Is a ‘free’ NHS really ‘fairer’? It is time to consider an insurance-based system in the UK

Matt Hancock, who has had the country’s least enviable job during the Covid pandemic, is right to want to use that experience to reform the NHS – despite all the objections to tampering with the system yet again. He is right, too, to want to streamline the health and social care sectors, whose conflicting interests gave rise to a disaster in care homes this time last year.

Where he is wrong is in wanting to return the NHS to more political control. His frustration at the lack of levers he could pull as health and social care secretary is understandable. He was blamed for failings that were beyond his control. His proposed restructuring, however, goes in precisely the wrong direction.

Amid all the negatives of the pandemic there has been one tiny positive. By circling the globe in the space of a year, the virus has made possible real-time comparisons between countries. So far as health systems are concerned, those comparisons are still rough and ready; statistical methods and many definitions are not standardised. But league tables exist – and the NHS does not emerge well.

If we take just the western world – so excluding the generally better figures from Asian countries – the UK’s death rate by million of population exceeds that of either the United States or France, and is more than twice that of Germany. The NHS has also needed substantial adaptation and help, including from the military, even to cope as it has.  

Rather than stopping at the raw comparative figures, however, it must surely be asked how and why other countries, similar to the UK in size, GDP and demographics, have fared better. At which point it is hard to avoid what is often a taboo word in UK health circles: insurance.

When founded in 1948, National Insurance contributions formed a much larger part of NHS funding than they do now. The insurance principle has progressively been lost, to the point where the NHS is seen as a free service and the bulk of the NHS budget (NHS England’s 2019-20 budget was £130bn) comes out of general taxation.

Entitlement comes not from any earmarked contribution, but from being “normally” resident in the UK – although how to define “normally” and how to turn away visiting expats, who assume that citizenship, rather than residency, qualifies them for free care, creates tensions.

Those tensions hardly exist in those European countries that have insurance systems. Nor, despite all our preconceptions about insurance systems, do you find people collapsed on the streets or begging for admission at A&E. What you do find are facilities often superior to ours, much speedier or direct access to specialists, cleaner and better-equipped hospitals, with far more beds in proportion to the population and a higher ratio of professionals, especially nurses and midwives, to patients.

Most important of all, you find better outcomes almost across the board. The NHS likes to cite the Commonwealth Fund table that regularly places the UK at the top of 11 national health systems overall. But that position takes into account indicators that include affordability and equity. On outcomes, which you could argue are the whole point of it all, the NHS ranks 10th. Think about it: 10th out of 11.

Despite this proven inadequacy, however, anyone who even hints that an insurance-based system might be the way to go is slapped down as a traitor. Why is this such forbidden territory?

One reason, I suspect, is that insurance-based systems are associated in the UK almost exclusively with the United States – a country whose health outcomes bear no relation to its wealth. At once the most expensive and least equitable system in the developed world, US healthcare leaves 10 per cent of the population uninsured at any one time and comes in below most European countries in such key indicators as life expectancy and infant mortality. For all that, “socialised medicine” still gets a bad name in the US, where it conjures up images of an antiquated and queue-ridden NHS.

The US model is also familiar to many in the UK through TV hospital dramas, and to experts thanks to the generous grants given by US academic institutions and Big Pharma. Unless you have lived in a European country, or have had to seek help while visiting, you have to try a bit harder to find out how their health systems work.

But they do work. Not only do they produce generally better “outcomes” than the NHS, but they do not have to cost either the state or the individual more. Contributions in France and Germany are progressive, that is, income-related, with employers contributing, too. Those with minimal means pay little or nothing. Compared with the contributions that a UK resident “pays” for the NHS through taxes and National Insurance, the tipping point would come on a salary of around £40k a year: below that, you could pay less under a French- or German-style insurance system; above that, you might pay more.

Either way, there would be advantages. Insurance-based systems can be more responsive to new demands or threats; and it is clear what the public is paying for. Peter cannot be robbed to pay Paul. Many plans also include basic dentistry, optometry, physiotherapy and the like, which are increasingly paid-for services in the UK. As with most insurance policies, there are options to “top up” – to obtain a better room or access a particular facility.

“Topping up” is a no-no for patients in the egalitarian NHS, where a sharp divide separates public and private patients (although medics may “top up” their incomes handsomely by taking private work). Yes, some trusts buy in services from private providers, and patients may now receive (free) NHS treatment with drugs paid for privately (though it took a lawsuit to achieve that). But there is little love lost between the two sectors, as the lack of cooperation after the first wave of the pandemic graphically showed.

Most Continental systems, in contrast, function as one, offering gradations of service that the patient – note, the patient, not the doctor or trust – can choose. This provides a revenue stream (partly from middle-income earners choosing to spend a little more) that is completely lost to the NHS. Where, oh where, is its equivalent of the airlines’ “premium economy”?

A riposte might be that the “free” NHS is “fairer”. But is it, really? Study after study, most notably the 2010 Marmot Review, has shown that the health gap in the UK between rich and poor is as wide, if not wider, than in many developed countries. The starkly unequal effects of the pandemic in the UK should quash the equity argument once and for all.

In fact, insurance-based systems may help narrow the gap, as standards of public health have a direct effect on their bottom line. Companies will watch out for harmful trends – in diet, obesity, pollution etc – and lobby or provide incentives to address them in a way that governments for the most part do not, or at least not until an emergency, such as Covid, shows up the poor state of public health.

Why the NHS warrants such adoration in the UK is a mystery to many continental Europeans, who see it as outdated, inefficient and hard to navigate. As they see it, their insurance-based systems are more responsive, offer more choice to patients, and are more effective, both in treating disease and improving public health.

Rather than returning the NHS and its management to government control, Matt Hancock and his civil servants should look across the Channel to those countries that are most similar to ours – except in their health systems, which are superior in almost every way.