
cost
of
a
private
nursing
home
place
were
higher
than
the
new
co-­‐payment
level.
And
some
would
pay
more
–
those,
in
particular,
who
had
medium
to
high
incomes
or
assets,
but
who
secured
a
public
nursing

8. 8
home
place,
rather
than
paying
for
a
private
bed.
A
transition
provision,
however,
was
implemented
to
ensure
that
no
person
currently
in
care
would
be
disadvantaged
by
the
introduction
of
the
new
scheme.
So
no
person
actually
lost;
the
changes
were
in
notional
cases
or
what
a
person
might
have
paid
under
the
old
scheme
relative
to
the
new
one.
21. The
introduction
of
a
rational
co-­‐payment
mechanism
for
individual
contributions
was
seen
as
improving
the
sustainability
of
financing
long
term
care,
even
if
it
was
not
aimed
at
reducing
the
foreseeable
Exchequer
cost.
22. Extracting
from
the
complexity,
the
following
tests
were
used
for
the
acceptability
of
using
the
house
asset
for
finance:
a. Clarity
of
concept
and
rationale
b. Affordability
–
contributions
not
in
excess
of
actual
disposable
income
c. Fairness
-­‐
as
between
all
applicants
across
the
country
d. Choice
–
upfront
payment
or
deferral
e. Simplicity
–
while
addressing
situations
like
farmsteads
f. Capped
depletion
of
house
asset
value
at
an
acceptable
and
evidence-­‐based
level
g. Exemption
of
some
savings
–
up
to
€36,000
individually
h. Protection
of
persons
with
diminished
capacity
while
allowing
for
sufficient
decision-­‐making
powers
for
care
representatives
(usually
family
members)
i. Protection
of
spouses
and
adult
dependants
j. Non-­‐commerciality
of
deferral/”loan”
provisions
k. Administrative
ease
to
the
greatest
extent
possible
l. Well-­‐grounded
legal
framework
to
avoid
estate-­‐probate
complications
Other
ideas
for
the
scheme
were
examined,
including
insurance
and
total
tax-­‐
based
funding,
but
the
Scheme
as
designed
was
ultimately
chosen
as
meeting
the
tests
of
ability
to
fund
care
provision,
financial
sustainability
and
fairness.
Oliver
O’Connor

9. 9
London
28
January
2011
Appendix
Documentation
Comprehensive
documentation
on
the
Fair
Deal,
the
Nursing
Home
Support
Scheme,
is
available
at
http://www.dohc.ie/issues/fair_deal/
In
addition:
Report
of
the
Long
Term
Care
Working
Group,
2008
(publication
date)
(incl).
Frequently
Asked
Questions
(release
2009)
–
when
scheme
is
operational
Frequently
Asked
Questions
(release
December
2006)
which
gives
statistics
available
at
the
time
of
the
Government
policy
decision