Questions and answers about coronavirus and the UK economy
Questions and answers about coronavirus and the UK economy

Why has social care been so badly hit by Covid-19?

The social care system in England was ill-prepared for coronavirus. Examples of the many weaknesses that have made it harder to protect users include difficulties in acquiring protective equipment and the discharge of hospital patients with Covid-19 into care homes.

The Covid-19 pandemic has hit the adult social care sector in England very hard. There were 30,000 (46%) more deaths among care home residents than expected in the first half of 2020, with those who receive care in their own home also badly affected. Covid-19 is more deadly among the very old and the sick, who are most likely to need social care. But it has become clear that weaknesses in the current social care system have made it harder to protect users from the virus.

The health and social care sectors are closely inter-related and share a similar economic rationale for government intervention. Yet in England, and many countries around the world, the state plays a much more limited role in funding, delivering and regulating social care than it does for healthcare. This has contributed to many of the challenges faced by social care in recent months, including the discharge of Covid-19 patients from hospitals into care homes, and difficulties in acquiring and distributing PPE (personal protective equipment) and Covid-19 tests.

The many weaknesses of the current social care system in England are not new. But the Covid-19 crisis has further highlighted them, brought them to public attention and shifted political priorities. Social care reform has been promised for many years. Will Covid-19 provide the impetus to make that happen?

What is social care?

Adult social care, or long-term care, includes support for younger adults (aged 18-64) who have disabilities or learning difficulties, and older people (aged 65 and over) who need help with daily activities such as washing, dressing or making meals. Formal social care services include residential homes (with and without nursing care) and home care. These types of formal care are frequently supplemented by informal and unpaid care from friends and family.

The value of this unpaid care in the UK was estimated at £57 billion in 2017 (Office for National Statistics, ONS, 2017). An ageing population and increased life expectancies for those with disabilities mean that the number of people in need of social care is expected to rise in the coming decades (Health Foundation, 2020).

What does the social care system look like in England?

Most of those who need social care will also have substantial health needs. But there are several important differences between the health and social care systems in England. The first is access to publicly funded care. In healthcare, access is based on need and provided free at the point of use through the taxpayer-funded NHS.

By comparison, access to state-funded social care is heavily means-tested. There is no private market for social care insurance, so people who do not qualify for state support must fund their care out of their own pocket.

The second difference is who provides care. Most healthcare services are provided by the publicly owned NHS, and staff are employed directly by the NHS. There are strict regulations on the organisations and workers that can treat patients in both the public and private sectors.

Most formal social care providers are privately owned. Care homes and home care providers are regulated, but there is very little regulation of carers who are self-employed or family and friends who provide informal care for free. Social care workers require few or no formal qualifications. Wages are low, zero hours contracts are common and there are high rates of vacancies and job turnover (Skills for Care, 2019).

The third difference between the health and social care systems in England is the organisation and funding of government support. The NHS is a national service, even though many aspects of care are organised locally. Funding comes from a ring-fenced pot of money from central government that cannot be used for other services. There are national guidelines and performance targets that specify what care patients should receive and how quickly.

By comparison, government-funded social care is provided by local authorities, which must decide how much of their budget to allocate to social care and what social care services to offer. This means that there can be large variation across local authorities in levels of spending, the services that are offered and the level of need required to qualify. Recent funding reforms mean that an increased share of local authority funding comes from locally collected taxes rather than central government grants (Amin-Smith et al, 2018).

NHS funding was largely protected during the austerity of the 2010s, while social care spending was subject to significant cuts (Harris et al, 2019; Lee and Stoye, 2018). This has tended to increase the level of impairments needed to qualify for state support.

What is the economic rationale for governments to intervene in health and social care markets?

Health and social care share several features that make it hard for private markets to deliver efficient health and social care systems without substantial government intervention. Economists refer to these features as ‘market failures’. In health and social care, there are challenges both in providing insurance against future costs and providing care to those currently in need.

In almost all developed countries, the state intervenes to ensure universal health insurance coverage for its citizens. This is either through ‘Beveridge’ type systems, where healthcare is state-funded, such as in the UK and Scandinavia, or through universal social insurance, as in Germany and the Netherlands.

Similar coverage would not be replicated by an unregulated private insurance market without government intervention in healthcare markets. The principal reason is that people tend to know more about their risks of needing healthcare in the future than insurance companies do. For example, they may have a family history of a given disease, or they could have private information about their own behaviour that might affect their future health or care needs.

This means that when an insurance product is introduced, only those who expect greater future healthcare costs than the premia will apply. The insurance company knows they would make a loss and will therefore not offer the product. This occurs at all prices. Economists refer to this problem as ‘adverse selection’.

In the presence of adverse selection, unregulated private insurance markets are likely to be incomplete, covering only some individuals or some conditions, or they may be missing entirely so that no insurance is available at any price. This creates inefficiencies, as the lack of insurance may affect how much people consume, save and work. It is also regarded as inequitable since for the uninsured, access will depend on their ability to pay, and those with the highest level of need are likely to find it hardest to get insurance.

Governments overcome adverse selection in the health insurance market by pooling risk across the population and breaking the link between the amount that people pay and their current or future health needs. Taxes and social insurance contributions that fund healthcare are typically based on income rather than health status.

The same adverse selection problem exists in social care, but government intervention is far more limited. This is true in England, but also in many other developed countries (Finkelstein and Brown, 2011; Barr, 2010).

The consequences are exactly as theory would predict. The government in England funds social care for the poorest and most in need, but there is no private social care insurance market. People must therefore fund their own care out of their savings and assets. The Dilnot Commission estimated that this meant that one in ten people face lifetime social care costs of over £100,000. This is a substantial uninsured risk that will affect decisions that people make when planning for retirement.

For those who must fund their own social care, decisions about whether to use social care will depend on both price and their care needs. This increases reliance on informal or unpaid care from friends and family, and may delay accessing formal care or affect the level or mix of care that they purchase. Subsidising or reducing the price of social care has been shown both to reduce reliance on informal care and to change the mix of care services that are used (McKnight, 2006; Kim and Lim, 2014).

There are potential spillovers for the NHS, as people who need social care but are not receiving it may see a deterioration in their health. There is also an incentive for people in need of social care and their families to seek assistance from the NHS rather than social care because it is free at the point of use (Gaughan et al, 2015; Gaughan et al, 2017; Crawford et al, 2018; Costa-Font et al, 2018).

The difficulties created by incomplete social care insurance are further compounded by market failures in the provider market. Markets operate most efficiently when there are clear and transparent information flows between buyers and sellers. In both health and social care, information does not flow freely. It is hard for people to know how good the care is that they are receiving. Governments across the world therefore strictly regulate who can provide healthcare and strong safeguards are put in place.

In social care, these regulations are much weaker. The pressure that can be placed on social care providers to improve by those paying for social care is also limited. Many of those purchasing social care are private individuals or families rather than governments, or private insurance companies who have more buying power. In addition, choices about care homes are often made at short notice due to a sudden deterioration in health, making it even harder to shop around for the best care.

How did the some of the weaknesses of the current social care system interact with Covid-19?

The social care system in England was ill-prepared for Covid-19. Cuts to public funding had reduced the numbers of care users eligible for state support and left many providers with fewer resources. Those ineligible for state funding often had less care than they needed, and the government had only a partial idea of who was receiving social care and from whom. The sector was highly fragmented, with many providers and no strong national bodies to help with coordination or communication. Integration between social care and the NHS was very weak. Staff were low paid and there were high vacancy and turnover rates.

These weaknesses contributed to many of the challenges faced by social care during the pandemic. Here we discuss two of the most high-profile examples.

The first is the instances early in the pandemic when hospital patients with Covid-19 were discharged into care homes without being tested, thereby spreading the virus. While in most cases this was not deliberate, those making hospital discharge decisions did not have the same incentive to test patients discharged to a care home as they would if the same patients moved wards within the hospital. This is because care home residents who later contracted Covid-19 were not transferred back to hospital.

The second example is the widely reported difficulties that many in the social care sector had in acquiring the necessary PPE and Covid-19 tests. The social care sector is mostly privately operated and highly fragmented. Support for publicly funded social care recipients is via local councils. There are no national data on who is receiving social care, where that care is being provided and by whom.

It was therefore very hard to coordinate and disseminate the information, PPE and tests that were needed. This contributed to higher rates of infection among vulnerable care users. It also increased the risk for social care workers who are predominantly low paid and disproportionately drawn from minority ethnic groups with the highest Covid-19 mortality rates. The rates of death including Covid-19 are significantly higher for social care workers than for healthcare workers and the general population.

Care homes and large domiciliary providers are registered by government, and over time the flow of resources and information has improved. Both the formal social care sector and the government are likely to be better prepared in the event of subsequent waves of Covid-19.

But many older and vulnerable people are cared for by informal carers (friends and family) or semi-formal carers (self-employed helpers or personal assistants). This is in part because of the incomplete insurance offered by the social care system. The government still has very limited information on these care users or carers, which will make it harder to support them through any Covid-19 resurgence.

What reforms have been proposed in England and would this solve the problems?

In 2011, the Dilnot Commission proposed reforms that would introduce a lifetime cap on an individual’s contribution towards their own social care. Once an individual had reached the cap, the government would fund remaining care expenses. This would limit the financial risk for individuals, and therefore provide partial insurance for everyone.

But the proposals were not implemented, and a subsequent government green paper consulting on potential reforms to social care has been delayed many times.

It is impossible to know whether the social care sector would have fared better if the Dilnot proposals had been implemented close to a decade ago. On one hand, the reforms would have increased the funding flowing in the sector. This may have improved the quality of services, which could have made it easier to contain Covid-19.

On the other hand, the proposed reforms did not provide many additional incentives for the health and social care systems to work together. The need to count spending under the cap may have improved record-keeping and the flow of information on those receiving and providing care. Whether that could have been used to improve the dissemination of information, PPE and tests is unclear.

The social care system is very complex and suffers from many sources of market failure. If reforms do finally come, it will be important to be clear about the shortcomings that the reforms address and those that remain.

Where can I find out more?

The Dilnot Commission, which reported in 2011, surveys the adult social care system in England and provides recommendations for reform, but these have not been implemented.

In Subsidising long-term care: lessons from subsidy expansions and cuts, Joan Costa-Font examines how expansions in public funding for social care in Spain and Scotland have affected care-giving choices, household finances and hospital care.

Social care for adults aged 18-64 in England: The Health Foundation analyses the use of social care by younger adults, who are often neglected in discussions about the challenges faced by social care and the need for reform.

Who are experts on this question?

Author: Elaine Kelly, The Health Foundation and Institute for Fiscal Studies
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