• In the 1940s, the UK and Australia had similar healthcare systems. The UK then created the NHS; Australia introduced gradual reforms to its existing model. The latter now has a superior system with substantially better outcomes.


• Cancer survival rates are several percentage points higher, while heart attack and stroke mortality rates are several percentage points lower. This equates to thousands of lives. In terms of avoidable premature deaths, Australia is about a decade ahead of the UK.


• The UK healthcare system is not relatively underfunded. Total healthcare spending is lower in Australia, and it has been for nearly two decades. In 2019, it stood at 9.3 per cent of GDP, compared to 10.3 per cent in the UK.


• The NHS, however, does appear to have a lead when it comes to avoidable hospitalisation rates for chronic conditions


• While the Australian system has many flaws, it can teach the UK to be more relaxed about the benefits of private sector involvement in healthcare delivery, private insurance and decentralisation.

New research from the Institute of Economic Affairs, titled ‘Wizards of Oz?’ and authored by Head of Political Economy Dr Kristian Niemietz, compares and contrasts the Australian healthcare system with the NHS, with particular focus on outcomes.

Australia and the UK had very similar healthcare models until the late 1940s, when they diverged. The UK created the NHS; Australia implemented gradual reforms, leading to a multi-layered hybrid system. We can therefore look to Australia for a plausible counterfactual on how healthcare in Britain might have evolved had the NHS never been created.

According to the paper, the Australian system is, in a number of important ways, superior to the NHS. When it comes to healthcare outcomes for the major life-threatening conditions, the Australian system outperforms, and at lower levels of overall spending.

For instance, in the UK the 30-day mortality rate for a heart attack was 6.8 per cent in 2017, compared to 3.8 per cent in Australia the year before. In the UK, the mortality rate for haemorrhagic stroke was 28.2 per cent, compared to 19.4 per cent in Australia.

The paper does not argue that there is one perfect type of healthcare system, nor that the Australian model is one for the UK to replicate, given it has problems of its own. Waiting lists at public hospitals can be fairly long, and hospitalisation rates for people with chronic conditions tend to be higher than in the UK (which suggests weaknesses in coordination and chronic care).

But there are some key takeaways. The ideas of tax rebates for private health insurance (PHI), and community rating in PHI, are certainly worth looking into, as is the generally more decentralised nature of the Australian system.

The conclusion to be drawn from this paper is not ‘Ditch the NHS, and adopt the Australian system instead,’ but rather that the UK should not shy away from learning from international best practice.

Previous IEA publications by Niemietz, most notably Universal Healthcare without the NHS, have made the case for a competitive, market-based Social Health Insurance system. This – and not the Australian model – remains the author’s preferred option.

Dr Kristian Niemietz, IEA Head of Political Economy and author of Wizards of Oz?, said: 

“The Australian healthcare system is perhaps the closest thing to a realistic counterfactual for how healthcare in Britain might have evolved if the NHS had never been created. The two countries started from a very similar place, but then diverged sharply in the post-war years, as Britain went for a wholesale nationalisation of the health sector, while Australia opted for more gradual reforms within the decentralised, part-private system they inherited.

“On a whole range of measures, that counterfactual looks a lot more attractive than what we actually have. It is therefore not implausible to the draw the conclusion that the creation of the NHS was a historic mistake, and that Britain would have been better off without it.” 

ENDS

Contact: Emily Carver, Head of Media, 07715 942 731

Dr Kristian Niemietz is available for interview and further comment.

Wizards of Oz? is under embargo until 00.01 Thursday 5th August 2021. An embargoed copy of the paper can be found here: https://iea.org.uk/wp-content/uploads/2021/08/DP102_WIZARDS-of-OZ_web.pdf

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics.

The IEA is a registered educational charity and independent of all political parties.