UKIP and the NHS: reigniting the insurance debate in the NHS - new blog by Emma Spencelayh Earlier this week Nigel Farage, the UKIP leader, was reported as reigniting the debate on private health insurance as an alternative model for funding the NHS. Back in 2012 Farage was recorded advocating an insurance-based system for the NHS, but the UKIP official line has been that it would ensure the NHS is free at the point of delivery and time of need for all UK residents. Speaking to the BBC’s Political Editor Nick Robinson on Radio 4, Farage was asked about his party’s apparent U-turn on replacing the current system of NHS financing with an insurance-based system. Farage was asked whether he had bottled it and whether he had compromised on his personal beliefs about the NHS because the public wouldn’t accept an insurance-based system. Farage stated that there is no question that health care provision is going to have to be very much greater... and were going to have to find ways to do it. While it’s difficult to disagree with these actual words, it was the wider context of the interview which prompted the press coverage suggesting that there could be a potential change in direction from UKIP on NHS financing after the general election. To counter speculation on this issue, on Tuesday UKIP stated on its website that its position is for the NHS to remain funded through general taxation and free at the point of delivery. We know that there is an increasing financial pressure on the NHS. But is an insurance model really a silver bullet for the NHS’s financial challenges? The short answer is no. The NHS Five Year Forward View spelt out that while the financial situation is challenging, there is nothing to suggest that continuing with a comprehensive tax-funded NHS would be intrinsically undoable. It is not entirely clear from what he has said whether Farage would advocate a voluntary health insurance system, as can be seen in the United States and South Africa, or a social health insurance system as has been seen traditionally in European countries such as Austria or Germany. However, he has been reported as denying that he had ever advocated an American-style model. There are significant differences between the two models. The former, as the name suggests, is insurance that is discretionary for either individuals or for employers and can risk significant gaps in coverage. Social health insurance tends to be more heavily regulated and can be a mechanism for achieving universal health coverage. Traditionally, social health insurance has been based around subscriptions taken out of paid income with coverage being subject to membership of a fund, with non-government funding coming from employers and employees. Either way, the assumption that a change from a general tax-based system to an insurance-based system would save money is unsubstantiated. Evidence suggests that for voluntary health insurance systems, management and administration costs are high because insurers have to spend money on marketing (particularly focused on attracting lower-risk clients), assessing risk, setting premiums and in considering whether to fund or reject claims. The business case for a social health insurance system rather than a tax-based system on financial grounds is equally unclear. The World Bank (whose structural adjustment programmes in the 1980s received criticism for introducing private sector health reforms into low-income countries) published a working paper in 2009 which looked at OECD countries between 1960-2006 to assess the impact of adopting social health insurance over tax-based systems. It was found that social health insurance increased per capita health spending by 3-4% and did no better in terms of most health outcomes that are amenable to medical care, despite the additional spending. Our current system of financing is flexible because it is not limited to revenue generated specifically from employee earnings. In contrast, social health insurance systems have traditionally been dependent on revenue generated from earnings from employees, rather than being able to draw on a wider range of income streams such as VAT. One other advantage of the tax-based system is the ability to distribute risk across a large population, offering financial protection to those who might otherwise face catastrophic health care costs. In 2002 the Wanless Review concluded that the UK system of finance delivers strong cost control and prioritisation and minimises economic distortions and disincentives. He also noted the separation between an individual’s financial contributions and their use of health care. This latter point is important. Our current system is based on need and not on the ability to pay which shields patients or users of care from having to make health decisions on the basis of cost. It is likely that the people who account for the bulk of health care expenditure are the sickest and therefore those most in need of financial protection. Even in an insurance-based system, the state has an important role to play in devising policies to protect this portion of the population. Without strong regulation, there are incentives for insurers to target the young and the healthy (effectively those who are less likely to need to use health care) with those of a higher risk (the old and the sick) subject to prohibitively high premiums and gaps in coverage. The state may still be required to subsidise the care of those with the highest risks or to intervene heavily in the market (by equalising the risks between insurance funds) to ensure universal coverage. While Nick Clegg has ruled out any coalition with UKIP, there is still a possibility that UKIP (if they win any seats) could form a coalition government with the Conservatives in May. On that basis, they should be held to the same standards as the other parties when considering their policy proposals for the NHS. While it is legitimate to ignite debate on the mechanisms of raising funds for the NHS, Farage still has some way to go before he can make a convincing case that an insurance model could solve the current financial pressures facing the NHS. The Health Foundation (an independent charity) will be publishing a series of briefings and blogs in the run-up to the 2015 general election, to inform the ongoing public debate on health care policy. These materials will analyse and discuss key issues raised by political parties and others about health care policy and the NHS. Emma is a Senior Policy Advisor at the Health Foundation, twitter/ESpencelayh See the reaction to this blog at bit.ly/1CiuKja
Posted on: Sat, 24 Jan 2015 10:09:00 +0000
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