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Spectator Briefing

Fixing social care is key to the future of the NHS

23 October 2017

8:46 AM

23 October 2017

8:46 AM

On 12 September, The Spectator hosted a round-table dinner, sponsored by Bupa, to discuss the future of healthcare in Britain, involving MPs and practitioners. This is a summary of the evening’s discussion.

We are forever being told that the health and social care system is in crisis thanks to government ‘cuts’. The trouble is that political parties which try to be honest about the rising cost of healthcare, and come up with solutions as to how we will fund it, tend to be given a rough reception – as the Conservatives discovered when they launched their manifesto for this year’s election, which saw their proposals for social care funding damned as ‘dementia tax’.

So what would a financially sustainable health and social care system look like, and how do we get there? The charge that the NHS is crumbling due to ‘cuts’ is not true. Actually, the NHS has seen its budget rise steadily in recent years, from £111.7 billion (at today’s prices) in 2009/10 to £123.7 billion in 2017/18 – although this real-terms rise (of just over 1 per cent) is much lower than the annual real terms increase of 4 per cent to which the NHS has been accustomed since its foundation in 1948. Services are under strain not because the overall budget has been slashed but because we are demanding ever more from the NHS. For example, there has been a huge rise in the number of people sent for colonoscopies to detect or rule out bowel cancer. Ever more advanced and expensive treatments have become available, especially at the end of life.

The image that the NHS is struggling is not shared by all. Interestingly, people are less likely to say that they think the NHS is failing if they have had a recent stay in hospital. The reality, it seems, is a lot better than is widely perceived by people who have not had cause to use NHS services.

While it will be possible to fund a free-at-the-point-of-delivery NHS through general taxation for the foreseeable future, social care is a different story. Demand is rising sharply thanks to an ageing population. Moreover, in social care budgets really have been cut. In 2014/15 local authorities – through whom public-funded social care is provided – spent £7.23 billion on social care for people over 65. This was 11 per cent lower in real terms than it had been in 2009/10. These cuts have been effected largely by reducing the scope of the care service. The number of older people receiving some sort of public-funded social care has fallen 25 per cent over the same period, from 1.1 million to 850,000.

Britain is unusual in having a ‘Beveridge’ model of public healthcare. Most countries such as France and Germany have what is called a ‘Bismarck’ system – whereby healthcare is provided through compulsory health insurance. Most Bismarck systems work on ‘community rates’ – meaning that people pay similar premiums and are not penalised, for example, by having medical conditions. Premiums are like a tax, deducted from pay packets just like National Insurance Contributions.

The main difference between a Beveridge system and a Bismarck system is that that latter has a plurality of providers, some of which might be state-owned, others of which might be not-for-profit and others of which might be run for profit. In Britain, a single organisation, the NHS, provides the vast majority of healthcare. Most countries with Bismarck systems pay a little more, relative to GDP per head, than we do. The US – where most people have to buy their own insurance and public healthcare is limited to the elderly and the poor – actually spends more per head on public healthcare than we do.

Every so often over the past 30 years it has been argued that our system should be reformed, perhaps becoming more of a Bismarck system. But it would be politically difficult because any suggestions along these lines tend to be met with charges of ‘privatising’ the NHS. It has also been suggested that pressure could be taken off the NHS if we developed a bigger, parallel private healthcare system. At present, the private healthcare market is tiny – just £6.4 billion a year, compared with the £123 billion spent on the NHS. But there would be problems in expanding private healthcare. The Treasury has studied the potential effects of giving tax breaks for private healthcare and concluded that it would not remove much of the burden from the NHS – it would just expand demand for elective surgery. Moreover, it could have a harmful effect on the availability of NHS doctors. In Pinochet’s Chile, the development of a parallel private healthcare system resulted in orthopaedic surgeons rushing off to the private sector to perform elective surgery, and leaving the public health care system short.

The current model of the NHS, free at the point of delivery and funded through general taxation, isn’t going to change. There is a possibility, however, that extra money might be raised from some sources – the age ceiling for prescription charges could be raised from 60, as it is now, to retirement age. There is limited scope, however, for charges for services such as GP appointments – a £10 charge might be more trouble than it was worth, once the cost of collecting the money was taken into account.

There is still potential to save money through efficiencies. Built into NHS funding is already an assumption that productivity will increase by 2-3 per cent a year between now and 2021. The NHS, however, is not very good at supporting staff who are looking to improve methods of working. It is still very bad, too, at making purchases – there is a lot of scope for improvement here. Could we save the NHS money by looking after ourselves better, and switching some spending from prevention to cure? We could certainly improve our health and reduce the need for some treatment throughout life. But a lot of the increasing cost of healthcare comes from end-of-life care. However healthy our lives, eventually many of us are going to require expensive healthcare. Spending money on prevention, in other words, is not a direct alternative to spending it on cure.

What does need to be addressed, however, is funding for social care. This is hugely important because every extra £1 spent on social care saves the NHS 35 pence, as it frees up beds currently blocked by people who really need long-term care but who have nowhere to go. In contrast to NHS care, those with the sufficient means are expected to fund their social care. If you have £23,250 in savings or assets you are expected to pay the full cost of your care. Between £14,250 and £23,250, income from your savings or assets will be taken into account. Below £14,250 and the state pays the lot. In 2012 the Dilnot Commission proposed that the government set a cap of £35,000 on what older people would have to pay on social care. Once they had run up a bill of this amount the state would pick up the tab (no matter how many millions they had in the bank).

The Coalition accepted his arguments but decided instead on a cap of £75,000. However, during this year’s general election campaign the Conservatives did an about-turn and, instead of a cap, proposed a floor. Recipients of care would be expected to fund the full cost of their own care until their savings were down to £100,000. Although this is more generous than current arrangements, Theresa May performed a partial u-turn several days later after heavy criticism about what Labour called the ‘dementia tax’.

Britons hold a huge amount of equity in their homes, but it is politically difficult to tap this for social care because many people expect to be able to pass on their wealth to their children. Moreover, the concept of ‘equity release’ from housing is tainted by association with sharks. One possible solution is a system used in some private care beds in Australia. These are paid via a bond which in many cases is funded through the sale of a patient’s property. The money is invested to provide income which pays for the care. The equity, however, remains intact and is returned to the family.

If the NHS is to be sustainable it first needs a sustainable workforce. At present it doesn’t, with poor rates of staff retention. Often, the problem of doctors and nurses leaving the system is put down to low earnings. Yet this is not the real problem – few who are leaving cite their earnings as the reason. It is more a case of working conditions. Some staff are leaving because they say they are not able to give the standard of care that they want to give, which is especially true in emergency care.

What would make a big difference to the future sustainability of the health and social care system is an improvement in the training infrastructure. Britain is hugely reliant on doctors and nurses who were trained overseas. This is especially true in the care home sector where 90,000 nurses come from elsewhere in the EU. Foreign investors are very shy of investing in the UK social care sector because they are concerned where staff are going to come from, as well as who is going to pay for care.

The beginning of a sustainable social care system might be to ask: what would need to happen to make investors interested in Britain’s social care system?

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