The Care Act amendment: who is set to lose out?

In September 2021 the government announced it would cap the social care costs faced by individuals over their lifetime at £86,000, funded by the health and social care levy. This reform is important, long overdue and has been widely welcomed.

No new legislation is needed to bring in a cap as it is already on the statute books, in the 2014 Care Act. However, a few weeks after the announcement on the cap, the government set out further details of its proposals. These included its intention to amend the Care Act to change the way that costs are metered towards the cap. This is a technical amendment – perhaps one the government hoped would be missed – but one that has substantial real-world consequences. The amendment has passed its first vote in the Commons, though with a significant rebellion, and is now being debated in the Lords.

So far, parliament has been asked to vote on this change with insufficient information about its impact and which groups of people would be affected. In January the Department of Health and Social Care (DHSC) published an impact assessment which compared the entire proposed package of reforms, including the amendment, to the current social care system. This did not, however, include the crucial comparison needed to inform the vote – of the specific impact of the amendment which changes the way in which the costs of care are metered towards the cap.

Our independent analysis with the Institute for Fiscal Studies (IFS) assesses the impact of the government’s amendment, comparing it with the provisions of the 2014 Care Act. This detail is important to inform the debate on the amendment in parliament.

How will the amendment to the social care cap affect people?

Let’s first look at what the amendment means. Under the existing legislation, people with the same care needs will hit the cap after the same length of time, regardless of their income and wealth. For example, individuals with care needs costing £500 a week will hit the cap after 172 weeks, or 3 years and 4 months. But under the amended Care Act, only people’s personal contribution to their care costs will count towards the cap. There will be no difference in the length of time it will take wealthy individuals, who can fund the entirety of own care, to hit the cap. But for less wealthy individuals, who receive means-tested support to help them meet their care costs, it will take longer to hit the cap.

For example, someone receiving means-tested support of £250 per week to help them with their £500 per week care costs, will now take twice as long to hit the cap – 6 years 8 months. For this additional 3 years and 4 months, they will continue to contribute while, during this time, a wealthier person will have their care costs met by the state. The amendment means that this less wealthy person will devote a greater share of their wealth to their care than a wealthier person. The amendment has no impact on people with higher levels of wealth.

The chart below shows the proportion of starting wealth spent on a 'worst case' care journey, by level of wealth. The amendment makes no difference to people with starting wealth of more than £186,000 because they will not receive means-tested support. This is because they will hit the £86,000 cap before their assets fall to below £100,000 (the starting level for means-tested support). Those with initial wealth below this will receive means-tested support when their assets are below £100,000, and so will be affected by the amendment.

Who will feel the impact of the social care cap amendment most acutely?

When we divide the population aged 65 and older into fifths according to their wealth, those facing the biggest loss from the amendment are in the second poorest fifth (with wealth per person of between £83,000 and £183,000). For this group, the government’s plans would mean that 10 years in residential care would require spending an additional 10% of assets (or around £12,000), on average. This compares with almost nothing extra for people in the wealthiest 40% (those with assets of more than £298,000).

Because levels of wealth vary substantially across England, the proposed amendment has different impacts across regions. Average wealth among the population aged 65 and older in the North East is around £150,000, compared with an average of around £490,000 in London. People in the North East, Yorkshire and the Humber, and the Midlands would see the biggest erosion of their protection against large care costs, as a result of the proposed amendment. If they were to spend 10 years in residential care, one in four individuals in the North East would have to contribute an additional 10% of their initial assets to cover their care costs, as a result of the amendment. This compares with just one in forty people living in London.

As well as affecting older people, the amendment would also significantly affect adults younger than 65 needing care. We have little data on the income and assets of people in this group, but many will have few assets and low income. Take, as an example, an individual with a learning disability with care needs costing £500 a week, with no assets but income of £50 per week above the level of the minimum income guarantee. Under the current legislation, they would contribute £50 from their income for 172 weeks, or 3 years and 4 months. After this time, they would keep their whole income. But under the government’s proposed amendment, they would contribute £50 a week until they had personally contributed £86,000. This would take 1,720 weeks, or 33 years. As a result of the government’s proposed amendment, this individual would be £50 a week worse off for nearly 30 years longer. This means that for disabled younger adults the gains to working are significantly reduced.

The devil is in the detail

Our analysis shows that far from being a mere technicality, the government’s proposed amendment to the Care Act substantially reduces the benefits of the reforms for particular groups. Among older people, those most affected are those with modest assets and wealth, and by region, those living the North East, Yorkshire and the Humber, and the Midlands. Lack of data on assets and incomes for adults younger than 65 with social care needs means we cannot say how many in this group would be affected. However, simple modelling tells us that the impact on those with modest income and significant care costs would be substantial.

Charles Tallack (@CharlesTTHF) is Assistant Director for the REAL Centre.