Means-tested charges levied by local authorities may be a false economy because some people think they cannot afford the services and end up in hospital at much higher cost to the state, according to the Commons health select committee.
David Hinchliffe, the committee's Labour chairman, said there was "quite clear evidence" of charges being a barrier to appropriate community care. The Government should analyse urgently all the cost implications.
Dr Howard Stoate, Labour MP for Dartford and a former GP, said: "It may well be that by removing that means-test barrier, it may free up enormous resources for the NHS."
Local authorities recoup through charges an average 9 per cent of the costs of services for people at home, known as domiciliary care, although the proportion ranges from 23 per cent to zero.
On a visit to Dorset, the committee found one NHS trust paying the day-care charges imposed by social services on some people with mental illness. Health workers feared that, without the day care, their patients might break down and require expensive hospital treatment.
The committee's call for a rethink on charges comes in a report on relations between NHS and social services agencies. The report concludes that people are suffering because the agencies' responsibilities are blurred and the dividing line between health and social care indistinct and "arguably non-existent".
Whereas health care remains largely free, social care has been subject to means-testing since 1948 and users increasingly face charges.
Mr Hinchliffe said the situation was so ludicrous that Frank Dobson, Health Secretary, had been unable to tell the committee the difference between health and social care. "Where does this leave professional staff in health and social services who every day of their working lives have to offer some definition of who does what at local level?" he said.
The committee says that health and social care should merge in the long term, returning to the position before 1974, and criticises professional groups for failing to share such a vision.
However, the British Medical Association last night accused the committee of failing to make coherent proposals for change. The Royal College of Nursing said that while integration of services was desirable, it should be evolutionary and avoid structural upheaval.