Features: November 5th, 2010

By Emma Stone and Claudia Wood

The Comprehensive Spending Review has marked out the future path of care funding. The authors look at the alternative models of care funding that have been applied over the past decade and set out features that should be applied in the future.

We are at a critical point in the history of social care reform. A process which arguably began with the JRF Inquiry into the Costs of Continuing Care in 1996, followed by a succession of commissions and consultations, seems finally to be drawing to a close. It has been a tortuous journey, spanning four separate administrations and as it turns out, all three major political parties. But 2011 may just be the year that a new settlement for social care funding is agreed upon.

The Comprehensive Spending Review has set the pace of care funding for the next four years, and an articulation of the Coalition Government’s vision for adult social care. The Commission on Funding of Care and Support is due to make its recommendations in December 2010. In April 2011, the Law Commission will propose its recommendations on a new social care statute. Together, it is hoped, these will form the foundations of a permanent settlement for how we all contribute towards our care in later life and the system that delivers it. The big question is: will the proposed funding settlement and statute be aligned with each other and – critically – with a vision for social care that is designed around people’s lives, rather than around services?

Several alternative models have been developed over the last 15 years, some drawing on systems used in other countries which can have important lessons for the UK (Glendinning and Bell, 2008). The JRF, ILC1, Kings Fund2 and Policy Exchange3
Only a funding system acceptable in principle and in practice to those who contribute to it will survive over time. The NHS owes its longevity to this fact. Only a funding system which is aligned with the whole of people’s lives, as well as their relationships with families and communities, will succeed in delivering care and support fit for the 21st century.

The principles

Everyone agrees that there are three key principles for a future funding settlement (Hirsch 2006, Collins 2009). It has to be:
1. fair;
2. transparent – simple to understand; and
3. sustainable.
This provides a good basis on which to compare the range of current models, but it is not the whole picture.

Fairness is open to interpretation (Bell and Keen 2009) and will look very different depending on one’s ideological perspective or values (Keen 2008). Sustainable is often taken to mean financially sustainable – that is, capable of raising adequate funds to cover care costs both in the immediate and longer term. Less consideration is given to whether care funding is socially sustainable: will today’s care funding settlement be appropriate as society’s expectations of social care, community support and informal care change? Will it be flexible enough to cater to the needs and preferences of an increasingly diverse population?

Why is an outcomes-based funding system so important?

Perhaps in response to the substantial body of research which forcefully demonstrates the irrelevance of service silos to people’s life, independence and sense of wellbeing, the current care system is increasingly interested in outcomes. The ASCOT tool developed by PSSRU is the latest example. Outcomes-based commissioning is becoming more common (in policy, if not in practice). Outcomes-based assessments are now a central pillar of personal budgets. The Law Commission’s proposed new Social Care Statute is set to create a system based on needs and outcomes rather than service entitlements. The last thing we need is a funding settlement which maintains or reiterates old service-based assumptions about social care.

What is fair?

Fairness is a problematic and subjective term (Keen 2008). At the very least, all funding models must have a minimum entitlement – a safety net – for the poorest in society, and the amount people contribute must be related to their ability to pay. Funding care from general taxation is popular with some for its simplicity, parity with the NHS, and its progressive element – i.e. people pay according to their income (Beresford 2010). However, there are other forms of fairness which need to be taken into account – as well as the contested issue of how sustainable the current funding system for the NHS really is, and whether there is a case for increasing the levels of top-ups and co-payments that already operate within the health system (Featherstone 2010, Reform 2010). Intergenerational fairness is very important in care funding, given that the system will need to work for successive cohorts. generations.

What is sustainable?

A financially sustainable funding settlement must generate revenue in the immediate term, to support the provision of care for current older people, as well as generate sufficient resources over the longer term for future cohorts. A two-stage funding system, combining immediate payments plus gradual contributions, could achieve this (Hirsch and Spiers 2010), as might insurance models which transfer risk to the private sector rather than individuals or the state.

What is transparent?

The current system of social care eligibility and its funding is opaque and confusing for those who need care and support (Hirsch and Spiers 2010). To be transparent and easy to understand, a new funding settlement will need to state clearly how much people are expected to contribute, and what they will get in return. The minimum entitlement, or safety net for the poorest, will need to be explicit.

An outcomes-based settlement will need to define a set of outcomes which the public can expect as a minimum entitlement – either from the Government as a safety net, or in return for a minimum contribution. Any funding model currently configured around a minimum entitlement to services could be adapted to allow for a minimum entitlement to outcomes.

Co-payment models and outcomes

We must bear in mind that the setting of outcomes is a subjective and personal process, which must have individuals at its heart (Turner, 2003; Glynn et al 2008; Bowers et al 2009). Therefore, a minimum entitlement to outcomes needs to be complemented by a system which enables individuals to define their own outcomes and use their care funding to achieve those outcomes. Co-payment models are very conducive to this, as the minimum entitlement to outcomes could be designated as ‘state funded’, whilst the additional contribution made by individuals could be reserved to achieve additional self-defined outcomes.

Insurance-based models

To raise the individual funds necessary to secure self-defined outcomes, some form of insurance-based model would also work. Self-defined outcomes, and how they might be achieved, would, by definition, be extremely variable. The range of costs is likely to be large. Therefore, a model which pooled the risks of some people requiring very costly support would offer a financially sustainable approach.

The challenges of an outcomes-based model

Defining a minimum entitlement
We know that people do not identify outcomes in single service areas, but rather talk about their lives in relation to health, care, housing, transport, employment, income and benefits (Turner 2003) as well as maintaining and developing friendships and social relationships, a meaningful community life, and personal identity and self esteem (Godfrey et al 2004, Raynes et al 2006, Bowers et al 2009).
A minimum entitlement which (if a co-payment model were used) would be paid for by

Calculating the cost to the state

This is a valuable but nonetheless narrowly-defined set of care-related outcomes, could be used as a basis that would need to be supplemented with other wider outcomes. Unfortunately, the current focus on the integration across health and social care doesn’t appear to have extended to other areas such as housing, even though we know housing is critical in enabling people to enjoy later life (HAPPI 2010).

The costs to the individual T

his could be describes as the state in a co-payment model – of funding a minimum entitlement will need to be determined. This has proved to be a challenge for existing models, and many are still not wholly certain how much the overall costs or contribution levels will be (particularly if the settlement includes a voluntary insurance element, as premiums will depend on the number of people who decide to contribute). Calculating the costs to the individual and the state could be even more difficult for an outcomes-based model, in that we do not have readily available unit costs for the achievement of outcomes, and in any case this will vary from person to person.
minimum set of outcomes that is generous enough to be meaningful to people and act as

Calculating individual contributions and others

This could help provide a benchmark as to how much the Government should be prepared to pay to ensure the minimum entitlement is set at an acceptable level.
The same applies to the setting of people’s contribution levels. Aspiring to meet every self-defined outcome (even from a risk-pooled insurance system) could become financially unsustainable. Premiums would rise dramatically if, for example, a person were to set particularly aspirational outcomes or choose to meet those outcomes in a highly costly way.


JRF recognises that combining:
1. fairness;
2. transparency;
3. financial and social sustainability; and
4. capacity to support self-defined outcomes;
into a single care funding settlement is a challenge. Existing models have attempted to define and deliver on the first three, but the fourth remains elusive. No model explicitly recognises the importance of facilitating (ideally incentivising) the achievement of self-defined outcomes – which itself is contingent upon other critical elements being in place (e.g. significantly increased readiness on the part of commissioners, suppliers as well as demand for co-production; a greater understanding of the role of individuals, families and communities in caring and supporting each other; and clarity about the life outcomes to which we can expect to be entitled).

As such many models remain limited by service-based assumptions – whether explicitly or implicitly. This is understandable, given that narrow services are more easily quantified. It is much easier to design a model where a pot of funding is accumulated and entitles a person to a type of service with an associated unit cost. It is altogether more difficult to entitle a person to funding to meet an outcome which may not even fall within a standard definition of social care.

However, an outcomes-based settlement is not wholly out of reach. The key may be to link entitlement to need, which can be a valuable predictor of the costs of meeting outcomes (even if those outcomes are as yet undefined). This has been achieved on an individual scale with personal budgets, and there are a growing number of sources which can help develop a minimum entitlement of outcomes which would form the basis of such a settlement.

We believe it is critical for any funding settlement to start with people’s lives – not services, and to facilitate – indeed, incentivise –more positive and progressive approaches to care and support.

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The full report is available from the Joseph Rowntree Foundation. www.jrf.org.uk