Compulsory old age cover?

A report in The Telegraph has revived the ridiculous suggestion that the government will introduce compulsory long-term care insurance. Every adult could be forced to take out private insurance to cover the cost of his or her care in old age.

The Telegraph says: “It is widely agreed that it would be far too costly to provide free personal care for all, so a compulsory insurance plan is one of the favoured options for a long-overdue Green Paper on adult social care due to be published in the New Year. Forcing individuals to take out policies with private firms would reduce the cost to the government and avoid suggestions of a new stealth tax.”

Compulsory insurance was one of a number of options in a consultation document published in May 2008.

The Telegraph says: “Since then the government has held extensive talks on the possibilities for implementation with the insurance industry which believes it has a ‘key role’ to play. Officials have also consulted experts from Japan where a compulsory insurance system is credited with lowering the burden of care on family members and reducing lengthy hospital stays among the elderly.”

The Telegraph quotes the Care Services Minister, Phil Hope, as saying: "We know private insurance plays a substantial role in other countries' systems, including France. However we have made no decisions yet about the future."

Few insurers now offer long-term care insurance. Fewer still offer planned investment-linked long-term care that can be bought decades in advance of any possible need for cover. Over the last three years, several insurers have talked about entering or coming back in to the long-term care insurance market. None have done so. No company shows the slightest interest in joining this market.

Long-term care insurance at the point of needing care is a good way of husbanding money and resources.

Buying long-term care insurance, 30 to 80 years ahead of needing it when the chances of never needing it or dying first are far higher, is rather nonsensical.

Insurers are good at providing insurance, but not so hot at dealing with 40 or 50 years of investment. Many are owned by banks and we all know what a wonderful job they have done recently with our investment and savings.

How many people could really afford to pay more than £100 a month to provide just £10,000 a year worth of care?

There is a less than one in ten chance of needing to move into a home for long-term residential care.

Social and health workers agree that people live longer and better if cared for in their own home, and the trend is for home care not care in homes.

Private groups run most care homes. Some are very good, but very expensive. The lower the cost, the less appealing are the homes. At the bottom of the scale they are little better than the roughest boarding house; prisons offer more comfort than the worst ones.

People who die before needing care would be penalised.

People who take care to live healthy active lives would be penalised.

If separate insurance is necessary, it ought not to be compulsory. If people have other assets that could be used to fund care, they shouldn't be forced to take out insurance.

The logical way to encourage long-term care insurance would be to offer tax incentives. But tax incentives for health insurance are not something politicians like; they tried it on private health insurance for pensioners a few years ago and withdrew it as it worked too well!

Long-term care: January 2009