As the world faces a rapidly aging population and the cost of providing care
for the elderly mounts up, finding the best way to finance this service has
become a global challenge.
Since 2002, Professor Les Mayhew and Professor Ben
Rickayzen have been conducting research into ways that the public and
private sector might combine to provide this care.
Initially the academics considered how best to estimate the numbers of people
in the UK who will require long-term care (LTC) over the next 35 years. They
used these projections to estimate the costs of LTC for older people in the UK,
and considered how such costs might be met.
This theme was developed by comparing the UK system with those used in Germany,
Japan and Sweden. They concluded that a "mixed system" of public and private
funding would best suit the UK.
New products to support care costs
Professors Mayhew and Rickayzen also looked at LTC insurance. Very few
insurance companies ever offered pre-funded LTC insurance in the past and none
does now. This is because the premiums tended to be high and so the products
were unpopular. Their research identified several possible new products which
could be developed, such as disability-linked annuities (DLAs), which pay a
standard annuity while the individual is relatively healthy and increases to a
much higher amount if and when the individual subsequently requires care.
DLAs and the academics' other suggested options have received considerable
interest from government and industry. These other options include Personal
Care Savings Bonds (PCSBs) and top-up insurance. PCSBs are like premium bonds
(with prize draws) but the bond is used to pay for LTC (or paid on death if no
LTC was required). Top-up insurance is the notion of buying insurance cover
which fills the gap between state provision and actual LTC costs.
Professors Mayhew and Rickayzen have been heavily involved in shaping
government thinking on LTC. In January 2010, Mayhew was commissioned by the
Prime Minister's Strategy Unit to look at the impact on the wider economy of
increased longevity, healthy ageing and the ability to work longer. Using a
purpose-built demographic-economic model, he identified the scale of the
problems facing public expenditure along with potential strategies for managing
the problem. This study was widely circulated at senior levels in Whitehall and
presented to senior officials and was the subject of two public debates in
London and Edinburgh organised by ILC-UK in conjunction with the Actuarial
Early intervention to improve lives and reduce costs
From 2005 to 2009 Mayhew advised Brent Council on its 'Integrated Care
Co-ordination Service', a £1.6 million pilot funded under the 'Partnerships for
Older People Projects'. It was developed to show how early intervention and
working with the private sector could improve lives and reduce the costs of
health and social care.
Mayhew is also working with the independent 'think tank' Demos on a new family
of affordable equity release products designed to help people pre-plan their
care and he has recently presented his initial ideas at fringe meetings at the
main party conferences. With David Smith, an actuarial Cass colleague, he
recently launched a related proposal called the Equity Bank, which would enable
older people with housing assets but only limited income to boost their income
by drawing down the value in their home.
Professors Mayhew and Rickayzen's work has helped to stimulate policy debate on
ageing and the cost of long term care within central government, local
government and the insurance, pensions and health care sectors.
This research was submitted as part of Cass' entry in the Research
Excellence Framework (REF) 2014.