Tax-based financing of the NHS is better than the alternative

The end is not Nye. Along time ago..., CC BY

There should be a move to consider abandoning the NHS as a tax-funded health system offering comprehensive care free at the point of use, a recent article on The Conversation argued. Malcolm Prowle proposed “looking, with an open mind, at alternative funding options”, notably charges and health insurance models that “operate perfectly well in other European countries”.

Prowle supports his claims by citing his own study funded by the Association of Chartered Certified Accountants. This study assessed the sustainability of 11 healthcare systems in Australia, Abu Dhabi, Canada, England, France, Germany, Ghana, India, Malawi, New Zealand, and the United States. The study’s primary source material was an unspecified number of interviews conducted with a “finance professional working in the healthcare sector of a particular country or an academic commentator working in the healthcare field”.

We cannot conclude that health insurance models “operate perfectly well” in other European countries on the basis of a handful of interviews conducted in England, France and Germany. But the study doesn’t draw this conclusion anyway. Prowle misquotes his own report which says that “health insurance schemes work satisfactorily”. This is some distance from “perfectly”.

People think the NHS works well

Nor does Prowle’s assertion match what other research tells us. Rather than interviewing a few finance professionals and academics, it is far better instead to ask people who use the health system whether they think it works well or not. This is what the Commonwealth Fund did in its 2010 health survey. Between 1,000 and 3,500 people from 11 countries were asked if they believed their health system worked well, required fundamental change or needed to be completely rebuilt.

The UK had by far the highest proportion (62%) of people saying their health system worked well, with only 3% saying it needed a complete rebuild. This is ironic given that, soon afterwards, the coalition government embarked on a complete re-disorganisation of the NHS. In contrast, far fewer people in the four European countries with social health insurance systems thought they worked well: only 42% in France, 38% in Germany, 51% in the Netherlands and 46% in Switzerland.

View by country. Commonwealth Fund

The NHS is also less expensive

Why is there such approval for the NHS and such dissatisfaction with this alternative model? Compared to the NHS, social insurance models are typified by high administrative costs, over-treatment and over-pricing. These higher costs are passed on to the public in the form of high insurance premiums and co-payments, creating dissatisfaction.

These higher costs help explain high healthcare expenditure as a proportion of GDP in these countries, amounting to 11.7% in France, 11.3% in Germany, 12.9% in the Netherlands and 11.5% in Switzerland. In contrast healthcare expenditure as a proportion of GDP is 9.1% in the UK, amounting to around £112 billion per year.

Suppose we were to adopt Prowle’s recommendation of moving from tax-based funding to a social health insurance system. Based on the experience of the other four countries, this would have the potential to increase UK health expenditure by a further 2% of GDP at least. That would mean spending some £137 billion a year, some £25 billion more than we do now. I would question the motives of an accountant that suggested this as the way to deal with a projected £30bn funding gap.

MPs chasing popular opinion

Prowle complains that what is “really needed is some form of party political consensus about the best way forward for the NHS”. In this election more parties than ever have a realistic chance of winning seats. Among other things, these parties are trying to differentiate themselves in relation to their desire to end NHS privatisation. Indeed the National Health Action party is campaigning to “stop privatising NHS services and get rid of the market” entirely. In contrast, not a single party is advocating replacing tax-based financing with a system of health insurance. There is political consensus about this which probably reflects popular consensus.

As the Conversation’s health manifesto checks make clear, parties also agree about the need for increased NHS funding. They just disagree about what emphasis to place on the main strategies to meet this need, these being tax increases, economic recovery and improved productivity. Only UKIP proposes increasing charges – and only for so-called “health tourists”.

Is Prowle right while the rest of us are completely wrong? I don’t think so. His claims that health insurance models operate perfectly well in other European countries simply does not stand up to scrutiny, even from reading his own report. People much prefer the NHS, which is also a less expensive health system. Prowle’s evidence and arguments offer no basis for moving away from tax-based financing for the NHS.