16 September 2021
Funding Health Care
A game of two halves.
By Robert Kilconner
Is the government’s cap of £86,000 on social care over a lifetime about right? Should those with assets below £100,000 contribute nothing? How about the proposal to raise employers and employees national insurance contributions by 1.25%? Does it make it fairer that the tax burden on dividends is being increased? If dividends, why not rental income and interest? Do we draw comfort from the idea of hypothecation?
Such difficult questions, and all of them requiring more time than we have to understand them. How can the average voter possibly come up with a sensible view? Will he or she not simply die of indigestion of the mind in the same way that King Henry I died of indigestion of the stomach? Too many issues: too many lampreys. Same difference, really.
If Henry had split his dish of lampreys rather than demolishing it at one sitting (though who can blame him, lampreys stewed in Bordeaux wines are truly delicious and if you happen to be passing through the market there and are thinking of the editors of Shaw Sheet, a small, not inexpensive, tin would make a most acceptable gift) he might well have survived, so let’s apply that technology to the questions arising in respect of the Government’s new approach to social care.
In essence there are two questions. The first is the extent to which the state should pay for care. The second is how it should fund it. They are of course interconnected in that the answer to the first must depend upon what can be afforded, but, rather than be distracted by that, it is helpful to take them one at a time. This article will focus on the first.
The proposals on funding long term care represent an extension of the idea behind the National Health Service. Currently the burden falls on the recipient unless he or she has assets of less than £23,250. That doesn’t mean that those suffering from disability and dementia get left on the streets (give or take the odd local cock up) but rather that the cost drains away their assets until only £23,250 is left to pass on to the next generation.
“Well, so what?” you might say, if you are of the political right. Why should the heirs be left with more money, leaving the state to pick up the bills which inevitably follow from severe disability, dementia or simply living too long? That’s just tough, bad luck, hard cheese, how the cookie crumbles, etc. The right of inheritance is not a sacred one. Why should it be protected?
That is a perfectly fair approach and I have no doubt that in Republican circles in the US it would be regarded as orthodox. Here, however, the fundamental principle was debated in a slightly different context in 1948 when the NHS was introduced and our answer was a very different one.
From an economic point of view the great advantage of the NHS is its role as an insurance scheme. By removing the cost of medical care it frees individuals from concern about unquantifiable liabilities and allows them to plan their financial affairs without having to make provision for possible doctor’s bills. If the worst happens they do not have to take to manufacturing methamphetamine as in “Breaking Bad” but can go along to the doctor or hospital confident that their treatment will be free at the point of delivery. That is good for the individual and it also means that he or she can spend the money that would otherwise have to be set aside on other things: so it is good for the economy as well. Some of this benefit could be obtained through compulsory health insurance but in macro economic terms the model is fundamentally different. Throwing the burden on central taxation means that it is borne in proportion to general tax bills. High taxpayers subsidise the health cost of low taxpayers. This piece of social engineering is part of the price they pay for living in Britain and almost everyone from the richest to the poorest accepts that that should be the case.
In 1948 life expectancies were much lower so long term care wasn’t such an issue. Modern medicine has changed all that and so, subject to the £23,250 threshold, we are back where we started with potential large unquantified liabilities overhanging family finances. This now needs to be addressed and, if we could afford it and followed the NHS model, would mean free long term care for all paid for by the taxpayer. Quite apart from peace of mind that would bring the same economic benefits.
Alas, though, resources are not unlimited and the Government has set its stall on a £100,000 threshold and a £86,000 cap. The first of these must be right. Resources mean independence and self respect in a capitalist democracy. £100,000, supported by loan schemes, sounds a sensible figure. The £86,000 is more moot. Yes, in an ideal world but, if push comes to shove, could one push it up to the greater of £86,000 with a further payment taking that up to 5% of the estate? That would not be as generous as the basis underlying the NHS but it is hard to see that it would cause those of us who are getting older enormous anxiety.
tile photo: Dominik Lange on Unsplash