Introduction
Many people with elderly relatives are aware that long term care is a problem and has many associated costs. These costs can quickly erode assets such as savings and the family home. It is possible to use an immediate needs annuity to help cap or reduce the total cost of a nursing home, when a relative can no longer fully look after themselves.

According to the ABI, in the UK there are 9 million people over the age of 65. Of those aged over 70 approximately 20% receive some form of home assistance and 4% receive home assistance on a continuous basis. There are 500,000 people in residential care and the total cost of long term care in 2001 exceeded £4 billion.

Part of the funding for long term care in a nursing home where the relative suffers from impaired health can be provided from NHS funding or the Local Authority subject to means testing. Any shortfall could then be met from an immediate needs annuity. The income from an annuity could be as high as 25% of the capital to purchase the annuity depending on the individuals age and medical condition.

However, if the individual has capital of more than £20,000 in England, (£19,000 in Scotland and £20,500 in Wales) there would be no assistance from NHS funding or the Local Authority. Full assistance from the Local Authority is provided if the assets are less than £12,250 in England (£11,750 in Scotland and £13,500 in Wales).


State benefits
There are state benefits for people that require assistance on a daily basis, Disability Living Allowance (DLA), Mobility Allowance (MA) and Attendance Allowance (AA). The DLA and MA can be claimed by people that need help looking after themselves and people that find it difficult to walk and get around. The DLA is paid at three different rates depending on the help required, lower rate (£15.55 per week) middle rate (£39.35 per week) and higher rate (£58.80 per week). The MA is paid at two different rates depending on the nature and severity of the mobility condition, lower rate (£15.55 per week) and higher rate (£41.05 per week).

Anyone over the age of 65 is eligible to claim for Attendance Allowance if they are either ill or disabled or requires help with a number of activities of daily living such as washing, eating or mobility. The benefit is not means tested and is paid to anyone irrespective of personal wealth and assets. The applicant needs to explain the type of help they require, when they need this help, details of their medical conditions and other less serious problems they may have as well as the medication they are taking. There are two rates for AA depending on the amount of help required, lower rate (£39.35 per week and higher rate (58.80 per week).


Means testing
Where an individual is applying for long term care support either, residential care or nursing home care, from either NHS funding or Local Authority, there are a number of limits relating to their personal capital. Capital is defined as including savings, investments and property.

Under section 47 of the NHS Community Care Act 1990, the Social Services must assess each applicant in relation to their needs for residential care or nursing home care. This assessment will determine how much the applicant can afford to pay after taking into account any state benefits they are entitled to claim and any other income they receive less any personal expenses.

If the individual has capital of more than £20,000 in England, (£19,000 in Scotland and £20,500 in Wales) there would be no assistance from full NHS funding or the Local Authority. To cover the long term care costs, full assistance from the Local Authority is provided if the assets are less than £12,250 in England (£11,750 in Scotland and £13,500 in Wales). There is a sliding of scale of support where the assets fall between these levels, for example in England between £12,250 and £20,000. There a number of factors that can be taken into account to discard the applicant's property from the means test as follows:

There is also a 3 month property disregard rule. This allows an applicant to access residential care or nursing home care for 3 months and have their property disregarded for means testing. Therefore the value of other assets such as savings and investments must be less than £20,000 in England to have part of the long term care costs paid by NHS funding or the Local Authority or maximum funding towards long term care if below £12,250 in England. Once the 3 month period is over, the property will then be included for means testing.


NHS funding
The NHS is legally obligated to provide long term care funding where an individual requires specialist supervision or equipment. If an individual does not meet the NHS funding criteria funding will not be provided on a health care basis and is deemed social care which would be provided by the Local Authority subject to means testing.

The local primary care trust (PCT) is responsible for providing local health services and they determine an individual meets the criteria for NHS funding of long term care. The decisions made by the PCT are not necessarily accurate or consistent and there is difficulty determining what medical conditions warrant health care provided by NHS funding and social care provided by the Local Authority.

This confusion was highlighted in the case of Pamela Coughlan in 1999 who challenged the decision to transfer responsibility for her care from the NHS to the Local Authority. Pamela was partially paralysed resulting in breathing difficulties, required regular catheterisation and was doubly incontinent. By changing from the NHS to Local Authority this would mean Pamela would have to find extra funding to meet her care costs.

The Courts ruled that Pamela meet the NHS criteria of 'complex and intense' needs and that funding her long term care must be provided by the local health authority. Due to the nature of her condition her needs were in a 'wholly different category' from the needs that would be provided by the Local Authority.


Nursing care bands
Partial NHS funding is possible for those individuals that do not qualify for full long term care from the NHS. Subsequent to a Royal Commission in 1999 that recommended all health care and personal care to be provided free, changes were introduced in England to provide extra funding but only for health care and not personal care where the care is provided by a registered nurse and only up to certain limits.

Under the Social Care Act 2001 this defines nursing care as the registered nurses contribution to providing, planning and supervising care in a nursing home setting. This does not include time spent by any other personnel such as care assistants however would include the time spent by a registered nurse in the monitoring and supervision of others delegated work relating to long term care.

This change was introduced from 1 October 2001 and means that anyone paying their own nursing home care fees will have a fixed weekly contribution paid by the Department of Health directly to the nursing home care provider. In England the PCT determines if an individual is entitled to a registered nursing care contribution and which of the following funding level bands would apply:

The definition of the type of long term care provided by the bands is that the lower band requires minimal registered nursing care input, say bi-weekly wound care. The middle band requires registered nursing on at least a daily basis and the highest band requires frequent intervention from a registered nurse throughout a 24 hour period because their condition is unstable or unpredictable.