The radical alternatives: Social health insurance
Social health insurance is a system into which employees, employers and the state all contribute. The money collected by independent bodies typically known as insurers or ‘sickness funds’, which then pay health care providers for people’s care. Contributions are usually mandated so they are in effect a tax but are not directly collected or spent by the government. Employee and employer contributions are related to income, rather than risk of illness.
This system is used in some countries, eg, France and Germany, but social insurance works very differently in each country. In Germany, for example, those who can afford to pay for their own health care can opt out of the compulsory social contributions, either taking the risk of paying out of their own pocket or taking out private insurance. In France, and many other countries, there is no such opt-out. The number, construction and operation of sickness funds, and any competition among them, also varies. In other words, there is no single model of social health insurance and each country’s version is customised and usually defined by its health policy history.
As social health insurance is often based on employment, countries operating with this model must also find ways to provide cover for those not in employment – which usually includes funding health care through general taxation and other sources such as statutory pension funds. For example, the Japanese health insurance scheme has several options to ensure universal cover: employees of large firms are required to sign up to social health insurance; employees at smaller firms are given cover through the Japan Health Insurance Association; those who are not covered by either of these are covered by a government scheme (this latter group does not include families of people who are employed as they are often covered under the employee social insurance scheme).
|Arguments made for social insurance||Arguments made against social insurance|
Greater use of private self-pay and insurance
People in England can access private health care through employer-based schemes (either fully or partially subsidised by the employer), individual private medical insurance (where costs vary depending on age and pre-existing conditions), or self-pay (paying to go private out of your own pocket on an ad hoc basis).
Private provision of health care in the England has historically been a choice, not a necessity. Recently there has been an increase in the number of people using private health insurance or choosing to ‘self-pay’ for their treatment because of long waits for NHS services.
Encouraging individuals to take out private health insurance or self-pay for private treatment is sometimes advocated for as a means of ‘lifting the burden’ on the NHS. There have been previous attempts do this in the England, most notably in 1991, when the Government introduced tax subsidies for individuals aged over 60 who had already taken out, or subsequently took out, individual private medical insurance. There was a deadweight cost to the state as all those who already had individual private cover also received a tax break. In 1997 the tax break was abolished. The Institute for Fiscal Studies calculated that £135 million saved by removing the subsidy more than compensated for the additional cost to the NHS of treating those who decided not to take out private medical insurance as a result of the subsidy being removed.
Arguments made for private self-pay and insurance
Arguments made against private self-pay and insurance
Expanding charging for NHS services
In England there are charges for prescriptions, dentistry, eye tests and a few other services. There are various forms of exemption to charges, most typically for children, older people and those on low incomes to ensure everyone can access the health care they need.
Charging is sometimes introduced to try to alter demand. Some countries, such as Sweden, charge for primary care appointments – eg, seeing a GP – to reduce repeat visits, and there is evidence that this can lead to lower demand without impacting health outcomes, apart from for patients who are poor or in poor health. Some evidence from other countries also shows that charging for inpatient care – known as ‘hotel cost’ charges for each night someone stays in hospital – has little impact on patient demand.
Charging can also be seen as a way to increase overall funding for health care, however, there is little evidence from the NHS or other countries’ health systems that this results in significant amounts of revenue, given that these schemes will have to exempt what are often large numbers of people, such as those with long-term illnesses, from the charges.
|Arguments made for expanding charging for NHS services||Arguments made against expanding charging for NHS services|
Hypothecation is the earmarking of a tax for a specific area of public expenditure. In the context of health, introducing hypothecation could provide a clearer link between what people pay in tax and the service they receive from the NHS. It’s possible that this transparency would increase support for raising taxes to pay for health care.
There are many different ways of hypothecating taxes, for example, ‘partial’ or ‘full’. Partial hypothecation would top up current levels of spending so that funding for the NHS would come from a combination of a new hypothecated tax and general taxation. This approach has been used for the NHS before, in 2002 when the Chancellor directly linked an increase in National Insurance to a significant spending increase for the NHS over a five-year period. This has also happened locally for social care with an additional Council Tax charge called the adult social care precept, through which councils who provide adult social care are able to increase their share of Council Tax by up to an extra 2 per cent in comparison to last year’s Council Tax if they use the additional money raised to fund social care.
Full hypothecation would mean that one hypothecated tax would set the whole NHS budget. International research shows that hypothecating tax revenues for health care or social care is not common (though it shares a lot of features of social insurance) – some countries have considered it but few have used it.
Past attempts at hypothecated taxes in the England– including vehicle excise duties to improve roads, a landfill tax, and a windfall tax on utilities – have broken down. A recent example is the Health and Care Levy, an earmarked National Insurance levy to raise £12 billion a year for health and social care, announced in 2021 by then Prime Minister Boris Johnson and scrapped in 2022 by the Chancellor.
|Arguments made for hypothecation||Arguments made against hypothecation|
Merging the NHS and social care
The NHS provides comprehensive health care to everyone free at the point of use. Social care, which is the responsibility of local authorities, is both means tested and subject to tests of eligibility – meaning an individual’s income must be below a certain level and their ‘need’ above a certain level, set by government, in order to receive publicly funded support.
Despite these different funding and eligibility arrangements, health and social care services have been working more closely together for several years through the Better Care Fund, Section 75 arrangements and now integrated care systems (ICSs). Merging their budgets is one option to further formalise this way of working. Unlike England, in many countries, such as Germany and Japan, the way social care and health care are funded is very similar. For example, in Germany, social insurance is used to finance both health and social care. In this sense, England is an outlier with the distance between the relatively generous NHS and the heavily means-tested system of social care support.
When considering merging health and social care in England, there are three potential routes:
- local authorities and the NHS taking joint responsibility for social care, perhaps working from a single combined budget
- local authorities taking on responsibility for NHS budgets, on top of social care and public health budgets
- the NHS taking on responsibilities for adult social care (and possibly services for children with disabilities).
Any of these options would involve reconciling a means- and needs-tested social care system with a health service that is available to everyone, free at the point of use. This would be challenging politically, financially and operationally. For example, if budgets remain similar, challenging conversations might be needed over whether more people should be eligible to receive state-funded social care in exchange for expanding rationing or charging of NHS services. Ensuring the sustainability of health and care services is the lens taken to assess the arguments made for and against merging the two systems. However, there are other legitimate arguments against merging these two systems, such as the difference in risk appetite or culture.
|Arguments made for merging of the NHS and social care||Arguments made against merging of the NHS and social care|
The King’s Fund view
Each of these ‘radical’ alternatives has its own strengths and weaknesses. They are all used in one form or another somewhere in the world – these are not theoretical concepts and they have been seen as appropriate for some countries. Given the current state of the NHS, should we consider using these alternatives in the English system?
There are four key reasons why this would not be advisable.
First, the cost of changing to a new model would be substantial, both in terms of the resources needed but also the opportunity cost. Take, for example, introducing a social insurance model, which is often proposed. As each country’s interpretation of this model differs, a design unique to England would need to be developed, legislated for and implemented, with a lengthy transition period if a new financial partnership between the individual and the state was required.
Second, in the long term, there is no evidence that suggests any specific funding models routinely delivers a better health care system than any other. In fact, what tends to differentiate performance of health systems is the level of investment rather than underlying model of funding. This would suggest that a lengthy, costly and disruptive transition to social insurance is unlikely to deliver significant improvements in and of itself, without a corresponding increase in investment.
Third, self-pay and expanding charges would have ramifications for health inequalities for those unable to afford them and would also be unlikely to reduce pressure on the NHS. Furthermore, those who delay or avoid care due to cost could increase demand for expensive treatments, and this could also result in poorer health outcomes. All the different models still need a tax-funded safety net, and if this is not adequately funded and resourced there will be implications for health inequalities.
Finally, in the short term, there are significant challenges facing the NHS that these alternatives do not help to tackle. None of the alternatives proposed above would in and of themselves increase the capacity of the health care sector and so there would be no meaningful impact on improving access or reducing the backlogs of care more quickly. They would not result in more beds, diagnostics equipment, or improvements in the state of NHS buildings. Neither would they overcome the significant workforce challenges in the NHS, which require action to boost recruitment and retain existing staff. Likewise, to improve health outcomes requires action on both the quality of health care and also societal action on the wider determinants of health, which these alternatives do not guarantee.
England needs to improve both health and care delivery and health outcomes. Doing this requires additional investment particularly on capital (buildings and equipment), fundamental changes to social care funding and provision, a comprehensive approach to improving the wider determinants of health and governments adopting a long-term perspective to avoid repeating the mistakes of the past on issues such as workforce planning. None of the ‘radical’ alternative models would be an immediate or targeted solution to the challenges facing the NHS. In fact, each would bring their own drawbacks as well as benefits and introducing any of these would bring significant disruption. Tackling the challenges is better done through improving our current health care system rather than jumping ‘out of the frying pan and into the fire’.
I have waited over 156 weeks to be seen for talking therapy when the NHS website says you will be seen within 18weeks.
I have had all kinds of excuses, staff shortages, psychologist being off on maternity leave then long term sick. They can lie and point finger and say they don't get enough funding, but that is not true. They get more than enough. The problem with the NHS is corruption. People at the top on £200,000 salaries and GPs on £100,000. The mismanagement of funds and understaffing issue because they can retain staff. They pay them in pittance and increase their workload just so the people at the top can get their shiny pay cheques.
There isent just one or two either. It spirals down the Web all the way to the bottom. They protect each other and make harder for people to complain by adding limitation stature laws like not being held accountable for negligence after 3 years (when most non health companies you you have up to 6 years). Then they make it harder to complain by having different sections like ICB switchboard which came into effect July 2022. Making complaints and negligence harder to report.
I don't clap for the NHS anymore. It's a joke. I have Autism and I've had to jump through hoops to get my voice heard and it's still not being listened too. Shut the NHS down.
How about banning private medial treatment? In the UK the NHS is our preferred system so make it the only one. Medical insurance both health and dentistry is allowing these companies to make a lot of money. They would not do it if it did not. Make medical training free to encourage more young people to train as both doctors, nurses and support staff. I would not consider going into £100,000 debt to train for a career.
Great article, many thanks.
I found that most of the problems you have identified in the NHS (England) and almost identical to the ones in the NHS of Spain. Except for the “regionalization” of the 17 Spanish regional systems, both health systems are quite a few similar. I celebrate you have at least identified the problems and that you are looking for the solutions…
Thank you to Charlotte Wickens and Toby Brown for this excellent analysis. I've been supporting the NHS as a patient representative and campaigner for more than 8 years now. I long ago came to the conclusion that the way we fund the NHS is the best model; we just need to pay more! This analysis says it all.
Here is a subjectively "radical" view...reform education to emphasise health and wellbeing. The attention to health promotion and disease prevention is simply diabolical. Those aware of and attempting to promote making the correct choices and highlight relevance of teaching the importance of self care no doubt become frustrated and disillusioned by false government promise and paucity of state support. With each new generation there could be dramatic improvements in health behaviours resulting in a healthier population living longer and contributing more. If preventative disease went away imagine what the service would look like?
I am astonished by your negativity towards changing the system, which is clearly broken. I have worked alongside the NHS for more than 40 years and I'm convinced that people like the system and would be prepared to pay more in someway, with the taxes or hypothecation, to keep it afloat-witness the Covid situation. My daughter lived in France for many years and the system there seems to work extremely well, with high quality medical care and not too many complaints as far as I could see. I wish it were possible to speak to someone face-to-face about this.