LONDON (Reuters) ? Britain's cash-strapped government should spend more on caring for the elderly, according to proposals on Monday that would for the first time limit the amount anyone has to pay for help in old age.
The cost to the individual should be capped at around 35,000 pounds ($56,000), the government-commissioned report said, with the state picking up the bill thereafter. The proposals would cost taxpayers up to 2.2 billion pounds annually.
The report saw scope for financial companies to offer new products to insure the cost of cover, rather than people having to spend their life savings or sell their homes to meet the cost.
The prospect of the government paying more is awkward for a Conservative-led coalition trying to cut public spending. It runs contrary to its efforts to shift the burden of paying for things like university education and public-sector pensions from the state to the individuals benefiting.
Economist Andrew Dilnot, the lead author of the report, said the cost was a fraction of total annual public spending of about 700 billion pounds.
"This is a price worth paying," he said, noting that people were going into old age worried about losing everything.
But the initial response from the government was guarded. Health Secretary Andrew Lansley said additional costs would have to be balanced against other needs for a government cutting spending by a fifth across most departments.
Britain, like other European countries, has an aging population. Many elderly people need expensive care either at home or in special accommodation at a time when state spending is shrinking and family budgets are under huge pressure.
"In the current public spending environment, we have to consider carefully the additional cost to the taxpayer of the commission's proposals against other funding priorities," Lansley told Parliament.
INSURERS EYE NEW MARKET
Residential care for the elderly is means-tested and those with more than a relatively modest 23,250 pounds in assets have to pay their own way. That threshold should rise to 100,000 pounds, the report said.
How to look after the elderly has risen back up the political agenda after care home provider Southern Cross ran into financial problems, raising concerns about the welfare of its 31,000 residents, many of them frail.
Germany is sometimes cited as a model for elderly care.
Workers in Germany pay a "Pflegeversicherung" (care insurance) to cover the cost of long-term care and care for the elderly. Everyone covered by state national insurance has such coverage, while people with private health insurance also have to take coverage for old-age care.
Dilnot's recommendations would make care costs more predictable, helping consumers plan for their time in care, and opening up opportunities for insurers to sell dedicated savings products, analysts and industry executives said.
"There is a real opportunity for the financial services industry to play a part in providing a suite of products that fulfill peoples' needs and expectations," said David Brown, insurance partner at accountants PwC.
The most likely beneficiaries are providers of equity release mortgages, which allow homeowners to cover their care costs by borrowing against the value of their properties.
Insurers could also design dedicated care insurance policies, or modified annuity products that would generate income to offset care costs.
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