Universal healthcare without the NHS


Government and Institutions

UK’s current version of industrial strategy will do little to boost productivity

Poor NHS performance is costing thousands of lives a year

  • Despite some relative improvements in the last fifteen years, the National Health Service remains an international laggard in terms of those health outcomes that can be attributed to the healthcare system. In international comparisons of health system performance, the NHS almost always ranks in the bottom third, on a par with the Czech Republic and Slovenia. In a ‘blind test’, in which we look at health outcome data, and guess which data point represents which country, the UK could easily be mistaken for an Eastern European country. We would certainly never mistake the UK for Switzerland or Belgium.

  • Age-standardised survival rates for the most common types of cancer remain several percentage points below rates achieved in most other developed countries, and such differences translate into thousands of lives lost. For example, if the UK’s breast cancer, prostate cancer, lung cancer and bowel cancer patients were treated in the Netherlands rather than on the NHS, more than 9,000 lives would be saved every year. If they were treated in Germany, more than 12,000 lives would be saved, and if they were treated in Belgium, more than 14,000 lives would be saved. A similar picture emerges for a range of other conditions, as well as for more holistic measures of health system performance. For example, the UK has one of the highest rates of avoidable deaths in Western Europe. If this rate were cut to the levels observed in Belgium, more than 10,000 lives would be saved every year. More than 13,000 lives would be saved if the rate were cut to Dutch levels.

  • The one study which seemingly comes to a radically different conclusion is the Commonwealth Fund study, which ranks the NHS as the world’s top performer. Illustrating the dynamics of confirmation bias, the Commonwealth Fund study has therefore acquired the status of a trump card in the British healthcare debate. However, there is only one category in the Commonwealth Fund study which looks at health outcomes, and in that category, the NHS ranks, once again, second to last. Thus, even the preferred study of NHS supporters shows that the NHS is an international laggard in terms of outcomes.

  • The UK spends less on healthcare than many other developed countries, but this must not be mistaken for a sign of superior efficiency. It is mostly the result of crude rationing: innovative medicines and therapies that are routinely available in other high-income countries are often hard to come by in the UK. Any country could keep healthcare spending in check by simply refusing to adopt medical innovation. In more sophisticated estimates of health system efficiency, the NHS ranks, once again, in the bottom third.

  • The NHS is poorly prepared to deal with the financial challenges of an ageing society. This is because, like virtually all health systems in the developed world, it is financed on a pay-as-you-go basis: healthcare costs rise systematically with age, which is why most healthcare spending represents a transfer from the working-age generation to the retired generation. Increasing longevity and low birth rates therefore represent a pincer movement which threatens the system’s financial viability. The fundamental problem is that the NHS (like other health systems) lacks old-age reserves. It should have started building up an old-age reserve fund, analogous to a pension fund, decades ago.

  • While NHS performance looks unimpressive in snapshot cross-country comparisons, it does better on time series. Compared to the 1990s, the NHS has improved both in absolute terms and relative to its peers.

  • Its critics sometimes compare the NHS to a ‘Soviet style’ state monolith: this characterisation is no longer accurate (if it ever was). There have been two major attempts to introduce market mechanisms into the NHS. The first attempt, the ‘internal market’ of the 1990s, did not succeed: the NHS was not yet ready for competition at the time. Important preconditions were lacking, in particular, there was a severe dearth of information about provider performance and quality of care. The second attempt, the ‘quasi-market’ of the 2000s, was a qualified success, because this time the preconditions had already been established.

  • In other policy debates, there is willingness to learn from international best practice, and a general curiosity about successful models abroad. English free schools, for example, were modelled on the Swedish friskolor. Healthcare is the exception to this rule. The healthcare debate remains insular and inward-looking, blighted by a counterproductive tendency to pretend that the only conceivable alternative to the NHS is the American system.

  • It would be far more insightful to benchmark the NHS against social health insurance (SHI) systems, the model of healthcare adopted by Switzerland, Belgium, the Netherlands, Germany and Israel. Like the NHS, SHI systems also achieve universal access to healthcare, albeit in a different way, namely through a combination of means-tested insurance premium subsidies, community rating and risk structure compensation. Unlike in the US, there is therefore no uninsured population (even homeless people have health insurance), and there is no such thing as a ‘medical bankruptcy’. When it comes to providing high-quality healthcare to the poor, these systems are second to none: in this respect, there is nothing the NHS has achieved which the SHI systems have not also achieved.

  • In terms of outcomes, quality and efficiency, social health insurance systems are consistently ahead of the NHS on almost every available measure. They combine the universality of a public system with the consumer sovereignty, the pluralism, the competitiveness and the innovativeness of a market system. We do not see any one particular country’s health system as a role model, because they all have flaws and irritating aspects of their own. But there are also plenty of interesting lessons to be learned, which we are missing out on by ignoring alternatives to both the NHS and the American system.

  • The Dutch system shows that a successful health system needs no state-owned hospitals, no state hospital planning and no hospital subsidies. The Swiss system shows that even substantial levels of out-of-pocket patient charges need not be regressive, and that people can be trusted to choose sensibly from a variety of health insurance plans. The ‘PKVpillar’ of the German system shows that a healthcare system can be fully prefunded, just like a pension system.

  • The quasi-market reforms of the 2000s can be built upon, to move gradually from the status quo to a pluralistic, consumer-oriented healthcare system. Clinical Commissioning Groups (CCGs) are, in a sense, comparable to insurers, so giving people free choice of CCG would be a necessary (albeit not sufficient) first step towards creating a quasi-SHI system. CCGs’ budgets would then have to correspond closely to the risk profile of the patient population they cover, and this market should also be opened to private non-profit and for-profit insurers. CCGs and non-NHS insurers should be free to offer a variety of health plans, including plans with co-payments and deductibles in exchange for rebates.

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Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).