The UK is an international malingerer when it comes to healthcare in the developed world. The NHS frequently comes bottom of rankings that measure health outcomes in high-income countries. As one Guardian article put it “the only serious black mark against the NHS [is] its poor record on keeping people alive”. It goes without saying that is a serious issue.
However, there is an alternative to the tax-funded, centrally planned model currently operating in the UK. When characterising the insular nature of the British healthcare debate, Kristian Niemetz identifies how “the only foreign healthcare system that is occasionally mentioned in British debate is the American one, and then only in a self-congratulatory way”. But there is another model again, situated as a ‘golden mean’ somewhere between the shirking NHS and the dysfunctional US arrangement, and that is a social health insurance (SHI) system. This is the model adopted by many continental European — such as the Netherlands, Belgium, Switzerland and Australia — that seeks to introduce benign competition, dynamic market forces and clearer incentive structures into the healthcare industry whilst maintaining universal coverage and redistributive elements of our current system.
Social health insurance systems introduce market forces into the health industry through a variety of channels. This basic system is as follows. Insurance companies or ‘sickness funds’ — often not-for-profit private firms — purchase healthcare from a pluralistic array of private providers who engage with each other in price and non-price competition. Patients are then given the freedom to choose and switch between different providers available under their plan depending upon which ones best meet their needs. Finally, providers are paid by insurers according to how many and how well patients are treated. A risk compensation fund reimburses insurers according to how healthy or unhealthy their clients are, thus negating the issue adverse selection that frequently distorts insurance markets. The result is a patient-centric environment where healthcare providers have to compete with each other to meet the needs and desires of the patient and insurer. In practice, this has manifested itself in the form of reduced waiting times, drastically improved care quality and lower prices for insurers and patients.
Statistics from the OECD (2016) suggest that the inefficiencies and idleness with currently pervade the NHS could be leading to tens of thousands of needless deaths every year. For example, if the UK’s cancer patients were treated in Belgium today more than 12,000 lives would be saved every year. Additional research by Journard et al. (2010) illustrate the magnitude of the efficiency gaps that exist within the current ‘Soviet-style’ NHS. In their paper they build a production function mapping healthcare inputs (spending, labour etc.) on to health outcomes (life expectancy, survival rates etc.) to try calculate differences in productivity levels and efficiency reserves across comparable healthcare systems. The results for the UK were shocking. When it came to health outcomes, the NHS was often found in the same category as the Czech Republic, Portugal and Slovenia. The model suggests that if the UK was able to adopt the SHI systems like those seen in Australia it could raise life expectancy at birth by 3–4 years, raise life expectancy after 65 by 2–3 years and reduce mortalities amenable to healthcare by 4–6%.
The most common response to this is to suggest that the only issue is underfunding, and thus the only solution is higher taxes. However, this reply underappreciates how far away the NHS remains from the “efficiency frontier”, and how the introduction of market forces through a SHI reformation could lead to a more efficient allocation of current resources without having to further burden the British taxpayer.
Sociological and psychological aspects of SHI are very important. The prevalence of SHI in Scandinavia and Western Europe is largely the result of how well it integrates into their model of social democracy. Its redistributive aspects — from rich to poor, healthy to unhealthy and young to old — maintains a commitment to strong progressive values. Meanwhile, its heavy inculcation of the private sector delivers stability, vivacity and an innovative zeal. It is a hallmark and cornerstone of their core social arrangements, and a symbol of solidarity for many nations.
This collective commitment to social institutions however is not exclusively a characteristic of SHI systems. In fact, it is a characteristic of almost all healthcare systems. The communitarian ethic is no place stronger than in the UK, where the predominately tax-funded and state provided NHS is seen by most as a ‘sacred cow’. The NHS is frequently mocked as having the status of a national religion. And though public engagement is a vital component to any collective endeavour there comes a point where pious adoration begins to inhibit necessary change.
When market reforms were first made to other European healthcare systems in the 1980–90s many predicted a severe political and moral backlash. Commentators believed that the introduction of the profit motive and competitive market forces into an industry where it had previously been unconditionally outlawed could be expected to indelibly tarnish the social identity of their institutions. To the public, it could quite easily have been seen as an inhumane attempt by the government to place corporate interests ahead of well-being and to allow vitriolic free market forces into the realm of universal human rights. Both statements would have been blatantly untrue and misleading, but nonetheless such conclusions would not have been surprising.
However, this didn’t happen. Instead, people embraced a new, hybridised version of healthcare that clearly endorsed equally progressive values of solidarity and social justice. The electorate appreciated the virtues of market liberalism and positively anticipated the transformative differences it would make to efficiency, service quality and medicinal innovation. The countries who did reform their healthcare arrangements didn’t degrade their vision; instead, their self-assuredness allowed them to preserve it.
This should act as a beacon of hope to libertarians and liberals alike in the UK. There is a better alternative out there. Change is possible. We need to conserve through change. The well-being of our current and future generations depends upon it. This is not a leap into the unknown. This is a leap into modernity.
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