The data used to produce table 1 of the Impact Assessment is from the English Longitudinal Study of Aging, Wave 3. This is a publicly available source and can be accessed at:
People under the age of 65 were removed from the sample. Then a logistic model of the need for formal care was estimated on the basis of each person's age, age squared, limitations in activities of daily living (ADL dependency) and whether or not they live alone (as a proxy for receipt of informal care). Fitted values from this logit model were used to produce a continuous variable for each person's level of need. The sample was then ranked in order of their predicted need on this variable, and the needs of the top 4.7 per cent. were assumed to be critical under Fair Access to Care Services (FACS)—this uses the Personal Social Services Research Unit's approach to defining those who are FACS critical, which draws on findings in the Commission for Social Care Inspection report, ‘The State of Social Care in England 2007-08’, published in January 2009.
The 204 sample members classified as FACS critical in this way were then grouped into those reporting difficulty with different total numbers of activities of daily living, as shown in table 1 of the Impact Assessment.
The numbers of individuals whose needs are critical under Fair Access to Care Services (FACS) estimated to be receiving state-funded care and making a means-tested contribution are taken from the Personal Social Services Research Unit's micro-simulation model for older people.
The estimated numbers in each of these groups have then been narrowed down to those FACS critical individuals with difficulty with four or more activities of daily living by using the percentages shown in table 1 of the Impact Assessment, which are derived from the English Longitudinal Study of Aging (ELSA). They were produced by secondary analysis of the ELSA data—which are publicly available—and not drawn from a published report.
The number of individuals estimated to be self-funders or those with unmet need is taken from the Personal Social Services Research Unit's micro-simulation model for older people. An extra 25 per cent. was added to both the volume and the estimated cost from their model to bring it closer into line with alternative estimates of the numbers of severely disabled older people purchasing private home care. This seemed prudent in view of the inevitable uncertainty about the impact of free care on demand and the consequent risk of under-estimating costs.
Residential care switchers were estimated by using a simple model of the likely flows into and out of a steady state stock of individuals in residential care. It is assumed that not all individuals entering care homes under the current system will either choose or be eligible to receive personal care at home under the new system (i.e. because their needs may be too great). We do not know exactly what proportion of these individuals will choose to receive their care at home rather than enter residential care, but for illustrative purposes we have assumed a figure of 10 per cent.
Informal care switchers were estimated by removing the 'living alone' variable from the logistic regression equation used to predict individuals' level of need for formal care and re-running the model to estimate the additional volume of individuals who would be classified as critical under Fair Access to Care Services if everybody hypothetical lived alone. We do not know what proportion of these individuals would actually have their informal care arrangements withdrawn in order to qualify for free personal care, but for illustrative purposes we have assumed a figure of 5 per cent.
We do not know how many potential informal care switchers, as estimated under assumptions detailed in the Impact Assessment, have difficulties with activities of daily living (ADLs). Therefore, we have assumed that 50 per cent. of potential switchers have difficulty with four or more ADLs—and actually switch—and 50 per cent. have difficulty with less than four ADLs and do not switch since they would not qualify for free personal care.
This is a working assumption. It relates to older people whose needs are not assessed as critical under Fair Access to Care Services (FACS) while receiving informal care, but would become FACS critical if they ceased to receive informal care. Comments on its validity are welcomed as part of the consultation on regulations and guidance, “Personal Care at Home: a consultation for proposals on regulation and guidance”, a copy of which has already been placed in the Library.
Studies by the Care Services Efficiency Delivery programme on reablement domiciliary care services have shown that up to 50 per cent. of older people who were offered a short term package of reablement did not require any further support at the end of their treatment1. However, as there are uncertainties about the long-term impact of reablement on the need for care, we cannot make an accurate forecast at this current time. That is why the impact assessment does not take into account the benefits of reablement, even though these are likely to be substantial.
Department of Health, 2009: Use of Resources in Adult Social Care: a guide for local authorities.
The supply-side failures referred to in paragraph 5.25 are the under-provision of insurance coverage and higher prices for those who do take out insurance. Insurance companies wishing to offer insurance for personal care will make an assessment of the likelihood that people will require such services and offer a product at a price based on the average probability of need.
People who view themselves as being at a low risk of needing personal care will not be attracted by an insurance product at an average price and would only buy one at a low price. Those who see themselves as high risk will see an insurance product offered at a price based on the average probability as good value for money and are likely to purchase it.
As a result, insurance companies are aware that an average priced policy will adversely select high-risk customers and so do not offer it. They may offer products at a higher price to reflect the higher risk of customers they do attract. In an extreme case, this could result in complete market collapse as the remaining customers respond to higher prices by deciding not to purchase insurance. In response, insurance companies raise prices further and eventually there are no purchasers left.
In addition, insurance companies and individuals may make a different assessment of the risk of a person needing personal care, owing to their having less information about a person’s risk than the individual themselves.
Insurance companies may respond to the problem by attempting to gather information about customers to set individually tailored prices to their products. Gathering information is costly and insurance companies pass this on through higher premiums. This can be compounded if the pool of customers taking insurance becomes smaller as insurance companies have to spread their fixed costs over a small number of people, further raising the price that customers have to pay.
The costs associated with increasing numbers of assessments have been included in the administrative component of Table 2 in the impact assessment. In the absence of firm data on this, we have assumed that the average cost of an assessment is £200 and that 135,000 extra individuals will be assessed per year, giving an overall cost estimate of £27 million per year, as shown in Table 2 of the impact assessment. This has been included in the estimate overall annual costs of £670 million per year in 2011-12 prices.
Paragraph 5.25 of the impact assessment discusses the lack of a private insurance market for personal care services and the reasons why this may be the case. One of the reasons for this may be that individuals believe that the welfare state acts as a safety net for them and so they do not need to make provision for themselves. The Government have not attempted to quantify this specifically.
The factors taken into account are set out in the impact assessment, which was published with the current consultation document, “Personal Care at Home: a consultation on proposals for regulations and guidance”. Both documents are available on the Department’s website at:
Copies have already been placed in the Library.
As set out in the impact assessment, the research undertaken in the English Longitudinal Study of Aging identifies the potential number of people living at home who may qualify for free personal care.
The impact assessment discusses a range of benefits of the proposals. One benefit is the distributional effect of providing free personal care to those in highest need, the beneficiaries of which are a sub-section of the population. A second benefit is the extension of Government-provided insurance to cover free personal care to those in highest need. The population as a whole derives a benefit from the extension as people know with certainty they will receive free personal care if they find themselves in need, as set out in the proposal.
Paragraph 7.5 of the impact assessment sets out current thinking. An equality impact assessment screening has been undertaken and published with the consultation document, “Personal care at home: a consultation on proposals for regulations and guidance”. Both documents are available on the Department’s website at:
Copies have already been placed in the Library.
A full equality impact assessment will be undertaken prior to the implementation of the policy.
None. As we said in the Green Paper “Shaping the future of care and support together”, if we reform disability benefits, anyone receiving an affected benefit at the time of reform would continue to receive the equivalent level of support and protection.
Our working assumptions in the financial modelling have consistently been that nobody will experience a cash loss as a result of the reforms.