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Support with health costs under Universal Credit: discussion paper of potential challenges and solutions

12 August 2011

Executive summary

Joint discussion paper: Support with Health Costs under Universal Credit (Adobe Acrobat Document 100kb)

The introduction of Universal Credit is an opportunity to improve how financial and in-kind support with health costs is provided for people on low incomes.  The current system is complex, ill-publicised, and unequal.  Currently, many people who need medical treatments do not receive the support to which they are entitled and so struggle to afford the charges.  This means that people can be faced with an unacceptable choice - either purchase the treatment and incur financial hardship, or go without and risk worsening health.

People who meet certain criteria can receive support with their NHS dental charges, optical costs, wigs and fabric supports, and travel costs.  Prescriptions are free to certain groups of people in England, whereas in Scotland, Wales, and Northern Ireland, free prescriptions are universal.

Support for those on a low income is given in two main ways:

The responsibility for deciding who is eligible for support with health costs is spread between three departments: the Department for Work and Pensions (DWP) which is responsible for designing how passporting from its benefits works; HM Revenue and Customs (HMRC) which decides how passporting from the tax credit system works; and the Department of Health which holds overall responsibility and is responsible for the agency which administers the LIS, the NHS Business Services Authority (NHS BSA).  The rules governing the interaction of these various means of support have evolved piecemeal and are frequently anomalous and unfair.  It mirrors the complexity of the interaction between benefits and tax credits but has been given less attention.  The introduction of Universal Credit is an opportunity to reduce this complexity.

The current system also leads to client error and high administrative costs.  Many who apply to the LIS will already have had their income and other details verified for another benefit such as housing benefit.  It is a waste of government resources to process a separate application to the LIS.  Any discussion about passporting through Universal Credit must recognise these interconnections to avoid carrying over existing flaws into the new system.

This paper looks at how the benefits system interlinks with the LIS, and discusses the advantage of a more joined up approach, in which the DWP would be responsible for administering support with health costs for people on low-incomes.  We look at a number of options for how the support given for health costs could be decided for those on Universal Credit.  The options vary in the extents to which DWP takes responsibility for deciding the amount of support an individual receives.

When the transition to the Universal Credit is completed in several years time, there will still be some groups of people who will not qualify for the Universal Credit but who will be entitled to help with health costs.  It may be more efficient to bring the administration of support for these groups within the Universal Credit because of the ease of verifying income and other details.  However, whether this happens or not, it is important that the rules for the LIS are aligned with the rules for those claiming Universal Credit, in order to remove the anomalies and complexities of the present situation.