This is why it never pays to fall ill in Britain
by David G. Green
From The Times, 16 April 2002.
The Chancellor has rejected the social insurance model of funding health care and has attacked the Conservatives for taking an interest. He should have asked himself why French socialists and German social democrats have long supported it. The German model is the oldest and requires employers and employees to pay equal amounts to a non-profit health insurer. The premium is calculated as a percentage of income, half paid by the employer and half the employee, with the current average about 13%.
Why do social insurance schemes work well? Above all, it is because they are based on respect for the preferences of people who have gone out to work and earned enough, not only to be self-supporting, but also to pay the taxes necessary to provide community services. Transparency of payment is not about getting more for yourself, it is also an effective way of enabling concerned people to ensure that the least well off in society get the best.
By permitting middle-income people to choose how much of their own money to pay for health care, such systems provide a measure of the standard that can be afforded for the poor. This is what the French and the Germans mean by social solidarity. They saw the dangers in pursuing equality of outcome many decades ago and took the path of social solidarity instead. Middle income people can spend more on themselves if they want to, but only if they show solidarity with the poor.
A good funding system should satisfy at least four concerns, and the NHS is inferior to social insurance on every count.
1. Can individuals tell whether they are getting good value for money?
2. Does it allow middle-income people (who in all systems must pay for themselves and for the poor) to ensure that the poorest people in society receive a high standard of care?
3. Does the system enhance the power of choice of consumers?
4. Has the system proved able to bring the expectations of users into balance with the capacity of providers to treat patients. And does it allow treatment capacity to vary over time?
Looking around the world, other methods work better than reliance on general taxation. In countries such as France and Germany people can see on their pay slips how much they are paying and arrive at an imperfect but reasoned conclusion about the value for money they are getting. In Britain we do not even know how much we are paying.
And what about the poorest members of society? The claim that the NHS is morally defensible because it provides care for everyone has become the flimsiest of excuses. If it were true that the poorest 10% of the population here received the highest standard of care in the world, many of us would be willing to sacrifice some measure of consumer choice for ourselves, if that were the only alternative. But the fact is that countries like France, Germany and Switzerland have found ways of combining consumer choice with social solidarity. The poorest 10% of people in these countries receive better quality care than the poorest Britons.
Gordon Brown claims that the NHS passes the equity test. Yet, the NHS is notorious for denying care to elderly people. Imagine you have worked all your life and so far enjoyed good health. You reach the age of 70 and your health starts to fail. Would the NHS be there for you? Maybe yes, maybe no. But if you lived in France or Germany high-standard care would be available and quickly. This is the real equity test and the NHS fails it.
Does payment through general taxes empower consumers? Not even Gordon Brown has the audacity to claim that. Social insurance schemes have always permitted more competition and our European neighbours are far more able to choose their GP, their specialist and their hospital. In Germany, for example, about half the hospital beds are private and around half the specialists operate from their own independent clinics.
Since 1948 the funding of health care from general taxes has proved to be an ineffective way of bringing the expectations of patients into balance with the treatment capacity of the system. The Wanless report recognises that treatment capacity has not kept pace, but it tries to measure future demand without prices. Health care is a unique blend of medical need, determined by experts, and sheer personal preferences, subject to individual whim. For instance, in America today some people in their 80s want to have their hips and knees replaced so that they can go on playing golf into their 90s. In poorer countries expectations are more modest. Insurance, whether social or private, brings people closer to the cost and allows them to moderate their expectations accordingly.
The systematic rationing which has typified the NHS for decades has not been the norm in countries where health care is financed by social insurance. Bringing the available resources – of hospitals, beds and staff with the rights skills – into balance with the demand for care is an imperfect process in all countries but there is little doubt that a long list of nations, including France, Germany, Holland, and Switzerland, have made a better job of it.
A health care system should be based on high ideals. The ideals behind the NHS are high, but it has never worked. The NHS is based on the perfectionist illusion of equality, which in practice has resulted in lower standards for everyone, including the poor, without eradicating unequal care. The European tradition of social solidarity works with the grain of human nature by tolerating a degree of inequality but only so long as the poorest members of society have access to the standard of care also enjoyed by middle-income earners. We have much to learn from them.