Healthcare

The NHS delivers poor outcomes – even the Commonwealth Fund agrees


Imagine a version of history in which the National Health Service had never been created.

What would healthcare in Britain look like today? Would we have luxury healthcare for the rich, and Wild West medicine for the poor? Would people live in fear of being bankrupted by medical bills? Would the poor have to choose between food and medicine? Take out Wonga loans when their children get sick?

Almost certainly not. If pre-war healthcare policy trends are anything to go by, we would probably just have settled for something more akin to a continental European-type social health insurance (SHI) system.

SHI systems – the sort of system we see in places like Switzerland, the Netherlands, Germany and Belgium – are universal insurance systems. Every legal resident of these countries has health insurance. People who cannot afford the premium receive a subsidy. Insurers, meanwhile, are not allowed to discriminate on the basis of individual health status. They cannot, for example, demand a risk surcharge from people in poor health, they cannot refuse to cover pre-existing conditions, and they cannot turn down an applicant. They have to accept everybody on the same terms.

Cherry-picking is prevented through a scheme under which insurers that end up with a disproportionate number of good risks have to pay a compensation to insurers that end up with a disproportionate number of bad risks. From an insurer’s perspective, insuring a person in poor health is therefore just as lucrative as insuring a person in good health.

Those compensation schemes can be quite complex and bureaucratic, but they succeed in creating a level-playing field, in which insurers compete on price and service quality, not on their ability to pick the healthiest clients. In fact, trying to attract people with particular chronic conditions, by offering a healthcare package tailored to their needs, can be a clever business strategy to find a market niche. In terms of outcomes, SHI systems easily outperform the NHS on virtually every available measure.

They have, for example, substantially higher cancer survival rates, lower stroke mortality rates, and more generally, a much lower proportion of avoidable premature deaths. Interestingly, this is confirmed even by the Commonwealth Fund study.

The Commonwealth Fund study is a massive outlier, in that it is the only international comparison of health systems in which the NHS regularly receives top marks (which is, of course, the reason why it is endlessly overhyped in the British media). The main reason is that this study does not pay much attention to outcomes – but it has one category which does, and in that category, the NHS ranks second to last.

It is fair to say that the SHI systems are among the best in the world in terms of outcomes. It is also fair to say that the NHS is one of the worst systems in the developed world outcome-wise, usually about on a par with the Czech Republic and Slovenia. But the strengths of SHI systems go beyond measurable outcomes, with the more market-oriented ones offering patients a great deal of choice and variety.

In Switzerland, for example, each insurer offers up to four different health plans, which come with different degrees of provider choice. The more restrictive options come with premium discounts. The default option is a health plan which offers unrestricted access to any healthcare provider you choose.

But you can also opt into a British-style gatekeeper model contract, under which you have to register with a GP, and under which you cannot see a specialist without a referral. Or you can choose a contract under which, emergencies aside, you must have a telephone consultation before you can see a doctor. Under the most restrictive option, you must get most of your healthcare from one single integrated, multi-speciality health centre.

In the Netherlands, you can choose between a health plan under which you pay your medical bills first, and then get reimbursed by your insurer, or a plan under which the insurer directly reimburses the provider, so that you never directly incur any costs. Under the first option, you can choose any provider you want; under the latter option, you are limited (emergencies aside) to providers your insurer has a contract with.

All Dutch hospitals are private non-profit organisations. Hospitals can go out of business – and a Dutch version of Mid-Staffordshire probably soon would have.

What’s not to like? Quite a bit. Above all, while insurers and patients have various cost-containment tools at their disposal, incentives to make use of them are blunted. In the Netherlands, part of the health insurance premium is nominally paid by the employer rather than the individual, and children are insured for “free” (i.e. the government pays their premium).

This means that if people choose a lower-cost health plan, the resulting cost savings do not fully accrue to them. The level of co-payments, meanwhile, is one of the lowest in the developed world. So unsurprisingly, people do not make much of an effort to economise on healthcare.

In Switzerland, there are no employer contributions, and people have to pay premiums for their children as well – but hospitals are generously subsidised by cantonal governments, which means that the prices they charge health insurers do not reflect their true costs. The result is that, again, people who choose low-cost health plans do not reap the full benefit. Selective contracting between an individual insurer and an individual provider, a potential way to intensify competition between providers and secure cost reductions, are not permitted either.

Neither in Switzerland nor in the Netherlands are insurers allowed to offer a slightly less generous benefit package. Insurers can offer extras, and patients can easily go beyond what is covered by their insurance package. But nobody can go below what is, by international standards, a very comprehensive package.

So those systems certainly have issues of their own. But they show that universal coverage and equitable access to healthcare can easily be achieved within a market-oriented health system. And they show that, yes, markets do work in healthcare.

 

This article was first published on CapX.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and 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).



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