Bills for long-term care in old age are to be capped at £75,000 in England, in a £1 billion move to be funded by dragging more people into the inheritance tax net, it has been announced.
Health Secretary Jeremy Hunt told the House of Commons that the "historic" reforms would save thousands of people from having to sell their family home to pay for care.
But campaigners voiced disappointment at the level of the cap - more than double the £35,000 recommended by the independent Dilnot Commission in 2011.
And thousands more will be hit with inheritance tax bills because of a three-year extension from 2015/16 of the freeze in the £325,000 threshold - £650,000 for couples - at which it kicks in at 40%. The move effectively means abandoning the Conservatives' general election campaign pledge to raise the threshold to £1 million.
Alongside the cap, the Health Secretary announced a large rise in the asset threshold beneath which people will receive means-tested Government support for care bills. Currently £23,250, that is set to rise to £123,000.
Taken together, Mr Hunt said the measures, to be introduced through the Care and Support Bill and come into effect in April 2017, will benefit around 100,000 people annually who would not receive support under the current system. Certainty about the maximum bill they may face will allow everyone to buy insurance to protect them against the possibility of care costs.
"We need to become a society where people prepare and plan for their social care costs as much as they prepare and plan for their pension," Mr Hunt told MPs. "Sadly, this is an issue that governments of all colours have long failed to tackle.
"Whilst there are many other things that need to be done to prepare for an ageing population, these reforms do herald a historic change in the way that care and support is funded in this country.
"Economic circumstances are challenging but these commitments demonstrate our determination to help people who have worked hard, saved and done the right thing to prepare for the uncertain hand that fate deals all of us in old age.
"By introducing these reforms within the timescales and thresholds set out, they will also be sustainable and consistent with our overriding priority to reduce the deficit inherited from the last government."