The long-awaited social care green paper has set out the government’s ambition for a national care service that could offer a basic minimum entitlement to all, regardless of financial means.

The paper - although described as “very green” - was welcomed by NHS leaders as an opportunity to make the social care system more compatible with the health service. It is the first time the government has talked of a national care service in terms similar to the National Health Service.

The prospect of improving preventative care by reducing the numbers of old people who go without care because of its cost was also welcomed.

But there were warnings that securing the funds required could pit NHS interests against those of local government and the estimated 1.4 million older people who receive the £3.7bn worth of attendance allowance benefit earmarked to pay for the reform.

Stephen Burke, chief executive of the charity Counsel and Care, which has been influential in lobbying for reform, warned: “Rather than a discussion on how we pay for care in the longer term, we may see instead a massive rearguard action to defend this benefit, which is very popular.”

The London School of Economics based personal social services research unit suggests that some £978m of that benefit is currently paid to 400,000 older people with no apparent disabilities.

At the core of two of the three options set out by government is the concept of a “partnership” funding model. A proportion of each individual’s care package would be paid for by the state with the remainder paid for by personal contributions or means tested benefits.

The paper leaves open whether the amount of funding that each individual gets for free care under this model should be determined centrally or locally.

The government has proposed that around a third or a quarter of each individual’s package of care should be state funded, but under a local model the monetary amount attributed to that would be determined by councils.

King’s Fund chief executive Niall Dickson said he favoured the national alternative where the government decided the monetary value of each care package, subject to regional weighting.

“That has huge implications for local government and abolishes the postcode lottery. It might also be better for the NHS because there would be less unmet need,” he said.

But David Rogers (Lib Dem), chair of the Local Government Association community wellbeing board, warned that could “destabilise the whole of local government funding, and won’t take into account factors that lead to huge variations in the cost of care”.

The third option proposes establishing a compulsory social insurance system into which all those over 65 with the means would be asked to pay.

Payments could either be periodic or one-off levies paid on retirement or as a death tax on estates. The system would be designed to ensure there were no point of use charges for adult social care.

NHS Confederation deputy director of policy Jo Webber said: “The critical issue for the NHS is making sure the system is sustainable.

“The NHS needs this to be a universal offer. If we are really going to do some of the reconfiguration around patient pathways to improve efficiency and patient care we need to know that everyone has an entitlement to an element of care. That’s also what people expect.”

But the prospect of free care for all who need it means the public cost of adult social care could increase substantially.

If all the people who needed social care in 2010 received it, the personal social services research unit said the total cost would be £14.1bn.

Council spending on adult social care is estimated at £6bn, leaving a spending gap of £8bn.

But the green paper says the government is now prepared to consider phasing out the £3.7bn a year attendance allowance benefit paid to disabled people over 65, regardless of their financial means.

The remaining £4.3bn cost could be raised through a social insurance scheme.