Elderly patients are suffering a "diminished quality of life" because social care funding pressures mean services are being reduced, a powerful committee has warned.

MPs also claimed cuts in support are driving increased demands on the NHS, as they called for an overhaul of the way the system is run. In a report, they recommended that elderly care, health and housing services are joined up to stop patients being "passed like a parcel" from one department to another.

Stephen Dorrell, chairman of the health select committee, said: "Growing demand, coupled with an unprecedented efficiency challenge, makes it more urgent than ever before to convert these fine words into fine deeds. We look to the Government to set out in its Social Care White Paper how this vital objective will be met."

The health committee suggests that failure to link up commissioning and provision across the services leads to more hospital admissions, later discharge and poorer outcomes. But the consequences for providers are "no less stark" as the NHS will fail to meet its efficiency saving targets of 4% every year over the next four years, it added.

NHS chief executive Sir David Nicholson told the committee that salami-slicing budgets instead of integrating services would have "very serious consequences". MPs welcomed the Government's commitment of an extra £2 billion a year for social care by 2014/15 but warned "it is not sufficient to maintain adequate levels of service quality and efficiency".

They found "funding pressures" are causing reductions in service levels "which are leading to diminished quality of life for elderly people and increased demand for NHS services". The cross-party committee also said the large bills pensioners are left with for services such as home help come as a "shock" to many.

It called on the Government to accept the "principle" of a cap in costs following the recommendation last year by the Dilnot Commission for the state to step in when bills rise above £35,000 for any individual.

Richard Humphries, senior fellow at the King's Fund health thinktank, said: "The committee is right to stress that a more ambitious approach is needed to achieve this based on coordinated commissioning and pooled budgets. We think this could go a stage further by moving towards a single assessment of the funding needs of the NHS and social care in future spending reviews."

Care Services Minister Paul Burstow added: "Integrated care should be the norm. That's why we asked the NHS Future Forum to specifically work on this issue. They told us there is no single silver bullet when it comes to integration. What we have already done and continue to do is create the legal and financial conditions for more integration.

"The committee's report is an important contribution to the debate."