Meeting the challenge of financing health and aged care: Re-Thinking Social Care

27 January 2011 Re-Thinking Social Care
Professor Martin Knapp Thank you very much indeed for inviting me here. As somebody said earlier: how do we solve the aged care problem?  I am not going to solve the problem, but I want to share some of the issues, some of the possible solutions, and hopefully contribute then to the discussion.   I am going to briefly describe what social care means; set that context in terms of the policy context; show you two slides on the really gloomy projections, in terms of future costs; summarise the main policy issues that are being discussed in social care, here and in many other countries; and then get into the issues of financing and the health/social care interface.  I was asked to particularly think about the health/social care interface. The last time I spoke in this room was the dementia summit, and I think dementia is probably the quintessential example of the challenges of health and social care integration or interfacing.   I shall start by defining social care. Countries and systems do differ, they differ now within the UK to some extent, but the common aims, I would say, would be to reduce the consequences of, or compensate for disability or disadvantage.  They do that by supporting families and communities, and of course by supporting and empowering individuals to lessen their dependence, in many respects, with the ultimate aim of improving quality of life.  It is a rather less precise, shall we say, set of objectives than improving health, and social care has always struggled a little bit with the position it might find itself in within a system more generally.     The main groups of people who are supported are children and families, older people and a range of people with disabilities, impairments and needs. The main service types - the things that you would be familiar with – are support in one’s own home, care in nursing homes, day activities, and so on, a whole range of things within a very complicated system.   Colleagues of mine in the Personal Social Services Research Unit have developed a suite of measures for measuring outcome in social care. For adults who use social care, the domains that we use, which are helpful to remember, are: personal cleanliness and comfort; making sure people have food and drink; ensuring safety; making sure they are kept in clean and comfortable accommodation; helping them participate in social activities and be involved; allowing them control over their daily lives; giving them something to occupy themselves; and supporting, caring for and treating them with dignity. Those outcome dimensions are not dreamt up by some academic sitting in a university office; these come from an extensive amount of fieldwork, talking to people who use services, or who have relatives who use services. Again it is more complicated than you would find when the main income is improving health or health-related quality of life.   We know that people have needs, in this case, needs for social care or long-term care, which have a number of roots. Those people, because of their needs, will often be quite high users of a range of different systems and services, and so, pretty much everybody who is an older person using social care services will be an above average user of healthcare services as well.  Many younger people, with some disabilities or challenging behaviours, will have high use of some other systems. I have put the Central Government Departments that are responsible for those different sectors and that emphasises that people with social care needs, many of them, are dependent upon, or need support in some way from, a range of different service agencies, and so their needs are not just contained within one neatly defined sector. They have to get their support from a whole range of different sources, and that is often a cause for considerable difficulty for them. I am going to talk about the health/social care interface in a moment, but there are a number of other interfaces.   I will now highlight some things which I think are important for understanding some of the challenges we face in the social care context. We are talking about personal services for people who are often very vulnerable. Many of those people have multiple needs, and so they have above average use of many services. There is an association between need and socioeconomic position.  It is not a simple association, but there is a higher risk, for people in lower socioeconomic groups.  There is a stigma about receiving some social care services.  My daughter is currently training to be a social worker.  She is on placement in a school.  She could not believe how many children in this secondary school, in very nice middle class Canterbury, were in contact with, being supported and protected by, the local child services. The filing cabinet with the names of those children is the most highly confidential filing cabinet in the whole school, and most of those children do not want other children to know that they are in that circumstance.  There is a huge stigma around it, which does not exist with receipt of most healthcare services.  Some care is compulsory, for some of those children. This is also true for many other people and many users of social care services have difficulty or reluctance expressing their preferences.  Consumer power is not non-existent and we are recognising that we have under-recognised, under-valued and under-appreciated the power that people can exercise when given the choice and control. However, this is still relatively weak in social care compared to many products we have in the economy.   Interventions mainly address the consequences and not the causes of need.  Interventions are actually quite simple, technologically, and because they are simple, that means that many very expert groups, like journalists that work for some newspapers, feel that they can pontificate with what they think is great wisdom on what social care means. Social care is not complicated, but it is not quite as simple as is often made out.  The third point is that most social care is relational.  The quality of the link between carer and user is crucially important, and I will give one anecdote.  I interviewed the Director of Social Services in Westminster 20 years ago. Westminster, at that time, was just coming out of the selling the cemeteries issue and it was one of those Councils that were very early in the contracting-out of services. She said she had to keep reminding her councillors that social care is different from, say, rubbish collection because you do not care who empties your bin, but you do care who wipes your bum. When you think of it in those terms, much social care is very personal.  It involves personal things and so the relationship you have with the person who is doing it is actually quite important. There is an issue there even more so than it would be perhaps in some healthcare contexts.  Many social care jobs have low status – they are low skill and low pay. There are many agencies involved in social care, not just in the state sector but in the private and voluntary sectors, and that will be important as we return to the financing in a moment.   This is a slide of the expected expenditure on long-term care over the next 22 years, based upon today’s system.  If we take today’s social care system and just keep rolling it forward, this is what would be the situation. There are many variants on those projections, depending on your assumptions about mortality rates and the availability of carers and all sorts of other things. The core message is that the cost of long-term care, both public and private, based upon today’s financing arrangements, will change hugely.   This second picture, which comes from the Map 2030 project, funded by the ESRC, shows the Government expected spending on pensions, on means-tested benefits for people aged 65 and above, and long-term care, as a percentage of GDP. There are different assumptions about survival rates. The very high is the most optimistic assumption for how people will survive as they get older. However, there is a substantial increase from around 6% to around 8% of GDP over the course of that relatively short period. We are facing a major challenge.   I am now going to identify the main issues.  We initially have “revenue collection” which channels resources into the social care system. There are many different ways of doing that. The money then gets challenged to some sort of purchasing budgets, whether it is social care, health care and also other agencies. Those purchasers then commission services from providers.  Those providers, whether they are care homes or home care agencies, will employ a range of resources – staff, vehicles, buildings amongst others – and also rely quite heavily on family inputs and other unpaid carers. With those resources, they deliver services, and I, as an economist, call them intermediate outputs. They are services of different qualities, and those services generate outcomes – meeting the needs of the individuals and getting improvements in their health and wellbeing.  From an economic perspective that is a simple production system. There is something slightly different here which I have called “non-resource inputs”. They are called non-resource inputs because they are inputs that do influence how good you are at achieving your outcomes, but they do not have an obvious price. They would be tings such as the social environment within a care home, the relationship between the person receiving care and the person providing that care. Those are very important in determining how successful those services are, but they are not traded within a market, not in a direct way.    That system allows me to do two things. Initially, we remember that funds are likely to go down at exactly the time when needs are increasing quite rapidly. Secondly, I can use that slide to identify the main discussion points, in this sector.  The first issue is the question of financing, to which I shall return. The second discussion is how we transfer that money from the purchasing budgets to the providers – and the majority provider of social care is the family, unpaid, and the next biggest provider is outside the state sector.  The state is a very small provider of social care services today, but it is a very major funder, so the issue of setting the relationships between purchases and providers is crucial.  A third set of policy issues would be around prevention. A fourth issue around the technology of care is linked to the quality and some of the things we were hearing earlier would be just as important in social care. There is then the question of measuring outcomes and ensuring we get good outcomes. There is the question of co-production – the involvement of families and use of their tremendous skills. The final one question is of integration – working to integrate health and social care in ways that are helpful.   There are these seven Ps which are the principles that the Coalition Government put out just shortly before Christmas for social care. In fact, they did not have to bend the principles too much to make them begin with P: prevention; personalisation; partnership; plurality – that is, recognising the diversity of needs, providers; protection of people - safeguarding because of the very considerable risks for many people; productivity - achieving good outcomes; and people - investing in the workforce in social care. Those principles are the seven Ps of the Coalition Government, but the previous Government’s objectives for social care were very similar, and there is not much dispute about the relevance of these as the main emphases in the social care sector.   I will now move on to the question of financing. Here is a very brutal summary of the current situation. We know that healthcare is free at the point of use, throughout the UK.  Nursing care in nursing homes is now also free throughout the UK. Personal care delivered within the social care sector is free in Scotland, but in the rest of the UK, it is means-tested, so those above quite a low level of income or wealth holdings would be liable to pay charges.  Hotel costs - accommodation costs in care homes - and domestic help are also subject to those means-tests and charges though disability cash benefits are not subject to means-tests. That is the basic system.  I am sure that Lord Warner and his fellow commissioners might recommend some changes to those patterns.   Here are some discussions of three main approaches to long-term care, and they each have their difficulties.   One option is to let people buy their services out of their own incomes through pocket payments. The problem with that idea is it simply would not work. If you survive to 65, you can expect, on average, to have long-term care costs of £35,000 before the end of your life.  Now, to many people, that would be completely unaffordable, and of course, to many people, it would be considerably much more than £35,000.  So, we have, in some cases very high costs for people, which would be very difficult for them to afford. The availability of family support to provide some of that care for free is very variable, and it is becoming less available as well, so it is a problem of unpredictability and very high costs.   Another idea is a voluntary or private insurance system where people are free to purchase their insurance to cover their long-term care costs. This has proved very difficult, and there are many reasons for that. People have very low perception of their risks. People have very low risk perception. They have particularly low risk perception when they are young adults. That period of their lives is the time when, if they are going to have an affordable long-term care policy, they should start contributing. There is a low willingness to pay for insurance coverage and there are all sorts of problems about moral hazard and adverse selection - the sorts of things we heard described very well in relation to the Dutch system.   Private sector insurers have also had difficulty. They find it very difficult to predict care costs. It is much harder to predict social care costs than it is to predict even healthcare costs, and hence it is difficult to price their products.  So, that is very difficult, particularly if you are thinking about trying to price a product which you are selling to people which they may not used for 50 or 60 years. Therefore, it is quite a difficult technology for the insurers, and anyway, life expectancy is still changing. Health technology is improving, public health programmes are having their impact and so it is not as if there is a static situation in terms of the likely trends in need.   The third option then would be to go to a collectively organised financing system, which would then allow for risk pooling across the whole of society, rather than just risk pooling within the insurance customers. This means you can then target on the most vulnerable individuals and you can address income variations – there are lots of attractions to that.  However, most systems do have some co-payments, and that would influence take-up.  I used to have a neighbour who was assessed as needing homecare. She decided, after she had paid the first monthly bill that she was not going to have homecare anymore, and she then just saved the money that she had been paying for homecare. When she had enough money in the jam-jar, she went on a coaching trip round Europe!  Now, that was probably a very good choice and probably improved her quality of life, but I do not think that it improved her length of life. Charging even relatively small amounts can influence take-up and will have implications for the distribution of the benefits as well as the burdens. Again, there can be drawbacks if there is no compulsory membership of this scheme, but the biggest drawback is that current systems in many countries do not look sustainable or affordable in the long-term.  There is no reason why we should not sustain the current system; it is just that it is unlikely to win much favour with taxpayers who are facing a big hike in their rates of taxation.   There are kind of three main systems that you can observe across high-income countries. You have the minimum safety net system, which we have in England and the US. It minimises state intervention and is relatively low-cost.  The targeting of public resources is on low-income groups, but there is a danger of leaving a group of people behind, and that has been very evident in this country over recent years. People on very low incomes will get support from the state.  People on very high incomes will have no problem paying for their care. It is the people in that middle area who have great difficulty in finding the right solution, and of course, the system, as we know very well from lots of discussion, penalises financial prudence. In the high-cost end of the market, in places such as Denmark and Sweden, the system is state funded and has very few co-payments. It is rightly spaced, it is very transparent, there are lots of good things about it, but it is very high cost. Somewhere in the middle, would be the so-called progressive universalism of France.  It is a combination of universal entitlements to state help, combined with a means-tested element. It is a top-up system which has the advantage of limiting state expenditure.   There are many different systems.  I think that the funding of social care varies much more between countries than does the funding of healthcare, and so many countries are still trying to find a system that works well.   Here are two things to illustrate some of the difficulty of learning from international experience.  Here are percentages of people aged 65 and above living in institutional settings - the countries are on the left-hand side - and they do relate to different years. Some of the data is a little bit old – 2000 – but you can see lots of variation between the countries, from 2% in Italy up to nearly 12% in Norway.    If you look at people living in their own homes receiving homecare, the variation is even more marked.  We do not have the data for Italy, but it is down to about 5% in Ireland and up to 25% in Denmark. There is a lot more variability, I would say, again, in social care between countries than perhaps there is in healthcare between countries, which makes it quite difficult sometimes to learn from those international experiences.   I am now going to move on to the integration issue. There are some implementation challenges which we are facing in the discussion here.  The first issue is about the raising of revenue. The second one is about eligibility and who decides on the eligibility for care and whether it is done by some algorithm. Many local authorities have a thing called a RAS, a Resource Allocation System, whereby you plug somebody’s needs into the computer, it tells you how many points they have and points mean budgets. There is a lot of concern about whether that is an appropriate way to allocate services. There is a big question about whether the service someone receives is dependent on whether they have a carer. If the system is carer-blind, you have a quite different allocation than if you take account of the fact there is a carer, but that change might be unfair on the carer. Furthermore, there is the question of interactions with other systems which I would like to come onto.   There are many interconnections about which you will know. I want to put up two or three bullets there which show some of the contributions that social care makes, in quite big ways, to the healthcare system.  We know that many, particularly older, users of social care services are high users of healthcare.    Two of my colleagues at LSE who are doing quite a bit of work now for the Commission, did some comparisons across time and between localities in England, across the 150 local authority areas in England. They found that there is a 35p saving on hospital care for each additional pound spent on care homes in the social care system – plus of course all the benefits of being in a care home.  So there is quite a high return to the health system of having a higher presence of social care in those localities, and of course, you could find equivalent links the other way. So we know that the provision in one sector will have a bearing on costs and burdens and achievements in the other sector.   Thirdly, I will mention the POP pilots. These were pilot programmes across 30 or so areas of England, trying to define ways of diverting people away from unnecessary hospital admissions, trying to provide better care for people and they found that they generated savings, again, of £1.20 in this case, for each pound of preventative spend.  So you can see quite important connections between these two sectors.   However, the two systems still work predominantly in parallel, with separate policy frameworks, separate financing arrangements, separate regulations, very different professional domains, different professional identities, different roles and also cultures. .   Integrating takes many forms but, clearly, if we have the degree of interconnection I have just shown, it would make some sense to identify and assess individual needs and preferences jointly, because that could make for a much more effective and cost-effective response to those individuals’ needs.  Individuals do not separate their healthcare needs and their social care needs; they think of their overall situation and what they are going to do that day to meet those needs. Integration of some form would enable holistic responses to need, by achieving better access, having more flexibility, and in that way, you would hope to avoid wasteful gaps, overlaps and duplication. You would have better cost-effectiveness across the systems, not just within the systems, and that would also, it is argued, support efforts for social inclusion, solidarity and sustainable communities. These are many arguments for why we should be bringing health and social care systems closer together.   In practice, we currently see integrated care pathways. We have care managers, who might assume some responsibility across health and social care. This is often called intermediary care services, which are often jointly health/social care initiatives.  We might get joint assessments of needs, joint planning and teams of multidisciplinary professionals. We get shared clinical guidelines.  There is a dementia guideline, which is produced by the National Institute for Clinical Excellence, in the health sector, and the Social Care Institute for Excellence, in social care. We also have these things called personal budgets. I think this is one of the most exciting ways forward – instead of you getting your services determined by your case manager, you take the cash and you buy the services yourselves.  If you have the cash from your health budget and from your social care budget, you can pool it in your bank account, and that seems pretty good integration to me.  .   Governance integration examples would be joint commissioning, pooled budgets, and organisational mergers – there are a whole range of things that might happen at that level.   There are many difficulties. I do not have time to go through these in detail, but there are structural problems, there are problems of different budget cycles, there are problems of one sector being centrally driven and unelected while the other is locally driven and elected.  There are big differences in status and legitimacy of professionals, and histories of not working terribly well together.   The evidence across the international experience would suggest the following are facilitators that can help: umbrella organisational structures as opposed to seeing these systems as forever being parallel systems; encouraging this multidisciplinary working; helping providers to work together - this does not work terribly well in this country at the moment; providing financial incentives, of course; and attending to the central/local issue - the central Government policy in this country has not been terribly helpful in encouraging that integration.   I previously showed outcome domains and the policy principles recently set out by the Coalition Government which are fairly widely accepted as the things we should be trying to achieve in social care.  My question would be whether the effectiveness and equity gains that come from integration outweigh the transaction costs.   I was at a meeting yesterday of Lambeth Cooperative Council.  Lambeth are trying to change their philosophy in delivering services. The very clear view from their councillors, the officers and the members of the public was that there are lots of benefits from integrating health and social care, but the transaction costs of doing so are just enormous.  So, if we are going to have a more integrated system, across the health/social care interface, then we have to find some way of overcoming those big barriers. Copyright Professor Martin Knapp, 2011