Adam Smith Institute

News just in from the Lib Dem conference – the party is planning to give income tax breaks to the healthy. Under the proposals, Local Health Boards would be set up with powers to cut taxes for those who gain 'points' by attending regular cancer screenings and take part in physical activities. Activities would be logged via a swipe card system and points redeemed against proposed local income tax bills. Direct incentives would be backed up by penalties for failing to turn up to GP appointments.

At first glance the proposals appear to contain some sound principles – in particular the attempt to break the Stalinist grip Whitehall has over the health service by establishing directly elected Local Health Boards who would be "free to commission services from a range of providers to secure improved quality of care and value for money". The explicit incentives to get patients to take more responsibility for their healthcare would also bring a welcome shift in patient attitudes towards their health.

Last week I discussed Clegg’s proposals for directly elected health boards pointing out that a market based health system would provide a form of democracy far superior to that of merely voting every four years for a health board. 

Similarly, proposals to recreate the incentives of a market based insurance system beg the question – if insurance companies have been so effective in incentivising healthy living why try to merely recreate these incentives? Why not just switch to the superior model? An insurance system would put the purchasing of health services firmly into the hands of the patient - simultaneously breaking the government monopoly on healthcare delivery, while providing patients with incentives to live healthy lifestyles. Clearly the Lib Dems believe that markets work – why not put those beliefs in to practice?

Previous blogs have highlighted concern over “immoral, incoherent and quite possibly illegal” NHS rules denying patients care if they choose to top-up their treatment privately.  Now, the health think-tank, the King’s Fund, has said that the NHS should no longer be able to discriminate in such a way.

Currently, patients may lose the right to free NHS care if they pay privately for drugs rejected by the National Institute for Health and Clinical Excellence as not cost-effective.  This seems highly inconsistent when people are able to top-up dental and optical treatment, as well as additional non-clinical treatment such as private rooms, but are denied this option when it comes to the prolonging their life.

Niall Dickson, Chief Executive of the King’s Fund, said that: "The current practice on top-ups, which prohibits people from privately purchasing drugs not available on the health service while continuing a course of NHS care, is untenable."

Some of the drugs concerned are not available on the NHS as they are only effective for some patients.  The King’s Fund said that if the treatment is effective for the patient, then after a certain time period, particularly if the patient is financially unable to continue using the drug, the NHS should bare the cost.

Up until recently, ministers have said that top-up treatment would cause a two-tier health system, however, after recent high-profile cases of cancer patients being denied life prolonging drugs, they have agreed to reconsider the issue.  Professor Sir Mike Richards, cancer expert, is currently preparing a report for ministers reviewing top-up policy that is likely to be ready in the next month.

When people look at the US healthcare system, they imagine that private healthcare has to be hugely expensive. But the reason it's expensive is because it's hugely over-regulated. Tax and regulatory rules promote insurance through employers – reducing individual choice and meaning you lose your insurance when you change jobs. You can't buy insurance across state lines – live in New York and you have to have a Rolls-Royce insurance plan of the kind New York specifies: you can't buy a SmartCar plan, even if that suits you better.

And of course a rising part of the US healthcare system is the federal Medicare and Medicaid plans - bigger than the UK National Health Service, and growing fast:, according to the CBO, Medicaid and Medicare alone will absorb 20% of GDP in 70 years' time.

There are some proposals to open up the insurance market: a standard personal tax deduction rather than favouring employer-based plans, allowing choice across state lines, and so on. But there are promising new alternatives too. Pioneered by drugstore chains CVS, Target and Walgreens, more than 1500 retail health clinics are now in operation, up from 800 last year. Wal-Mart plans to open another 400 by 2010.

Wal-Mart will lease space in their supermarkets for drop-in clinics run by local hospital and other providers. Nurse practitioners  will staff them, and they will be open seven days and evenings each week. They will provide basic services and will refer more serious cases to doctors and hospitals. Prices will be typically in the $40-$65 region.

People will be able to get quick, cheap, convenient diagnostics, even if uninsured (about half of Wal-Mart clinics' patients are uninsured). That will break the physicians' monopoly, which will have very positive effects on driving down US healthcare costs more generally. I only hope that the Wal-Mart clinics come quickly – before the doctors lobby to outlaw them and restore the regulatory sclerosis that they naturally favour.