Paying for healthcare


During the question and answer session that followed his Adam Smith Lecture on Thursday, Irwin Stelzer was asked what he would do about the NHS. His response was interesting.

Although he was strongly opposed to President Obama’s socialization of healthcare in the United States’, he didn’t see much point in attacking the NHS in Britain. It is too much of a national icon to be tackled head-on, and has a ‘social solidarity’ effect that many Brits are deeply attached to, he said. Instead, you need to nibble away at the edges.

His main suggestion was that we accelerate the process that started in 1951, when Hugh Gaitskell introduced charges for prescriptions, dental care, and spectacles. In short, we should gradually introduce user payments throughout the health system, increasing them over time so as to rely more on direct payment and less on tax revenue.

This is a sensible idea, and would certainly save the taxpayer money – by bringing in funds directly, by reducing the number of missed appointments, and by stopping people from using services unnecessarily, simply because they are free. This US study, for example, found that introducing a $5 ‘co-pay’ within a Health Maintenance Organization (HMO) resulted in an 11 percent drop in primary care visits, and a 3 percent reduction in specialist visits, without causing any negative health impacts.

Furthermore, Britain stands more or less alone in the world by not charging people anything at all to use medical services. Even countries with very egalitarian, Beveridge-style health systems – like Sweden – tend to charge, for precisely the reasons outlined above.

If combined with the supply-side NHS reforms that look set to accelerate under the new government, and which would free hospitals from central control and allow both private sector competition and patient choice, user charges could slowly tranform the NHS into a completely different institution.

Indeed, it is possible that we could eventually reach a point where the NHS was simply a universal insurance policy covering Britons against unpredictable, big-ticket health expenses. Most day-to-day funding would be private and, crucially, paid directly by patients to providers, without adding the unnecessary bureaucratic costs of governments or private insurers. Moreover, all provision – even when NHS-funded – would be independent of government.

As far as I’m concerned, that would be a pretty ideal set-up, which could deliver a high standard of care while also keeping costs under control. We just need to abandon the idea that "free at the point of use" is a sacrosanct principle that can never be infringed.