Britain must stop subsidising pensioners to save the NHS

Telegraph

5 days ago

The Government recently produced a paper on the NHS entitled 'Fit for the Future – The 10 Year Health Plan for England'. It included many radical ideas and didn't pull its punches in regard to the need for reform. It said: 'The choice is stark: reform or die'. And, if nothing is done, it said, the NHS could become 'a poor service for poor people'.
Despite its radical tone and many good ideas, this report did not go far enough. In particular, it accepted the continuation of the current system of funding whereby just about the whole cost of the Service is borne by the taxpayer.
In a report published last week by Policy Exchange entitled 'The NHS – a Suitable Case for Treatment?', I and two co-authors went much further and called for an end to the system of predominantly taxpayer funding which has been the model since the NHS was founded in 1948.
In the mid-1950s the government spent about 3pc of its GDP on healthcare. Today the figure is 9pc (excluding the private sector), amounting to almost a fifth of all government spending. If nothing is done, by 2070 we could end up spending more than a fifth of our GDP on the NHS.
This is unacceptable. If we allowed this to happen, other sorts of public spending would have to be squeezed and/or taxes would have to be raised to eye-watering levels. This would have a devastating effect on incentives and therefore a materially depressing effect on the economy.
The funding system is the first of the NHS's major problems. The second is inadequate quality. Many British people think that the NHS delivers a first-class service. Yet, it is clear that the NHS offers neither the best nor the worst healthcare in the world. Admittedly, at its best, it is superb, but the standard is hit and miss, and at its worst, it is pretty bad.
Among a group of countries of comparable economic development (Australia, France, Germany, the Netherlands, Singapore, Switzerland and the US), on both life expectancy and healthy life expectancy the UK comes in second to last. Only the US scores worse.
On preventable and treatable mortality, the UK again comes in second to last, ahead of only the US. On the proportion of patients waiting over a year to see a specialist, the UK is the highest in the group. We also perform badly on the ease of securing an appointment with a GP and access to GPs out of hours.
What is to be done? Whenever someone criticises the NHS and suggests that we need to move to a different model, a chorus of voices loudly proclaims that we must not become like America. Indeed not. The US health system pulls off a remarkable double whammy. Although some of the best healthcare in the world is to be found in the United States, average health outcomes for the population as a whole are simply dire.
Meanwhile, the system is about the most expensive in the world. However bad the NHS may seem, it is infinitely preferable to the American system. Under no circumstances should we consider copying the US.
But we don't have to. There are many countries in the world which operate a different system for funding healthcare and enjoy better average health outcomes than the UK. The essence of their approach is to combine charging and co-payments with a system of social insurance. That is to say, compulsory purchasing of medical insurance, covering everyone in the population, with concessionary rates or even full reimbursement available for poor people. The state remains involved as both a partial funder, co-ordinator and regulator of the system. But governments spend much less on healthcare in these countries than we do, and thereby place a much smaller burden on their taxpayers.
Countries that run such a system include Australia, Canada, France, Germany, the Netherlands, Singapore and Switzerland. The most outstandingly successful of these is Singapore. It spends only about 5pc of its GDP on healthcare and of that, not much more than a half comes from government. Meanwhile, Singapore achieves just about the best health outcomes in our comparator group.
Yet Singapore is a very special case, with a particular political and social model. For an example that would serve the UK well, we should probably look closer to home. The obvious place to look is the Netherlands, not least because it underwent a radical reform of its health system in 2006. It delivers high standards of healthcare yet the government spends only 1pc of GDP on health.
Some people will argue that we already have a system of insurance to pay for healthcare, namely National Insurance. Despite its name, however, this is not really a system of insurance. It is rather another form of tax. The amount of money the state pays for healthcare is not restricted by the amount of National Insurance contributions coming into the Treasury. Moreover, unlike pensions, where eligibility is connected with National Insurance contributions, a person's ability to access the NHS is not circumscribed by their NI contribution record.
Moving from a system of funding through taxation to one based largely on social insurance is going to be a tough ask. It cannot be completed overnight. The place to start a programme to reform the financing of the NHS is with the introduction of a small charge for GP appointments and an end to the automatic entitlement to free prescriptions for pensioners, regardless of their financial circumstances.
Doubtless many people will say that these proposals destroy the essence of the NHS as it was established in 1948. But the provision of healthcare in this country cannot be treated as a sort of museum exhibit. We can adhere to the spirit of the NHS in creating a system that delivers excellent healthcare for all within a funding framework that is right for the 21 st century.