Elderly people will now have to pay £75,000 towards their care home bills before the government steps in to provide financial help.
The cap is the result of a new deal struck between the Department of Health and the Treasury.
George Osborne has agreed to foot the £700m bill for the £75,000 cap, according to The Sunday Times.
However, the figure is more than double the £35,000 cap recommended by Andrew Dilnot, the economist appointed by David Cameron to draw up a blueprint for the future of long-term care. Dilnot issued a report on the matter in July 2011.
The chancellor is understood to have overruled the £35,000 cap because it would have cost £1.7bn, regarding it too expensive in the current economic climate.
The cap on care home bills follows fears about the tens of thousands of pensioners who are forced to sell their homes to pay for basic care such as help with washing, dressing and feeding themselves.
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