Stakeholder Health Insurance

Stakeholder Health Insurance

David G. Green

Commentar ies

Tim Bak erNich olas Bea zley

Adr ian Bull

CIVITAS: Inst i tut e for th e Stu dy of Civil Society

London

First published November 2000

CIVITAS: Inst i tut e for th e Stu dy of Civil Society

The Mezzanine , El izabeth H ouse

39 York Roa d

L on d on S E 1 7 N Q

© Inst i tut e for th e Stu dy of Civil Society 2000em a il: book s@civit a s.or g.u k

A ll r igh ts reser ved

ISBN 1-903 386-07-1

Typ ese t b y CIVI TAS

in N ew Ce n t u r y S ch oolbook

Pr inted in Great Brita in by

The Cromwel l Press

Tr owbr idge, Wilt sh ire

C on t en t sPage

Th e Auth ors vi

Pr efa ce

Da vi d G. G reen viii

Sta keholder H ealth Insu ra nce:

A Bet ter Wa y to Gu ar an tee Access F or All

Da vi d G. G reen 1

Commen tar ies

Time to Split th e NH S

Ad rian Bu ll 21

Th e N ee d for Com pe t it ion

N icholas B eazley 31

Op en in g t h e D oor to C on su m er Ch oice

T i m B a k er 35

Notes 43

vi

T h e A u th o rs

Tim B a k e r h a s a degree in econ om ics a n d a pos t -g r ad u a te

qu a lifica t ion in m a n a gem en t . H e join ed N or wich U n i on

H e a lt h ca r e in 1 990 a nd wa s a pp oint ed C omm er cia l D ir -

ect or in December 1993. H e is respon s ib le for a wide r a n ge

of m a r k e ti n g-r elat ed a ctivit ies wh ich in clud e m ar ket ing

communica t ions, p rodu ct deve lopmen t , t h e development of

ma na ged care, genera l provider l ia ison , pr ic ing and r i sk

underwr i t ing . He has a l so deve loped a wide ran ge of new

busin esses for Norwich U nion Hea lthcar e.

N i c h o l a s B e a zl e y gradu ated from Pem broke College,

Ca mb rid ge in 1981. He is Group S t ra tegy and Deve lop-

m e n t Dir ect or a t B U P A a n d p la ys a m a jor p a r t in B U PA’s

govern men t a ffai r s w or k. H e join ed BU P A in 19 93 from

C oop e r s a n d L yb r a n d. P r ior t o t h a t h e w a s a cor p or a t e

lawyer for F r e sh fi el ds , w or k in g in bo th London a nd N ew

Yor k. Most recent ly , in h is ro le as cha i rman of the ABI

PMI p a n e l, h e h a s p la y ed a k e y r ole in br in g in g th e U K

pr iva t e m ed ica l insuran ce indus t r y together t o w or k on it s

pr oposa ls in r es pon se to t h e O ffice of F a i r Tr ad ing’s

crit icisms in 1998.

A d ri a n B u l l qu a lified a t E din bu rg h in 198 1. F r om 1981

to 1987 he served in t he Royal N avy, combining dut ies a t

sea and abroad wi th t ra in ing in both genera l p ra cti ce a n d

pu blic hea l th m edicin e. In 1987 h e joined Wessex Re gion a l

H e a l t h Author i ty and com p l e t ed h i s M D on t h e tot a l

origin s of ca r d iov a scu l a r disease a t t h e Southampton MRC

epid em iology un it. App oint ed cons ult an t in pu blic me di-

cine in 1991, he wa s Dir ector of Acute S ervices Policy at

Yor k s h ir e RHA for th ree years , then CPHM for E a s t

Suss ex HA an d Medical Director of Ea stbour ne a n d

C ou n t y NHS Trus t . Ad r ia n joi n ed P P P h e a lt h ca r e a s

Dir ect or of Pu blic Hea lt h M e d icine in 1995 and wa s

app ointed Med ical Dir ector in 1 998. H e is cu rr en tly a lso

AUTHORS vi i

M a n a gi n g Director of the subs id iary bus inesses Access 24

and MIS.

D a v i d G. Green is th e D ir ect or of th e I n st it u t e for t h e

Study of Civil Society. His books include Power and Party

in an E nglish City , Allen & Unwi n, 1980; M u t u a l A i d or

Welfare S tate?, Al len & Un win, 1984 (with L. C r om wel l);

Workin g-Class Pa ti en ts an d th e M ed ica l E st ab lis h m en t ,

Tem ple S m i t h / G ow e r , 1985; T h e N e w R ig h t: T h e Counter

Revolu tion in P olitical, Econom ic and S ocial Th ough t ,

W h ea t s h ea f, 1987; Reinventing Civi l Society , IEA, 1993;

Comm un ity W i th ou t Polit ics , IE A, 1 99 6; B en ef it Dep en d -

en cy, I E A, 1998; A n E n d to Welfare Rights , IEA, 1999; a n d

Del ay , Den ia l a n d Di lu ti on , IE A, 1 99 9 (w it h L. C a sp er ).

H e w r ote th e chapt er on ‘The N e o-L ib er a l Per spective’ in

T h e S t u d en t’s Com pa n ion to S ocia l P olicy , Bla ckwell,

1998.

viii

P refa ce

S om e overse as syst em s gu ar an tee a h igh e r st anda rd o f

ca r e t h a n t h e N H S for t h e poor est mem bers of society. Ca n

we adapt these alt er na tive s t o imp rove h ea lth car e in t h e

UK?

T h e J u l y 200 0 N a t ion a l P la n for t h e N H S r eaffirm ed th e

G ov er n m e n t ’s comm itm ent to pu blic sector m onopoly.

H e a l t h care was t o be fin a n ced pr ed om in a n t ly fr om

taxat ion a n d hos pit als were to r e m a in firm ly in t h e Govern -

ment’s han ds .

In t h e m on t h s p receding the N ationa l Plan , there h ad

been mu ch m edia discu ssion a b ou t t h e m e r it s of a l t er -

n a t i ve system s, i n cl u di n g E u r op ea n s oci a l i n su r a n ce

schemes, an d th e Governmen t’s respons e was t o devote a

ch a p t e r t o t h e ir r e je ct i on . It ju d g ed t h em against two

criter ia : equ ity a nd efficiency. It define d efficiency as:

‘te st in g whet her a p r op os a l would ach ieve its proposed end

a n d wh eth er it p rovid es t he gre at est poss ible h ea lth

i m pr ov em e n t a n d h e a lt h ca r e w it h in t h e fu n d in g ava ilab le’.

And it de fin ed eq u it y a s: ‘an a l ys ing how wel l the proposa l

w ou l d m a t ch fi n a n ci a l con t r ib u t ion s to a bility t o pay, a n d

h ow we ll it wou ld m a tch h ea lt h car e t o he a lt h n eed s.’1

S om e overseas system s were found wa nt ing when

mea sur ed a g a in s t t h e s e cr i t er i a , b u t e ls e wh e r e in t h e

docu m e nt the N HS is compar ed un favour ably with oth er

E u r op ea n cou n t rie s. Th e N at iona l P l an admi t s , for

examp le, th at can cer s ur vival is wors e in th e U K t ha n in

m a n y E u r op ea n cou n t r i es , a n d i t a d m i t s t h a t d e a t h s fr om

cor on a r y hea rt d isease h ave fallen less th an elsewhere. 2

M or e ov er , it con ced e s t h a t t h e N H S h a s s u ffe r ed fr om

‘decades of u n d er -i n ve st m e n t ’ a n d t h a t sp en d in g h a s

‘con s i st e n t ly l agged beh ind o ther developed cou nt rie s’. As

a res ult , it h as ins ufficient capaci ty to provide t h e s e r vices

t h e public expect. There a re too few h os p it a l be ds com -

par ed wit h m ost ot h e r hea l th systems, a n d too few doct or s:

1.8 p r a ct i si n g d oct or s p er 1,000 popu la t ion com p a r e d wit h

PREF ACE ix

t h e Eu ropean Un ion average of 3.1. An d t h e G ov er n m e n t

a cknowledges tha t the NH S car r ies ou t t oo few ope ra t ion s

in con t r a s t t o cou n t r ie s s u ch a s t h e N e t h er la n d s , w h er e

twice as man y hear t bypass opera t ions a re pe r fo rmed .3

T h e c h a p t er in t he N ationa l Plan which dism isses

overseas s ys t em s r ea d s a s if th e Gover nm en t m ad e u p it s

m i n d first an d t he n s et ou t t o gat he r w ha tev er evide nce it

could find to bolster i ts conclusion. I t would ha ve been

bet ter t o ask a v er y d iffe r en t qu es t ion : is t h e r e a n overse a s

system t h a t g ua ra nt ees a ll its p eople, an d es pecia lly th e

p oor e s t , a h igh s tandar d of care ? An d i f so , i s tha t s ta n-

d a r d h igher than the NH S? An honest obser ver lookin g at

cou nt ries such as Germany , France or the Nether lan ds

would h a ve to a ns wer th is qu est ion wit h a res oun din g

‘yes’.

Con seq ue nt ly, th e chie f pur pose of th is publ ica t ion i s to

ask whet her we cou ld a da p t s u cce ss fu l ov er s ea s sch e m es

t o the UK. T h ere a re severa l v iab le a lt e rna t ives and the

first essa y des cribes one s uch mod el, st ak eh older he alt h

i n su r a n ce, selected becau se i t is based on a n overseas

s ch e m e wh ich h as a lon g t r a c k r e cor d of s u cce ss . T h e

p r op os a l is a ccom p a n ied by cr it ica l com m en t a r ies from

representa t ives of three leading pr iva te insur ers .

Th e N a t ion a l P l a n w a s a great missed oppor tun i ty w h ich

left the funda ment al f laws in th e NHS u nresolved. How-

e ve r , ther e a r e a ls o ele m en t s i n th e d ocu m en t wh ich

sugges t tha t the Governm ent i s beginning to recognise

t h a t pu blic sector m onopoly is n ot viab le in t he long r un .

T h e t endency of the document to face both ways i s mos t

a p p a r en t in i ts discussion of consum er resp onsiveness .

Th e Se cr et a r y of St a t e s a ys in h is in t r odu cti on th a t th e

N H S wil l be r efor m ed ‘from top t o toe’ to ‘m eet th e cha l-

lenges of r is in g pa t ie n t ex pe ct a t ion s ’. Ye t , a r a t ion a l

person ch oos in g a s t r uct u r e m ost likely to be res pons ive to

con s u m e r s w ou l d n ot n e ce s sa r ily p ick pu bli c se ct or

mon opoly.

T h e r e is a l so evi de n ce of fa cin g bot h wa ys in th e d is cu s-

sion of hospit al a u t on om y . T h e G ov er n m e n t con ce de s t h e

STAKEHOLDER HEALTH INSURANCEx

valu e of m a n a g er ia l a u t on om y, b u t ca n n ot b r in g its elf fully

t o let go. As a r es u lt we en d u p w it h th e com pr om is e of

‘earn ed a u t on om y ’, a h a lf-wa y hou se w hich could ea sily

t u r n ou t to b e t h e w or st of al l wor ld s, n ot lea st be ca u se

centra l power can sti l l be exerted at an y t ime.

T h e N a t ion a l P la n lea ves a gr ea t m a n y qu es t ion s

un an swered and t hese essays are ear ly cont r ibut ions to

th e next st age of the d ebate.

Da vi d G. G reen

1

Stakeho lder Hea lth Insurance :A B e tt e r Wa y to Gu a ra n te e

Access For Al l

D a vi d G. Gr e e n

S u m m a r y

T h e un der lyin g pr oble m is t h a t th e N H S d oes n otach ieve its own objectives. It su ffers from th ree long-s tand ing flaws:

• I t is und erfund ed becau se it s m eth od of fund ing is

unre la ted to pe rsona l demand a nd need .

• Th er e is a la ck of com pe t it ion .

• T h e r e is a lack of respect for individual choice an d

res pons ibility.

Un fortu na tely, the B lair Governm en t h a s m a d e m a t t er s

wor se by d im in is h in g com pe ti t ion :

• G P s ha ve been d ragooned in to p r imary ca re g roups

w h ich h a v e t u r n e d t h e m in t o g a te k ee pe r s r a t h er t h a n

ch a m p i on s of t h e p a t ie n t .

• H os p it a l m e r ge r s a ffe ct in g a bou t 20 p er cent of tru st s in

t h e la st t wo fi n a n cia l ye a r s h a ve r ed u ced in cen t ive s fo r

i m p r ov em e n t .

W h a t ad van ta ges w ould s t a k eh ol de r h ea l th i n su r a n ce

offer ?

• A un iversal ma rket -t es t e d g u a r a n t ee in s t e a d of a m e r e

polit ical prom ise.

• Competit ion a nd p ersona l choice.

STAKEHOLDER HEALTH INSURANCE2

• T h e r en ewa l of civil socie t y t h r ou gh th e r es t or a t ion ofhospita l independ ence.

• Because t h e s ch e m e is n ot l in k e d t o em p l oy er s (u n l i k e

t h e soci al in su ra nce s chem es of contin en ta l Eu rop e) itwill not distort job opportu nit ies.

• Pe ople wil l bu y in su r a n ce collectively w ith th e re su lt

t h a t adm inistra t ion costs wi l l be lower, consum er bar -

gain ing p ow e r will be in crea sed , an d in divid ua ls will

h a v e access to good qu alit y inform at ion t o aid t he ir

choice.

• T h e r e will not be a sin gle regu l a t or y regime, b u t compet -

ing r e gu l a t or s t o r ed u ce t h e d a n ger s of ove r -re gu la t ion ,p a r t icula rly t h e crowding ou t of in n ova t ion a n d, b eca u se

ind ivid u a ls ca n ch oose wheth er or n ot t o opt i n to t h e n ew

syst em , chan ge will be evolu tion ar y.

In tr odu c t ion

Give u s ba ck s om e (b u t n o t a ll ) o f o u r t a x a n d l e t u s t a k e

p er s on a l respons ibilit y for our own he alt h ca re ! And

w h a t ’s more, extend t he sa me power of choice to t h e poor

an d eld erly!

C ou l d s u ch a p le a be com e a r ealit y? T h e ch i ef a r gu m e n t

used again st th e in t r od u ct i on o f com p e t it i on a n d p r i va t e

fi n a n ce i n h ea l t h ca r e is tha t the poores t people would be

w or se off. Is it poss ible t o envis age refor m s t ha t w ould

b r in g about s ubs t a nt ia l improvements for the poores t

secti on of t h e communi ty , a s well a s for t h e ma jor i ty? S u ch

a ch a n ge w ou ld n ot sa t is fy di eh a r d r a t ion -book colle ct-

i vi st s b u t it w o u ld achieve a genuine guaran tee of accessfor eve ry one , a promise wh ich th e NH S ha s not a chieved

in pra ctice.Pu blic op in i on h a s su ffe r ed qu i te a jol t i n re ce n t m on t h s

a s people h ave come t o see t ha t, eve n ju dged aga ins t t heya r ds t ick of its own objectives , th e NH S falls a long wa y

s h or t . The N H S aim s to be universa l , compreh ensive,

e qu a l (‘u n i for m ’ a cr os s th e cou n t r y ) a n d of a h ig h st a n -

dard .

DAVID G. G RE E N 3

Un iversal and Comprehens ive: T h e N H S is for m a l ly

u n i ve r sa l, b u t n ot eve ryon e w h o goes to see a doct or will be

t rea ted . Universa l access i s of l imi ted valu e un less it is

c lear what r ange of serv ices the indiv idual ha s access to

and, fa r from bein g compr ehen sive, t h e N H S does n ot even

provide eve r y s er vice t h a t is r ega rd ed a s n ecess ar y in

coun tr ies of comp ar ab le we alt h.

Equal : U se of th e t er m eq u a lit y con fu s e s t wo ideas . The

first i s t h a t ‘ever yone, r ich a nd poor a like, sh ould h ave

access to car e’. Th at is, n o one sh ould fall below a cert ain

s tanda rd . Th e secon d is t ha t ‘no on e sh ould ever g et m o r e

t h a n a n yone else’. Th e la tt er con fuse s en vy wit h a legiti-

ma te concern for t h e less fortu na te. In a n y ev en t , t h e N HS

does not deliver th e sam e s t a n d a r d t o e ve r y on e . I t s e ek s

u n i for m i t y by g ivin g GP s con t r ol of a cces s t o h osp it a l ca r e

in the expect ation t ha t clinical need, an d not consum er

pr efere nces , will pr eva il.

T h e r e are t hr ee ma in points t o make. The fi r s t has to do

wit h p r ac t ica l i t ies . A government can de l iver universa l

access by p r ovid in g a gu a r a n t ee . Bu t it ca n n ot er a di ca t e

a l l differen ces in provision, either between in di vid u a ls or

locali t ies. The NH S ha s always va ried from ar ea to ar ea.

Seco n d , di ffer en ces in st a n da r ds , qu a lit y a n d p r a cti ce

st yle a re use fu l . Compet it i on c r ea t e s t h e a b il it y t o m a k e

compar ison s . Moreover, t h e adva nt ages t h a t re su lt a r e n ot

p r i va t e an d exclu sive, a s ega lita ria n s i m p ly. There ar e

si gn ifica n t comm on b en efit s. Com p e ti ti on p r od u ces

r e bou n d effect s w h ich r icoch et t h r ou gh th e system en cou r -

agin g t h e least s u cce ss fu l doct or s or hos pit als to raise thei r

s tand ards . The osten sib le u niform ity of th e N HS is

achieved by s u p pr e ss in g com p e t it ion , w h ich tends to lower

s tand ards .

Thi rd , d iffe r en ces in he alt h p rovision reflect legitim at e

p er s on a l preferences for a va r iety of styles of coverage a n d

t r e at m e n t. T h e e ga l it a r ia n t e n ds t o a s s u m e t h a t a ll

differences a r e t h e im p r o pe r fr u i t of r i ch e s a n d t h a t ,

th erefore, th ey ca n be su pp r es se d. B u t pe op l e w it h t h e

STAKEHOLDER HEALTH INSURANCE4

s a m e in com e migh t well h ave different preferences. When

you suppr ess abil i ty t o pay you a lso suppress willingn ess

to pa y.

S t a n d a rd s: Nor does the NHS prov ide a u niver sa lly high

s t a n d a r d by compar ison wit h ot h e r cou ntr ies . I t is oft en a s

good a s s ys t em s e ls ew h er e, b u t wit h gla r in g ex cep t ion s.

A par ticular consequen ce of t h e N H S h a s been a deter io-r a t ion in t h e doct or /patien t re la t ionship. I t h a s be com e on e

of gatek eeper a nd su pplicant r ath er th an expert a dviser

a n d client. Un der an y system , sca rc ity of resour ces crea t es

t h e pot e n ti a l for t h e doctor to be a gat ekeeper. Moreover,

pure ly on c l in ica l grounds a d oct or m a y re fu s e t r e at m e n t

because he th inks i t dan gerous or i ll -advised . But in acom m a n d - a n d -con t r ol system fin an cial ga tek eep ing is

he igh tened .

Fra m ing Achiev ab le Objec t i ves

T h e rea l p roblem is th a t th e ob ject ive s of t h e N H S a r e n ot

a ch ievable. Moreove r , th ey a r e n ot m u t u a ll y cons i st en t .1 In

p a r t icu l a r , th e er ad icat ion of differen ces in t h e n am e of

e q u a li t y suppresses compet i t ion . And the su p p r es si on of

com pe t it ion in t h e n a m e of u n ifor m s t a n da r d s h a s m e a n t

low er s t a n dards. T h e only people to ben efit from supp res s-

ing com pe t it ion a re pr ovider s wh o wan t t o cover up th eirdeficiencies . A ge n u in e con cer n for t h e poore st peop le

w ou l d seek to discover h ow to preserve compet it ion , w h ich

is in t he int er est s of all, w h il st m a in t a in i n g a cce ss for t h e

poor .

Th e ch a lle n ge is t o fr a m e s om e d iffe r en t obje ct ive s fo r

h e a lt h po licy which a re mu tua l ly cons is ten t and , inadd it ion , t o accept t he discip line of devisin g a n ew h ea lth -

ca r e system w h ich would ma ke th e poorest p eople better

off t h a n th e y a r e u n d er t h e N H S .

T h e r e are two m a in r eq u ir em en t s. F ir st , com pe t it ion

s h ou l d be intr oduced. Second, health care sh ould be

fina nced b y i n su r a n ce , n ot from ta xes. An d both compe ti-t ion a n d p r iva t e fi n a n ce s h ou l d b e i n tr od u ce d i n a m a n n er

DAVID G. G RE E N 5

w h ich impr oves the s tan dar d of service being received byth e poores t s ection of th e comm un ity.

Com pet i t ion

Com pet ition sh ou l d be encouraged in order to ra i se

s tand ards . It is ne ith er n ecessa ry n or a d vi sa b le for t h egovern men t t o ow n a ll th e h os p it a ls a nd em ploy a l l t h e

m edi ca l pr ofess ion a ls in ord er to gu a ra n te e a ccess . F ort h e r e to be genu ine compet it ion , hosp ita l s shou ld bei n de pe n de n t of govern men t , but i t does not fol low tha tthey should funct ion as for -profi t organisa t ions .

In or d er t o r e -cr e a te t h e e xp er im e n t a t ion a n d crea tivit yt h a t fl ow s fr om com p e ti ti on , N H S h os p it a ls s h ou l d beprivat ised a s n o n -p r o fi t h os p it a l s , r a t h e r l ik e modern isedver si on s of t h e ol d v ol u n ta r y h os p it a ls . I t wou l d a l lowm ed ica l st a ff to e volv e, e n h a n ce an d d evelop t he ir s pecia lloca l t rad i t ion , and would he lp to rebuild the social fa b r ic.

B e for e t h e N H S n a t i on a l is e d a l l t h e h os p it a ls in 1948,s om e wer e gover nm en t own ed (u su ally m un icipa l h osp i-

tals) b u t t h e ma jor i ty of or d in a r y hos pit als were volu n t a r y.T h a t is they were own ed by loca l ch a r ities , sup port ed by a

m i xt u r e of d on a t ion s , ch a r ge s a n d r eg u la r con t r ib u t ion sfrom local p eop le i n th e for m of pa y-p a cke t de du cti on s.V ol u n t a r y h o s p it a ls u n it e d t h e loca l com m u n i t y: t h ew ea l th y wer e expected to contribu te out of their a bun -dan ce, a n d did so; an d t h e r a n k a n d file made th eir re gula rs m a ll week ly pa ym en ts th rou gh t he hos pit a l con t r ib u t or y

funds . All s ect ion s of s ociet y fel t a loya lt y t o t he localv ol u n ta r y h os p it a l.

M or e ov er , i n t h e r e s t of E u r op e, p r iv a te h os p it a ls h a vebeen a l low e d t o co-e xi st w it h the pu blic sector . Sligh tly

over ha l f the hosp it a ls in G er m a n y a r e in d ep en d en t of t h egovern men t, a l on g wi th on e -t h ir d of t h e h ospit als in

Fr an ce, over 80 per cent in t he N ether land s an d 60 percent in B elgiu m .

I n su r a n c e

F i r s t , w e ca n n o t r a t ion a lly d is cu ss universa l access

w it h ou t des cribin g t h e ser vices t o which access is bein g

STAKEHOLDER HEALTH INSURANCE6

given. When we buy other t y p es of i n s u r a n ce w e e xp e ct acon t r a ct st ipu lating our enti t lem ents , and so wh en th e

taxpa yer bu y s h ea l t h in s u r a n c e on b e h a lf of t h e p oor t h ena con t r a ct s h ou l d s im i la r ly la y dow n t h e l eg al ly enforce -

ab le ent i t lements . B u t w h a t s h ou l d t h a t s t a nd a r d be ? An dhow should i t be fixed?

T h e r e is n o escap e from afforda bility . Wea lth y cou nt ries

ca n a ffor d t o s p en d m or e on h ea l t h ca r e . I n t h e t h ir d

wor ld , for insta nce, a ffordab il it y a ffect s fu n d a m e n t a l s l ik eva ccin a t ion ; w h er e a s i n th e wea lth y Un ited St at es, it

a ffect s t h e a va ilab ility of e xp er im e n t a l p r oce du re s s u ch a s

t h e t ran splanta t ion of a r t i f ic ia l organs or h e a r t a n d lu n g

t ran splants . I n t h e UK, however , the s tandard a nd scope

of ca r e does n o t predominan t ly r efle ct in com e per h e a d bu t

t h e t e n de n cy of t h e ‘com m a n d -a n d -con t r ol ’ N H S t o r a t i onlife -sa ving treatm ents , inclu din g r e n a l dia lysis a nd can cer

ca r e .W h a t count s as ‘com pr eh en sive’ at an y m omen t is in t he

pr ocess of being dis covered a nd red iscovered . The ad van -

t a ge of a system ba sed on insuran ce is tha t i t a l lows

g r ad u a l evolu t ion tow a r ds a r ea son a ble st a n da r d w h ich

r e fl ect s con su m er s’ jud gem en t s a bou t t h e t y p e a n d c os t of

cover they want .

Th e a l loca t ion of funds by the UK Treasury i s cru de by

com p a r i son . I t b ea r s n o re lat ionsh ip to m ed ica l demand. It

is w h a t t h e g o ve r n m e n t c a n a f fo r d or c h o os e s t o

spe nd —th is yea r in flu en ced by e ffort s t o con t r ol in fla t ion ,

next year by an im pend ing genera l election. In an y event

it is a glob a l a m ou n t wit h n o roo m for in d ividua l s to payfor mor e or les s. Typ ically, the governm ent conducts a

pu blic expenditu re su rvey ea ch y ea r , a n d t a r g et s a r e

a g reed for t h r e e y ea r s . T h e N H S a sk s for a p a r t icula r

b u dget a n d t h e T rea s u r y decides h ow m u ch it ca n ha ve. In

E n gland , a ft e r de du ct in g a n am ou n t for n a t ion a l services,

s u ch as b lood t ransfus ion , budgets a re d is tr ibu t e d t o

heal th a u th or i t ies and pr ima ry care groups and t r us ts .

T h is process of a lloca t ion can be com p a r e d with a p r iv a tei n su r a n ce m a r k e t. An i n su r a n ce com p a n y k n ow s t h e

d em a n d a n d e xp e ct a t i on s of i t s cu s t om e r s fr om p r eviou s

DAVID G. G RE E N 7

y ea r s a n d ca n adjust p r em i u m s from year t o year t o ma tchth eir pr efere nces . It w ill pr esen t it self to t he pu blic in a

pa r ticu lar way, offering specific contra cts. For examp le,

Am er i ca n consum ers can compa re an d choose between

d iffe r en t pr a ctice st yles . Som e h ea l th m a i n te n a n ceorganisation s (HMOs) migh t offer h os p it a l ca r e in t h e form

of sha red room s, wit h t he poss ibility of payin g e xt r a for a

p r iv a t e room. The prem ium tend s to be cheap er t h a n for a

‘ma na ged fee -for -se r v ice ’ insur an ce plan th at offer sun fettered choice of hospit al or spe cialist . And it w ould

pr obab ly be cheaper th an a ‘poin t of ser v ice’ pla n wh ich ,like a n H MO , offer s ca r e t h r ou gh a fixe d p a n el of d octor s

w it h ou t fu r t h e r ch a r ge , b u t wi th t h e opt ion of ch oosin g a n

alt ern at ive doctor or hospita l (at t he p oin t -of-service) in

r e t u r n for m e e t in g p a r t of t h e cos t ou t o f p ock e t .

T h e a v a il a bi li ty of s u ch com p a r is on s a ll ow s d oct or s a n d

hos pit als to get a bett er feel for w h a t p e op l e w a n t . A s

peop le change insure rs o r p rov ider s fr om y ea r t o y ea r , a

far more a ccur ate a ssignm ent of fun ds ta kes place.

Typica lly, a con t r a ct of ins ur an ce in t he US will en tit le

ind ividu als t o a ll needed he alt h ca re . In pr act ice th is

m e a n s t h a t , if a qu alified doctor says something i s neces-

sa ry, t h en th e in su r er m u st pa y, or be su ed for b r ea ch of

con t r a c t . More recen t l y insure rs have t r i ed to exclude

‘expe rim en ta l’ procedures. Th is cr it er ion a llow s m ore scop e

for d i sa g r e em e n t , bu t u l t im a t e l y t h e t e st i s ‘n or m a l p r a c-

t ice’ or th e con s en sus am ong medical pract i t ioners . In

extrem e cases th e line can be fuzzy, b u t t h e u lt i m a t e

ar biter is t h e cou r t of law. Un der t h e NHS, the cour t s h a ve

typ ically re fra ined f rom requ i r ing the NHS to p rov ide

spe cific serv ices prec isely because a v aila bil it y d ep en ds on

pol it ica l d ecis ion s a bou t h ow m u ch ca r e ca n be a fford ed .

Opponen t s of insu ra nce t ypica lly high light tw o ma in

problems: th e e xclu si on of p e op l e w it h pr e-exist ing con di-

t ion s an d th e relat ed ten dency of some insu rers t o ‘s e le ct ’

cu s t om e r s in order t o avoid those m ost likely to make l a r ge

claim s (‘a d ve r se ’ s el ect ion fr om t h e in s u r er ’s va n t a ge

p oi n t ). Ove r th e ye a r s m a n y d iffer en t sol u t i on s t o t h e se

STAKEHOLDER HEALTH INSURANCE8

problems h a v e been a t tempt ed , but perh aps th e most

p r om i si n g h a ve b ee n sch em es ba se d on gr ou p i n su r a n ce

with a ‘s p on s or ’ a ct in g a s a consu m e r ch a m p ion , also called

‘m a n a g ed com p e ti ti on ’. S p on s or in g age ncies , wh ich could

be pr iva t e or ga n is a t ion s, i n clu di n g la r ge e m pl oyers , or

s t a t u t or y bodies insu la ted f rom th e poli t ica l process ,

facilita te con su m er ch oice by offer ing com pa r a t ive in for-

m a t i on ab out qu alit y an d pr ice an d by filte r in g ou t b a d

insurers . Su ch sch em es h ave been cha m pion e d for m or e

t h a n 20 yea rs by P rofess or Ala in E nt hoven . Origin ally

called con s u m er ch oice hea l th plans, t h e latest n a m e is t h e

h e a l t h i n su r a n ce p u r ch a s in g co-ope r a t ive (H IP C). B efor e

discu ssin g how t o app ly t h e idea in t h e UK, I will describe

th e essent ial element s of Pr ofessor En th oven’s scheme.

Hea l th Insur an ce Pu rch as i ng C o-opera t ives

E n t h ov en ’s scheme comprises four main e lements . F ir s t ,

ea ch year con s u m e r s ch oose a compr eh en sive ca r e p a ck a ge

for one yea r. Se cond, th ey do so th rou gh a ge n cies whose

t ask is to fa cilit a t e ch oice b y p r ovid in g com pa r a t ive

i n for m a t i on ab out qu alit y an d pr ice an d by weed in g ou t

u n s a t i sfa ct or y ins ur er s. Th ird , th e consu m er ’s choice

s h ou l d be cost -con sci ou s , t h a t i s , p a r t or a l l of t h e cos t of

t h e prem ium should be met by all ind ividua l s excep t the

ab solu tely poor. An d four th , pr ovider s sh ould compe te in

str uctur es w h ich in t eg ra t e pr ovis ion a n d in sur an ce, e it h er

by establishin g a single system , such as a hea lth m aint e-

n a n ce or ga n is a t ion or by cr ea t in g s ch em es ba se d on

cont ra c ts between insurers an d independent providers .2

T h e rele v a n t ‘pr ice’, ins is t s E n t h oven , is n ot th e cos t of

a n y given m ed ica l p r oced u r e, b u t th e a n n u a l in su r a n ce

p r em iu m , be ca u se it give s t h e con su m e r a r e a son t o t h in k

abou t th e total cost and to try to min imise i t . Consum ers

must b e p r ice-con s ci ou s a t t h e t im e of t a k in g ou t t h e

i n su r a n ce packa ge an d in a pos it ion to compare packages .

To facil i tate compar i sons insure rs shou ld be requ i red to

p r ice e qu a l packages , so tha t du ring th e ‘open-enrolment

DAVID G. G RE E N 9

se a son ’ of a b ou t fou r weeks e ve r y y ea r , syst em at ic com p a r-

isons can be m ade, compa ring l ike with l ike.

E n t h ov en i s a n x iou s t h a t con s u m e rs s h ou l d n ot h a v e t o

ch oose be t we en lis t s of covered an d non-covered i tem s,

be ca use i t i s an a lmos t impossib le ch oice for ind ividu als t o

ma ke. A n in s u r a n ce policy should cover ‘all needed car e’

a n d cos t con t r ol sh o u ld n ot b e p r im ar ily achieved by

exclu d in g tr ea tm en ts or exclu din g peop le bu t by contr ol-

ling cost s. T o give b u t on e ex am ple , cost s ca n be contr olled

w it h ou t red ucin g qu alit y by en su rin g th at oper at ing

th eatr es a re fu l ly used , sk il led sta ff are effectively de-

p loyed and by ensu ring th e right ba lance between high ly

ski l led and semi-sk i lled employees .

Schemes ba sed on ‘ma na ged compet it ion’ ha ve been

fou n d t o work . Th er e a re exa m ples of such syst em s in

op e r a t ion in C aliforn ia a n d Min n es ot a , bu t I w ill m en t iononly on e: t h e Feder a l Em ployees Hea l th Benefi t s P r og r am .

Th e l a t t er bega n ope ra t ion in 1960 a n d n ow offe r s n ea r l y

400 ins ur an ce plan s t o some four million policy-holder s

coverin g a b ou t n in e m i ll ion p e op le . E v er y year in N ovem-ber/December th er e is a m on t h -lon g ‘ope n se a son ’ wh en

peop le choose the i r insu rer for t h e ne xt year . The y receivea n officia l gu id e a n d a consu mer group a lso publi shes a

p r iva t e guide. E a ch year only a b ou t five per cent of policies

ch a n g e han ds , bu t th e im pa ct on in di vid u a l in su r er s ca n

be su bs t a n t ia l, w it h som e losin g ha lf or mor e of th eir

subscr ibers . All insurer s mu st comm un ity r at e. Lite ra lly,

t h is m e a n s t h a t a r e t ir e d p er s on p a ys t h e s a m e a s a n 18-y ea r -ol d t r a i n ee . I n s u r er s must a l so a c ce p t a ll a p p li ca n t s

regardless of pre-exis t ing condi t ions .

Sin ce 1999 t h e fe de r a l governm ent con tr ibu tion h a s been

based on a ‘fa i r sh a r e ’ form u la . I t pays the lesser of twoa m ounts : 72 pe r cen t of th e pr ogra mm e-wide we igh t ed

a v er a ge pr e m iu m or 75 pe r cen t of t h e a ct u a l p r em iu m of

e a ch person’s chosen plan . Emp loyees pay th e difference.3

Two t ypes of cove r a r e offe r ed : ‘se lf on ly’ an d ‘se lf a n dfam ily’. In 1995 t he m aximu m wa s $1,600 per y ea r for a

‘self only’ policy an d $3,49 0 for ‘self an d fam ily’.

STAKEHOLDER HEALTH INSURANCE10

In H ow to Pay for Health Care I pr oposed th at a s im ilar

s ch e m e i n Br it a in could be ba sed init ially on he alt h

aut hor i t ies , w it h e a ch a u t h o r ity be com in g th e pu r ch a s in g

co-oper at ive for its locality. If implem ented , th e en d r esu lt

w ou l d n ot be a pu r e m a r ke t s ys t em , n or a pu r e colle cti -

vised on e b u t it wou ld b r in g a bou t a di ffer en t ba la n ce

between the p ublic and pr ivate sectors. The governmen t

w ou l d con fi n e i ts el f t o cr e a ti n g t h e fr a m e wor k w it h in

w h ich collective pr iva te init iat ive ca n w or k for t h e com m on

good . And it w ould pr ovide u nive rs al a ccess — som eth ing

t h e NHS ha s n ever ach ieved in pr act ice—by pr oviding a

clea r en t it lem en t for t h e p oor .

Sin ce pu blicat ion of th e origin al p r op os a l i n 19 9 7, t h e r e

h a v e been furth er N H S r efor m s , n ot l ea s t t h e in t roduct ion

of p r im a r y ca r e gr o u p s, a n d so w h a t fol low s a d a p t s t h e

or igina l idea to the new c i rcumst ances .

S t a k e h o ld e r H e a l th I n su r a n c e : H o w It C o ul d W or k

Alain En th oven advocates hea l th i n su r a n ce pu r ch a s in g co-

opera t ives . Perhaps a be t t e r name would be ‘sta keholder

hea l th insurers’. F or the sake o f adm inis tr at ive sim plicity ,

exist ing hea l th au thor i t ie s cou ld esta blish sta keholder

h e a l t h i n s u r er s (S H I s ) i n t h ei r a r ea s. We w ould all

con t in u e t o p a y t a xe s a s a t pr e se n t a n d h e a l t h car e wou ld

con t in u e to be p rovid ed through pr ima ry care groups ,

wit h ou t furth er char ge. However, individuals would be

free t o r e ce iv e t h eir care th rough the local s takeh older . In

r e t u r n for a s s u m in g r e spons ibi li t y for p a r t of t h e cost , t h ey

w ou l d receive a t a x cred it r e pr e se n t in g p a r t of the t a x t h ey

h a d pa id towards t h e NHS. B e for e t u r n in g to t h e det ails of

t h is t a x cr e di t, fu r t h e r a s p ect s of t h e scheme sh ould be

exp la ined .

T h e SH Is s hou ld be in de pe n de n t of gove rn m en t, a n d

pr efera bly m u t u a l or g an is a t ion s r u n by boa r d s r e p r es e n t -

ing me m ber s. E ach yea r, SH Is s hou ld invi t e p r iv a t e

i n su r e r s t o s u bm it t e n ders for a compr eh en sive p a ck a ge of

cover for a n yon e wi th i n th e S H I bou n d a r y . A ll in s u r e r s

DAVID G. G RE E N 11

s h ou l d be requ ired to p r ice a s t anda rd con t r a ct : to facili-

t a t e va lu e-for -m oney compar i sons ; t o reduce ma rket

se gm en ta t ion based on t h e r a n ge of ser vices covered r a t h er

t h a n on pr ice or qu alit y; to gu a ra nt ee n o hid den gap s in

coverage; a n d t o pr eve n t r isk se lect ion from r ed u cin g

incentives to produ ce value for m on ey . T h is s t a n d a r d

p a ck a ge s h ou l d be defined by ea ch SH I to r efle ct mem bers ’

preferences and t o fac i li ta te compar isons be tween SHIs .

O n ly i n su r a n c e p la n s w h ich com p l ie d wi t h t h e s t a n d a r d

p a ck a ge s h ou l d be included in th e scheme. However, they

s h ou l d be free to offer ot h e r insu ran ce schemes in add i t ion

to the st an dar d pa ckage.

O n e of t h e d a n g er s of a s ys t e m of r egu la t ion or ‘m a n a g ed

com pe t it ion ’, as Pr ofessor E nt hoven calls it , is th at in it s

a n x ie t y t o protect consum ers i t becomes too int ru sive,

s u p pr e ss in g valu ab le in itia tive s wh ich m ight ben efit

con s u m e r s . A system of SHIs could h a v e th i s effect , bu t t h e

dan ger is m itigated in t wo ways. First , SH Is should be

a llow ed to compet e for members. In divid ua ls s h ou l d n ot be

compe lled t o join t he local SH I, bu t s hou ld be free t o join

an other a r e a -b a se d S H I or on e n ot ba sed on localit y at all

(see below p . 13). Second , ins ur er s sh ould be free to offer

i n su r a n ce policies w h ich diffe r fr om t h e s t a n d a r d p a ck a ge.

In e s se n ce t h e sch e m e a cce p t s t h a t u n fettered m ar ket

com pe t it ion h a s b en e fi ci a l e ffe ct s for some an d h a r m fu l

effect s for oth ers . The cha llenge is to pr eser ve th e h uge

adva nt ages of in n ova t ion whilst eli m in a t in g known h a r m s.

T h e balan ce between ap propriat e regulat ion and over-re gula tion is a lwa ys d ifficult to strike. A system of sta ke-

holder h ea lt h in su r er s i s on e of com pe t in g r egu la t or y

regimes , w h ich a cce pt s t h a t w e ca n l ea r n from i n n ov a t ion

in regulat ory meth ods and stra tegies, just as we lear nfrom di ver si t y of p r ovis ion .

C on s u m e r s w ou l d m a k e th e ir ch oi ce on ce a yea r, basedon th e q u ot ed pr ices a n d a n y com pa r a t ive in form a t ion

supp lied by th e st ak eh older. Th ey could h a v e, s a y, fou rw e ek s t o consider th e op t ion s a n d n ot ify t h eir de cisi on to

t h e SHI. Th ere sh ould be contin uous coverage, to prevent

STAKEHOLDER HEALTH INSURANCE12

i n su r e r s f rom dum ping cos tly su bscr iber s. Th er e sh oulda lso be communi ty r a t in g , t h a t is t h e p r em iu m ough t to be

t h e sam e regardless of th e h ea lth st at us of the ind ividu al,

t h ou g h a g e r a t in g w ou l d be a cceptable . No one should fa ce

excl u si on s or l imitations of coverage becau se of pre-exis t ing condi t ions .

T h e r e a re som e d a n ger s t o be a void ed . Alth ough I h a ve

recommen ded th at he alt h a ut hor ities sh ould init ially

es tabl i sh st ak eh olders , it is ver y im p o r t a n t t h a t h e a l t hau th orit ies sh ould not als o be pla nn ing a gen cies, cont rol-

ling investm ent in m ed ica l faciliti es . Su ch p l a n n in g is bestaccomplish ed by compe tin g providers . E n t h ov en ’s proposa l

en joys b ip a r t is a n s u p p or t in Am e r ica a n d P a u l S t a r r , w h o

is a m on g th e left -lea n in g su pp ort er s, h a s strongly ar gued

t h a t p u r ch a s in g agencies s h ou l d n ot be pla nn ing agencies .

Th eir t a s k is t o b e t h e con s u m e r ’s champion an d to foster

a n d faci lit a t e in form ed ch oice . To give th em a p lan nin g

role, h e s a ys , wou ld be t o cr e a t e a pot en t ia l con flict of

in teres t be tween the i r advocacy and p lanning dut ies .4

Thus , t h e r e su l t in g s ys t em would work som eth ing lik e

th is . We wou ld a ll contin u e to pa y t a xe s a s n ow , a n d

peop le wishing to continue r eceiving care from the N HS

need take n o act ion a t a l l . People who prefer to be covered

by i n su r a n ce would opt t o receive ca re th rou gh t he ir loca l

SHI. E a ch exis t ing hea l th au thor i ty would es tab l i sh as t a keholder he alt h in su ra nce a gen cy whose task w ou l d be

t o a sk pr iva t e in su r er s t o p rice th e sa me compr eh en sive

p a c k age of ca r e. An yon e ch oosin g t o pa y m or e w ou ld do s o

with his or h er own mon ey.

Hospi ta l s , NHS or pr ivate , wou ld charge insurers for

th eir se r vice s. P r iva t e h ospitals , whet her for-p r ofit or n ot ,

w ou l d compet e on e qu a l terms. All hospitals would be free

t o e n t e r in t o con t r a c t s or a r r a ngem e n t s w it h in s u r er s a s

th ey believe best . Simila rly, GP s fun ctionin g th rou gh

p r im a r y care groups would cha rge insu rers or offer pre-

pa id serv ices .

I n it ia l ly t h e sch e m e w ou ld be b a se d on e x is t in g h e a lt h

aut hor i t ies , but a s un der E nth oven’s scheme, i t sh ould be

DAVID G. G RE E N 13

poss ible t o e s t a bl is h m u t u a l purcha sing agen cies oth er

t h a n area-based s takeholders . This w ou l d crea t e com pet i-

t ion between S HIs a nd p erm it consu mer s to escape fr om

th eir local SH I if it p roved to b e in effect ive . A com m on

obje cti on t o s m a ll -scale pu rch as e of hea lth ins ur an ce is

t h a t t h e a dm i n is t r a tive costs tend to be very high. How-

e ve r , t h e RAND Hea l th Insuran ce Exper iment found th a t

gr ou ps of 10,000 or m ore h a ve a dm in ist ra ti ve cost s of 5.5

per cent, w h er e a s for sma l ler groups it ca n be 40 per cent.5

T h us , gr ou ps of 10,000 are lar ge enough to secure t he

relevant economies of scale.

T h e T a x C r e d i t a n d H o w t o E n s u r e U n i ve r s a l i t y

H ow m i gh t a s ys t em of t a x cre di t s w or k? F or each person

op t in g to r eceive insur an ce cover through the s tak eholder

r a th er t h an t h e NHS, a s u m of m on e y w ou l d be p a id by th e

govern m e n t t o t h e ir s t a k e h ol d er . H ow w ou l d t h is t a x

cred it be calculat ed? There would n eed to be a n i n t er i m

ar ra nge m en t u nt il enough exper ience had been ga in ed of

t h e evolving insu ra nce ma rket . Two years w ou l d probably

be s u ffi ci en t , a n d d u r i n g t h e s e t w o y ea r s t h e Tr e a s u r y

s h ou l d a p p or t i on a n a g e -w e ig h t ed a m ou n t p e r pe r son

based on t he pr evious yea r’s NH S exp en dit ur e (ap pr oxi-

ma tely £ 80 0 p er h ead) . In s u bs eq u en t y ea r s , t h e T r ea s u r y

a lloca t ion s h o u ld b e ba s e d on t h e m a r k e t p r ice for t h e

s t a n d a r d p a ck age defined by each s ta keholder . The

Exchequer su bsid y sh ould be a per centage of this ma rket

price.

T h e cha llen ge I s et a t t he begin n ing was to devise a

system tha t would , a bov e a ll, a ss is t t h e l ea st we ll off a n d,

t o tha t end , the t a x credit sh ould a lso var y accordin g to

fina ncia l ci rcu m s t a n ce s. T h e m a jor problem for a n y syst em

w h ich h a s t o b e a d ju s t e d a ccor d ing t o in come is how to

d ea l fairly w ith people a t t he ma rgi n b et w ee n t ot a l

depen d en cy a n d self-sufficiency. Needless t o sa y, peop le on

ben efit w h o ca n n o t b e e xp e ct e d t o w or k sh ou l d receive th e

full cos t of t h e st a n d a r d i n su r a n ce p la n . Th e m a jor it y of

STAKEHOLDER HEALTH INSURANCE14

e a r n e r s a r e ca p a bl e of p a yi n g th eir s h a r e ou t of pocke t , bu t

w h a t a bou t t h os e ‘i n be t we en ’?

Ba sed on expenditu re in F ra nce an d Germ an y, let’s

a s s u m e t h a t t h e cos t of a st a n da r d i n su r a n ce p a cka ge for

a husban d , wife and t w o ch ild r en is £2 ,60 0 p er yea r . F or

peop le on ben efit t he govern m en t w ould pa y th e full

a m ou n t t o t h e SHI. F or others, t h e govern men t w ou l d nee d

t o d e ci de w h a t pe r ce n tage of the s tan dar d-package pre-

m i u m s h ou l d be p a id from taxes, an d at wha t income level

peop le could be e xpe cte d t o ma ke a cont ri bu ti on. T h e t a x

cred it s h o u l d b e in t h e r a n g e 5 0 -7 5 pe r ce n t of t h e s t a n -

d a r d pla n. I f it were 50 per cen t , the t ax c red it would be

£1,300 per y ea r a n d t h e m a x im u m ou t -of-p ock e t p a ym e n t

w ou l d be £1,300 per y ea r , p lu s a n y e xt r a a con s u m er ch ose

to spend .

H o we ve r , if e ver yone w hose incom e exceed ed a cert ain

poin t ha d to pay £1,300, i t would be l ikely to have a

b eh a v iou r a l effect on s om e people whose incomes w e r e ju st

be low t h a t p oin t. T he y m ight be d ete rr ed fr om ea rn ing

m ore. The difficulty could be avoided by tap ering th e tax

cred it t o b r in g a b ou t a m o r e gen tle t r ans i t ion from s u bsid y

t o self-sufficiency. If the t ax credit were £1,300, then a

tap er of 25p for every poun d of tax l iabil it y a bov e ea ch

fam ily’s tax t hr eshold would ha ve a sm aller beh a viou r a l

im pa ct. At th i s poin t , h owe ver , a di gr es si on from th e

ar gum en t is n ecessa ry.

Work Incent ives a t th e Mar gin : A Digr ess ion

S om e crit ics regar d th e presen ce of a h ig h ‘m a r g in a l

ded uct ion rat e’ at a certain point in th e income r an ge as a

decisive obje cti on . H owe ver , t o a b a ndon an y scheme for

t h a t r e a son a l on e w ou l d be t o con s i de r it a c ce p t a b le t o

r e fr a in from w or k altogether or redu ce w or k effor t be ca u se

of t he generosi ty of the benefi t sys tem. Such a view is

su re ly p a r a doxica l , p a r t icu l ar ly if t h e u ps h ot is t h e

con t i n u a t i on of public se ctor m onopoly wh ich fails , in

rea lity, to provide universa l cover for the p oorest p eople.

DAVID G. G RE E N 15

T h e i ss u e ca n be unde r s tood m o r e clear ly if we per sonal i se

it . Im a gin e you l os e y ou r job a n d t h a t you h a v e a brother

w h o offer s t o pa y you £2 00 a we ek u n t il you get a n ot h er

job. After fou r w e ek s you a r e s t i l l ou t of work and he ask s

when you are expecting to get a job.

You rep ly, ‘Wh y sh ould I get a job when I can get £200 a

week from you w it h ou t work ing?’ Most people ca n s e e t h a t

it would be r eas ona ble for th e br oth er t o reply t h a t h e will

go on p a yi n g y ou for on e m or e we ek , a n d t h en t h e m on e y

will s top . The wider commun i ty is in exact ly the same

pos it ion , a n d s om e on e w h o is ab le t o w or k b u t r efuses to do

so be ca u se h e i s b et t er off on be ne fit is s im ply t ak ing

a d va n t a ge of the gen erosity of other people , n o m or e a n d

n o less . Con seq ue nt ly a benefit sys tem can legitim at ely be

b a sed on r ecip r oca l obl iga t ion s, i n clu di n g a n obli ga t ion to

p e r for m p u b l ic w or k i n r et u r n f or b e n efi t .

M or e ov er , fina ncia l incentives a re n ot t h e only in flu en ces

on decis ion s t o w or k or n o t wor k . In d i vi d u a ls t a k e in t o

a ccou n t m a ny fa ctors, in cludin g self-resp ect, loyalt y to

children, a spouse or a n em ploy er . Con se qu en tl y, m a n y

peop le d o n o t t a k e a d v a n t a ge of t h e ge n e r os it y of t h e

system , b u t st rive t h a t bit ha rder t o get clear of t h e in com e

zon e in w h ich th ey face a high m a r g in a l deduct ion ra te.6 In

a n y even t , t h e im pa ct on be h a viou r a t t h e m a r g in , w h il e of

s om e significance, is of minor im porta nce com p a re d wi t h

t h e gain s to be made by empower ing consu m e r s across t h e

in com e r a n g e . I t is fu n d a m e n t a l t o t h e s ch e m e t h a t t h e

poorest peop le s h ou l d h a v e t h e power to ch oose a n a l te r n a-

t i ve in s u r e r .

T h e I m p a c t o f t h e T a x C r e d i t

T h e r e would be a n in divid ua l policy an d a fam ily policy.

T h e cost m ight be £1,300 for an individua l and £2,600 fora fa m ily . Le t ’s a ss u m e t h a t t h e cos t of a st a n d a r d in s u r -

a n ce p a ck a g e for a h u s b a n d , w ife a n d t wo childr en is

£2,600 per year . For people on ben efit th e govern me n t

would pa y t h e fu ll a m ou n t to t h e S H I. T h e t a x cr e d it for

STAKEHOLDER HEALTH INSURANCE16

peop le wit h e ar nin gs wou ld t a p e r a wa y a t 25 p for e ve r yp ou n d of t a x liab ility a bove ea ch fam ily’s t ax t hr esh old.

T h e t a p er cou l d s t op w h en t h e a m ou n t of cr e di t w a s e qu a l

t o 50 per cen t o f the cos t o f the s tanda rd p la n . N o on e

would receive m ore t ha n a 50 pe r cen t s ub sidy.H ow m i gh t s u ch a scheme a ffe ct a fa m i ly of a h u s ba n d

wi fe an d t wo child re n a t d ifferen t in come le vel s? F or

families w ith n o t a x liab ility t h e sta keholder w ou l d re ceive

£2,600 fr om t h e gov er n m e n t a n d t h e r e w ou l d be n o ou t -of-pocket p a ym e n t . F or a fa m i ly wi th a t a x liab ility of £1,000

t h e sta keholder w ou l d receive £2,350 from t h e govern men ta n d £250 from t h e fa m i ly . F o r a fa m i ly wi t h a t a x l ia b il it y

of £2 ,60 0 t h e s t a ke h old er wou ld r ece ive £1 ,95 0 fr om th e

govern men t a n d £650 from t h e fa m i ly . A fa m i ly wi th a t a x

liab ility of £5,200 would pa y £1,300 to t h e stak eholder

w h ich wou ld r ece ive £1 ,30 0 fr om th e gover nm en t. At t h is

poin t th e t a x cr ed it wou ld be 50 pe r cen t o f t h e s t a n d a r d

pla n, t he ma ximu m s ub sidy.

Concl us ion

T h e en d r esu lt w ou l d be u n i ve r s a l a c ce s s t o a gua ra nt eed

s tanda rd , ra th er th an un iver sa l a ccess t o a polit ically-deter min ed sta nda rd wh ich bears l i t t le r ela t ionsh ip to

either n a t ion a l we a lt h , medica l need or pe rsona l demand .T h e r e would be compet it ion t o cr e a te r oom for e xp er im e n -

t a t ion a n d t h e discovery of n e w a n d be t ter wa ys of m eet in g

h u m a n needs . The d i spersa l of hosp ita l ownersh ip to

localities w ou l d he lp to re bu ild t h e socia l fa b r ic. An d aboveall, the poores t people in th e society would have been

empowered . Th ey w ou ld b e fr ee to r ece ive ca r e fr om th e

N H S as a t pr esent . If they pr efer t o s w it ch t o a n a lt e r n a-

tive i n su r e r , t h ey w ill e n joy t h e s a m e p owe r to d o so a san yone else.

Thus, we w ou l d a l l p a y ta xes a s a t p re sen t . P eople hap py

w it h t h e N HS ne ed t ak e n o action . Peop le wh o would

prefer t o t a ke pe r son a l r es pon si bil it y wou ld con t r a ct ou t

a n d receive a t a x credit r e pr e se n t in g 50 per cent of t h e cost

of a s ta n d a rd h ea lt h in s u ra n ce sch e m e.

DAVID G. G RE E N 17

M or e ov er , s takeholders would give adv ice to he lp ind ivid-

u a ls ch oose, a nd becau se in su ra nce is b eing b ough t by a

gr ou p they would enjoy lower adminis t ra t ive cos ts a n d

m o r e b a r g a in i n g p ow e r . E a c h s t ak eholder would be a

m u t u a l or ga n is a t ion ch ar ged with r e pr e se n t in g members ,

not an ar m of th e Tr eas ur y, char ged wit h p ar sim ony.

Co m m e n ta ri e s

21

Time to Spl i t the NHS

Ad ri an B u ll

I n t h e in t r o d u ct i on t o t h e p a p e r t h e a u t h o r s t a t es t h a tt h e NHS fa l l s a lon g wa y s h or t of ach iev in g it s ow nobject ives . Th is is a wi de ly h el d, bu t ill -de fine d view,

largely because th ose objectives are over genera l ised and

poorly defined. The NH S embod ies tw o qu it e d is t in ct

fu n cti on s. The f irs t i s to be the funding vehicle by which

t h e G ov er n m e n t en s u r es t h a t a hea l th se rvice is a vaila ble

t o w h ich th e pop ula tion ha s un iversal access, lar gely free

a t th e poin t of us e. Th is, in rea lity, is t h e D ep a r t m e n t ofH e a lt h ’s fu n ct ion, but i t ha s become synonymous with th e

NHS. Th e second role of th e NH S is t o be th e orga n i sa t ion

w h ich m a n a g e s a n d p r ov id e s t h os e sa m e h e a lt h ca r e

services t o t h e pu b li c. I n t h is r ega r d , t h e N H S i s t h e

d om i n a n t pr ovider of ser vice s i n w h a t i s, in e ffe ct , a

na t ional i sed ind us tr y. Despi te t h e Tha tcher experimen t ofdivor cing t h e pu r ch a s in g from t h e provider fun cti on wit hin

t h e NHS, t h e two fun cti on s h a v e never been separa ted ou ti n t o two d if ferent organisa t ional s t ructu re s . M a n y of t h e

pr inc ip les of the pur chaser /provider sp l i t under those

r efor m s ha ve been ret ain ed in th e pr ima ry ca r e gr ou p

str uctur es of t h e cu r r e n t governm ent . This cont inues ,h o we ve r , t o be wit hin t h e fr a m e w or k of t h e sin gle, n a t ion a l

NHS.

T h e NHS’ a im s s h ou l d be consider ed in these t e r m s— a nd

t h e two fun cti on s h a ve qui te d iffe r en t s e t s of object ives. As

t h e fu n d in g m ech a n i sm t o e n su r e t h a t t h e n a ti on h a s

h e a l t h ca r e fr e e a t t h e poi n t of u s e, t h e N H S cont inu es to

be broadly successful. Costs ar e well controlled, the na -

t ion ’s e xp e n d it u r e on h e a l t h i s held w ith in r ea son ab le

l imi ts , an d hea lth car e cont inues t o be lar gely free at the

STAKEHOLDER HEALTH INSURANCE22

poin t of u s e; t h e r e a r e n o fina n ci a l d et e r re n t s i n th esystem w h ich h i n de r a pe r son seeking access to address

t he ir hea l th concerns . With some except ions a t t h e m a r-

g ins , t h e fu n d in g of he alt h ca re is broa dly comp reh en sive

a n d e qu a l acr os s th e cou n t r y. F u r t h er m or e, t h e N H S as afu n d in g m e ch a n i sm h a s en su re d a rem ar ka bly s u cce ss fu l

series of prevent ive and su rveillan ce ser vices—sp ecific

examp les bein g i m m u n isa t ion programmes, h ea l th visit in g

services a n d t es t in g for n e on a t a l dise as e. Fr om t his poin tof view, the N HS is a modera te su ccess. The pa per d oes

corre ctly iden tify a flaw, however, in th at t her e is no clears t a t em e n t or de scrip tion of the ra nge of services wh ich

s h ou l d be funded by t h is s y st e m . A t its in cep t ion , t h e N H S

a im e d to fund all hea lth ser vices—including long-term

n urs i n g care of the e lder ly , and a l l dent is t ry . These two

services have now mos t ly fa l l en ou t s ide t h e r em i t of t h e

N H S funding, while other lifes ty le- type condi t ions and

services r e m a in w it h in it s rem it. This issue m ust be

debat ed a n d r es ol ve d, a n d pi ece m ea l s t a t em en t s a bou tind ividua l d r u g s or op e r a ti on s from t h e N a t ion a l In s t it u t e

for Clin ica l E xcel len ce (N ICE ) will not ach ieve t he clar ity

of purpose tha t t he na t ion requi res .

T h e object ives of the NHS a s th e m eans of d el iv er in gh e a lt h ca r e ser vices form a sepa ra t e yar dst ick—a nd in t h isr e ga r d t h e N H S is in deed a failin g orga n isa t ion . T h e paperp oi n t s ou t tha t , in genera l , un i fo rm s tanda r ds of ca r e

pr ovis ion h a v e led to lower ra th er than h igher s tanda rds .Pa t ien ts ’ comm en ts a bout t h e ca r e t h e y r e ce iv e fr o m t h eN H S are h ea vily coloured by th eir relief that i t is free att h e poin t of use. D e sp i t e t h i s , t h er e is w id es p r ea d diss at is-fa cti on with st an dar ds of care provided. The NH S a lsos u ffe r s from si gn ifica n t d e t e r io r a t io n in c a p it a l s t ock ,

poorly developed and fragment ed IT suppor t sys tems,disil lusioned s t a ff wit h wid es pr ea d v a ca n cies in te ch n ica la n d clin ica l d is cip lin es , a n d p oor a n d u n r e l ia b le a cce s s t ot h e ser vice (long wa itin g tim es for ou t-pa tien t a pp oint -

m e n t s a t h ospita ls , una cceptable delays in GP ap poin t -ments , lon g w a it s for t r e a t m e n t a n d r e gu l a r la s t m i n u t e

ca n cel la t ion s of ope r a t ion s).

ADRIAN BULL 23

In the l ight of th is ana lysis , I t a k e is s u e w it h t h e p a p er ’ss t a t em e n t t h a t ‘hea l th ca r e s h ou l d be funded by i n su r a n ce,

n o t fr om ta xes’, alt hou gh I a gr e e w it h t h e s t a t em e n t t h a t

‘com pe t it ion sh ould be in t r odu ced [for t h e d eli ver y of

ca r e]’. C om p e t it i on i s a n ece s sa r y b u t n ot s u fficientr esponse to the fa i lure of the NH S as a provider organisa-

t ion . Ther e is n o over r id in g s t r a t egi c st a t em en t a bou t

w h a t th e N HS is t ryin g to a chieve as a d eliv er e r of s e r -

vices. T h e r e a r e t a ct ica l objectives in s om e a reas, b u t th esea r e s et i n s u ch a w a y a s t o con flict w it h wh a t som e i n th e

orga n i sa t ion se e a s i t s cor e ove r r id in g p r ior it ies . F orexamp le, t h e cu r r e n t lea din g pol it ica l objective is to red u ce

w a it in g l is t s , b u t th i s r i des rou gh sh od ov er th e cli n ica l

priorit ies an d need s of th ose either i n an a cu t e si tu a t ion ,

or wit h va r yin g life -th r ea t en in g con di t i ons wa itin g for

elective s u r g er y . N or w il l t h e r e ever be a clea r se t of

objectives a r ou n d t h e delivery of excellent ca r e a n d ser vice

(a s ther e should be), while the same organisa t ion i s a l so

ch a r g ed with deliver ing t h e m a x im u m volum e of ca r e froma fixe d (a n d in ad equ at e) bud get . At t he sa m e tim e, th is

con fu si on of rol es and funct ions prevents th e NHS as a

pur chaser of se r vice s fr om energet ically dr iving t he

p r ov id e r s t o in crease the i r s tand ards of pr ovis ion , be ca u se

it does not have the sa n cti on t h a t must be available t o a n y

pur chaser t o enforce t his —th e sa nct ion of with dr aw ingbus iness t o a n e xt e n t w h ich woul d t h r e a t en t h e p r ov id e r ’s

contin ue d via bility.

Because of th is , t h e p a pe r is r igh t to ca ll for h o s p it a ls

(a n d I w ou l d extend this t o all service providers) to be run

ind epen den tly. T h e concept of t h e N H S s h ou l d be split int o

two: t h e m et h od an d m ea ns by wh ich ta xpa yer s’ mon ey isused t o fu n d a c ce s s t o h e a l t h ca r e fr e e a t t h e p oi n t of

delivery on t h e on e h an d , a n d a n or g an i sa t ion w h ich i s

ch a r g ed with del iver ing excel lent care on the other . The

pap er calls for a ll hosp ita ls to be in dep en den t of govern -m e n t . T h i s i s n o t en tir ely ne cessa ry: it is sim ply necess a r y

t h a t se r vice p r ov id e r s wh i ch a r e i n d ep e n d en t , w h e t h er ornot th ey ar e als o profit-ma kin g, sh ould be eq ua lly ab le t o

STAKEHOLDER HEALTH INSURANCE24

tender for an d de liver t he ser vices comm ission ed by t heD ep a r t m en t of Heal th a s the count ry’s payer . I t is neces-

s a r y in such a cont ext for a full mix of providers to be able

t o compet e fairly with each other in order to st im u l a t e

con t in u ou s imp rovem en t in st an da rd s. Th e m ix wouldinclu de govern men t-owned, independen t n ot -for-pr ofit,

and independen t comm ercia l organisa t ions .

T h e paper , when addr ess ing the insura n ce p r opos it ion ,

calls for a d es cr ip t ion of t h e se r vi ce s t o w h ich t h e Gov er n -

m e n t s h ou l d p rovide access un der its hea l th scheme. Ther e

is som e con t r a di cti on i n t h is s ect i on , in t h a t a c on t r a c t of

i n su r a n ce i n t h e U n it e d S t a te s i s t h e n de scr ib ed a s

e n t it li n g in di vid u a ls to ‘a l l needed h ealth care’, explained

a s bein g wha teve r a qu alified d octor sa ys is n ecessa ry.

S e ve r al hea lthcar e system s ha ve att empt ed to define, by

m e a n s of a l is t , t h o se t r e a t m en t s w h ich s h o u ld b e p a r t of

t h e scheme. S u ch a t t empt s inclu de t h e Or egon experimen t

of pr ior i t i s ing t reat ment /condi t ion pa irs (now a lar gely

discredited exercise), and the Neth er lands’ exer ci se t o

define t h e core services provided by it s st at e sys tem . In all

cases t o da t e, t h e com pl ex it y of t h e ta sk has p reven ted a

com p r eh e nsive solution. Other count ries, such as New

Zea land , ha ve ta ken a d ifferen t a pp roa ch of defin ing

m e ch a n is m s by wh ich doctors sh ould a llocate p riorit y to

pa t i en t s wit hin t h e system , allowin g t h e low -prior it y cases

t o have a lower speed of access to car e tha n th e higher

p r i or i t y ca s es . I n t h e U K t oo, p r iv a te m ed ica l in s u r a n ce

does not list t h e r a n ge of t r e a t m e n t s w h ich a r e available.

Rat her it d efines in b roa d t erm s t he pr incip les w hich will

govern assess men ts of eligibil i ty, and am plifies these by

expla inin g, and in some cases expl ic it ly defining, what

types of condit ion or tr ea tm en t w ill not be eligib le. Th is is

t h e appr oa ch th at s hould be ad opted by the Govern men t

in s et t in g u p a n e w p u rchas ing NHS to commiss ion

services for t h e cou n t r y. B u t t h e fir s t r eq u ir em ent wou ld

be to es tab l ish t h e broad pr inciples which should govern

t h e function. For examp le, prevention services should be

limited to pr oph ylact ic t r e at m e n t a n d dia gnos tic screen in g

ADRIAN BULL 25

(i m m u n is a t ion , neonata l scree n i n g, h yp e r t en s i on t r e a t -

m e n t ) a n d s h ou ld n ot in clu de lifes t yle pr om ot ion or

ed u ca t ion ; in t er ven t ion s w ill n ot be pr ovid ed wh ich a r e a

ma tter of lifest yle im pr ovem e n t r at h e r th a n cl in i ca l

n ece ss it y, e. g. h ys t er ect om ies wit h ou t spe cific in di ca t ion ,

p os t -m e n op a u s a l fer t ilit y t r ea t m en t s, s u pp or t of dy sfu n c-

t ion a l per son alit y or em otiona l (a s opposed to psych i a t r ic)

problems, cos m e ti c t r e at m e n t s ot h e r th a n restora tive or

re cons tr u ctiv e s u rg er y.

Wit hin a na t ional f ramework for the comm ission in g of

services s u ch a s this , d iffe r en t p r ior i t ies cou ld be a lloca t ed

t o d iffe r en t t r e a t m e n t s or conditions, according to set

crit er ia , on a n ind ividual basis. The p aper also describes

t h e different models of providing care in an insu ra nce-

based ma rket s u ch a s th e US, cit ing HMOs a nd open

access fee-for -se r vice , ar guin g th at ind ividu als will m a k e

th eir own de cisi on s a bou t wh a t ty pe of se r vice wi ll s a t is fy

th eir needs a n d e xp ect a t ion s. T h is is a ph ilos oph y wh ich

must b e a cce pt e d i n th e UK. I t s h ou l d be e n t ir e ly a cce p t -

ab le th at , if people a r e n ot con t e n t w it h t h e n a t u r e of t h e

ser vice comm issioned on th eir beh alf by t h e s t a t e, or if, for

r e a son s of preference or convenience, they wish t o obta in

great er priority outside th e public system t h a n ha s been

made ava ilable with in it , or if the y wis h to a va il t h em -

selves of t h os e life st yle tr ea t m en t s w h ich d o n ot com e

wit hin the r an ge of sta te-fun ded care, they a re ab le to do

so through pr iva te mean s . Nor should th is be s ee n a s

some h ow un der m inin g or t hr ea ten ing t he st at e’s cont in -

ued role in g u a ra n t e ei n g access t o those services w h ich a re

w it h i n it s r e m it .

I d i sagree wi th the paper ’s co n cl u s io n s t h a t a s t a k e -

holder h ea lt h in su r a n ce p r opos it ion is th e a n sw er to t h e

sh or t com i n gs of the UK’s hea l th system . ‘Man aged com pe -

t it ion ’ is a n in t ere st ing s yst em , wh ich is d escr ibed well

her e, a n d i t i s on e w h ich offer s a n sw er s t o so m e of t h e

pr oble m s i n h er en t in a sy st em su ch a s t h a t o f the U nited

Sta tes w h ich i s fou n d e d en t i r ely on th e p r in cip les of

insu ra nce. I t is r i gh t t o quest ion and challenge whet her

STAKEHOLDER HEALTH INSURANCE26

t h e UK’s system of fu n d in g hea lthcar e services is viable,

a n d to com p a r e t h a t system with ot h e r s s u ch a s t h a t of t h e

Un ited Sta tes . It is righ t to see what lessons th e system s

in ot h e r cou n t r ie s h a v e t h a t m i gh t b e a d a p t e d for or

i n cor p or a t e d i n to t h e syst em in t his count ry. A cha nge

s u ch as t he one th at is pr oposed would, however, be

e n or m ously com pl ex, wou ld be a r a di ca l d ep a r t u r e fr om

t h e history an d cultur e of he alt h ca re in th is coun tr y, a n d

would , moreover, be an exper iment of h igh poli t ica l r i sk ,

w it h a s yst em wh ich h as not been tr ied or pr oven in an y

cou n t r y ot h e r th a n t h e U n ited States , w h ich h a s a h ist ori-

ca l level of hea lt h expendi ture and a cu l ture of access to

h e a l t h ca r e w h ich is en t ir ely d iffe r en t fr om t h a t of t h e

U nited Kingdom. One exam ple of the d ifferences tha t

w ou l d h a v e t o b e a d d r e ss e d i s t h e r elat i ve e xp e r t is e t h a t

t h e popula t ions of ea ch coun tr y ha ve in u s in g a n d ob t a in -

ing ma ximu m p ers ona l ad van ta ge from su ch arr an ge-

ments . Am er ica n s h ave grown up with similar a rra nge-

m e n t s a n d a r e w el l v er s e d in t h e p r ob le m s a n d p it fa l ls t o

be considered. T h e Bri t ish w ou l d be a t a s er iou s d is a d va n -

tage, w ith a n inadequa te kn owledge a n d u nd ers ta nd ing of

t h e system w h ich w ou l d t a ke a considera ble per iod of t ime

to rect ify. A s econ d exa mple of the d ifferences is t h e exten t

t o which pr ima ry care is a k e y p ar t of a l l h e a lt h t r a n sa c-

t ion s in th e Un ited Kingdom, but is a requ is it e on ly of

HMO-type pr ovis ion in t h e U ni ted States . T h e s takeholder

s ch e m e does n ot a ddress fu l ly the i ssues of direct access to

s e con d a r y care, or the r equirem ent t o access th e system

t h r ou g h a pr im a r y ca r e p h ys icia n . A t h ir d e xa m pl e of t h e

differences between t he tw o count ries is th e extent of

overs up ply of doctor s, s pecia l is t s a n d h os p it a ls in t h e

Un ited States , com p a r e d w it h t h eir un der -provis ion in th e

Un ited Kin gd om . In a n y s ys t em of plu r a lis t pu r ch ase rs ,

t h e con s t r a in t s of a v a il a bl e p r ov id er s in t h e UK would

seve re ly con s t r a i n t h e a bi li t y of t h o se p u r ch a s e r s t o

ach ieve th e de gre e of chan ge a nd contr ol th at ha s been

obtained b y t h e U S i n s u r a n ce com p a n i e s. In d e e d, t h e

cu r r e n t leve ls of provision would significan tly redu ce the

ADRIAN BULL 27

b e n efi t s t o b e g a in ed from a n y system of great er flexibilit y

a n d com p e ti ti on .

Oth er sw ee pi n g s t a t em en t s a r e m a de a bou t t h e fu n d a -

m en t a l chan ges which would need t o be int roduced to

fa cilita te th is p rop osit ion —su ch a s, for exa m ple , t h e

s t a t em e n t tha t th ere ‘shou ld a lso be comm un ity r at ing’

a n d th a t ‘n o-on e s h ou ld face excl u si on s or lim it a t ion s of

coverage because of pr e-exist ing con dit ions ’. Th ese con di-

t ion s a r e, of cou r se , pr er eq u is it es for a n y h ea lt h ca r e

fu n d in g system tha t depends pr inc ipa l ly on th e insur a n ce

p r oposi t ion . Bu t a th ird key r equ irem en t t ha t m us t go

a lon g with t hese t wo for the syst em t o be s u s t a ina ble is

w id es p r ea d an d cont inued u p t a ke of i n su r a n ce a t a ll a ge

levels , since only by t h is m e a n s w ou l d adverse se lect ion be

avoid ed a n d t h e r i sk s p r e a d s u ffi ci en t l y t o m a k e t h e

a b se n ce of exclu si on s sus t ain ab le. Sim ilar ly th er e wou ld

h a v e to b e s om e com pu ls ion or v er y s t r on g in cen t ive for

peop le t o contin u e w it h th e in su r a n ce p r opos it ion on a n

a n n u a l ly renew ed basis, again to ens ur e wi de sp r ea d

upt ake, if t h e in su r a n ce fu n ds we r e r eq u ir ed to s u pp or t

long-term or ch r on ic ca r e. T h is is be ca u se of t h e r i s k of

adverse se lect ion if t hose with out ongoing needs w e r e able

t o op t ou t o f t h e s ys t e m , w h i le t hose with su ch n e e ds w er e

ab le to renew t heir ins ur an ce w it h ou t qu es t ion . It is n ot

clear fr om t h e pa p er w h et h e r t h e op t i on of contin uin g to

h a v e he alt h ca re fu nd ed from gen era l ta xat ion, th rou gh

p r im a r y ca r e groups, a s opposed to t h e opt ion of t a k in g ou t

t h e s t a k eh older ins ur an ce, would satisfy these con di t ion s.

Indeed t h e u n fa m i li a ri ty of t h e Br itis h p eop le wi th t h e

i n su r a n ce op t ion would ma ke a low init ial upt ake seem

likely, wit h a ll t h e a t t e n d a n t r i s k s of an t i-se lect ion wh ich

would undermine the propos it ion in the ear ly years .

I t is a lso int ere st ing t o n ote, while considering m an aged

com p e ti ti on a s t h e a n s w e r t o t h e U K ’s p r ob le m s , t h a t t h e

U S is explorin g wa y s of m oving be yon d gr ou p or individua l

i n su r a n ce as the an swer to the p r oble m t h e y fa ce of v er y

high levels of n at iona l expe nd itu re on he alt h. O ne option

t h a t is be in g a cti vel y ex pl or ed is to i n t r odu ce highly t ax-

STAKEHOLDER HEALTH INSURANCE28

incen tivis ed Me di ca l S a vin gs Accou n t s, u n de r wh ich

em pl oyers , in s t ea d of p r ov id in g hea l th i n su r a n ce schemes ,

give t h e ir e m pl oy ee s a su m of money (appr oxima tely

$5,000) pe r annu m, par t o f which i s used to fund ‘ca t a -

s t r op h ic’ h e a lt h in s u ra nce (effectively a gain st cha rge s in

excess of $3 ,000) , par t of which goes into a ta x-efficient

s a vi n gs accoun t wh ich the ind ividuals dr aw on to m eet

ch a r g es for sm aller h ea l thcare needs . Th is type o f ap-

p r oa ch could w ell rep re sen t a sign ificant evolut ion in th e

w a y hea lth car e is fun ded in t he Un i t ed S t a t e s, a n d h a s

som e si m ila r it ies wit h sch emes in ot h e r cou n t r i es s u ch a s,

for e xa m p l e, S in g a p or e .

On this p oint i t is inter e s ti n g to no te t h a t th e paper does

n ot a d d r ess t he key is su e of co-paym en t, wh ere by th e

ind ividua l i s requi red to pay par t of the cos ts a s sociated

w it h a n y use of t h e h e a lt h ca r e service. Th i s i s a n e ss en t ia l

p a r t of m a n y in s u r a n ce sy st e m s, a n d s er v es t o cou n t e r act

t h e pr obl em of ‘m or a l h a z a rd ’— th e incen tive for those wh o

h a v e p a id th eir p r em iu m s to seek to m a xim is e t h eir u se of

t h e ser vice wh ich is free at the p oint of delivery. The N HS

also su ffers cons ider ab ly from m ora l ha zar d, wit h n u m er -

ou s an ecdotes circula tin g wide ly of i n a p pr opr ia te dem a n ds

on va r iou s a cces s p oin t s of t h e s ys t em —w h et h er ou t -of-

h o u r s calls to GPs, unn ecessary at tend an ce at A&E

depar tm ents , or spur ious ca l ls t o the em ergency services

for att enda nce to resolve min or a n d n on-urgent problems.

In p r oposing a s ystem w hereby ind ividuals could either

s t a y wi t h in t h e g en er a l t a xa t ion -fun ded syst em , th rou gh

p r im a r y ca r e gr ou ps (P CG s), or opt ou t , wi t h ta x cr ed i t s,

int o a s tak eholder insura nce scheme, the aut hor shou ld

exp lor e how co-payments w ou ld be int rod uced equ ita bly

in to bot h system s to avoid disadva n t a gi n g those w h o ch ose

on e r a t h e r t h a n t h e ot h e r .

As pa rt of the pr oposa ls, th e pa per pu ts consid er ab le

e m p h a sis on the n eed to separ ate t he p u rch a si n g of

h e a lt h ca r e services from th e plann i n g of those serv ices .

T h is i s a sound requ i rement , bu t i s pa r t o f the need to

sepa ra t e t h e pu rchasing (or comm ission ing) fun cti on of t h e

ADRIAN BULL 29

N H S fr om t h e a ct u a l p r ov is ion of s er v ice s. P l a n n in g is a n

e ss en t ia l pa r t of t h e d el ive r y of t he se rvices , an d t his

division h as been consider ed above.

T h e de ta i led mechan isms of the tax credi t proposa ls ,

w h ich th e pa per fully des cribes , ar e n ot a t is su e. It is

u n f or t u n a t e t h a t the p aper , having broadly ident ified t h e

key iss u es of confu se d ob ject ive s a n d l a ck of d ive r si t y of

pr ovis ion i n th e earlier sections, explores on ly on e op t ion

a s a so lu t ion —a n d t a ke s a s t h a t opt ion a sy st em wh ich

w ou l d r e qu i r e s u ch fu n d a m e n ta l a n d r a d ica l cha nge t o th e

cu r r e n t ar ra nge m en ts as to be p olitically a nd pr agm at i-

cal ly u n fea sib le.

T h e r e are s everal m att ers wh ich should be consider ed

m o r e car efully a s wa ys in wh ich th e cur re nt syst em could

be develo p ed a n d ad apt ed, using some of the better

p r inc ip les of t h e a lt e r n at iv e s ys t em t h a t t h e a u t h or

advocates . T h e r e i s an im pe r a t ive r eq u ir em en t t o cla r ify

t h e objectives of the NH S—a nd in d oing so t o di vor ce t h e

N H S as a mea ns o f fu n d in g th e h ea l th ca r e n ee ds of t h e

cou n t r y from t he NH S (and d iverse a l te rna t ives) as the

m e a n s of providin g he alt hca re ser vices. Th is wou ld a lso

r e qu i r e a clear st atem ent d escribing the cen t r a l r em i t of

t h e n a t ion ’s p u bli c h ea lt h se r vice s— t h e cr it er ia or p r in ci -

ples t h a t d et e r m in e t h e r a n g e of condi t ion s a n d t r e at m e n ts

t h a t i t offers—as well as a clea r a n d t r a n sp a r en t m e ch a -

nism to allocate a ccepta ble priorit ies w it h in t h a t system .

S u ch init iat ives w ould n e e d t o be a llied t o a ch an ge in th e

cu l tu r a l and po l it ica l at t i tudes t owards h ealth services

w h ich w ou l d a l low (a n d eve n en cou r a ge) i n di vid u a ls or

th eir em pl oye r s t o obt a in a cce s s t o clinical services that

w e r e not seen as par t of the publ ic sector ’s r e m i t , or t o

obtain grea ter p riority an d speed of access than would be

a lloca t ed in th e pu blic syst em . Th is wou ld a llow a s ignifi-

ca n t e xp a n s ion of se lf-paymen t for services outside th e

pu blic secto r—whether on a pay-as -used basis , or t h r ou gh

m ed ica l in su ra nce—which together a lready contribu te

s om e £3 bil l ion of hea lthcar e expenditu re. In det erm in i ng

these m or e e xp licit a r r a n gem en t s for a m ixe d-e con om y

STAKEHOLDER HEALTH INSURANCE30

h e a lt h sector, in wh ich health care funded from genera l

t a x a t ion w ou l d con t i n u e t o b e a t t h e cor e , t h e r ole of co-

paym en t for services, whet her funded by t h e pu blic syst em

or fr om pr iva t e i n su r a n ce, s h ou ld be ca r efu lly r e-e xam -

in ed , wi th the twin a ims of removing the adverse incen -

t ives of m o r a l h a z a r d fr om b ot h s ys t e m s, a n d e n s u r in g

t h a t pat ient s in eith er s yste m a ct m ore powe rfu lly as

con s u m e r s of the s ervices by link ing m ore closely an d

dir ectly the pa yment for services wit h the use of those

serv ices .

In con cl u si on , t h e a u t h or h a s identified a nu mber of k ey

weakn esses in t h e cu r r e n t a r r angemen t s for hea l th ca r e in

t h is coun tr y. Th e m er its of one alt er n a t i ve s ys t e m , cu r -

r e n t l y op er a t ive i n t h e U n it ed St a t es a n d a su cces sfu l

m e a n s of a dd res s ing s ome of th e h ea lth car e pr oblem s in

t h a t coun tr y, ar e fully des cribe d. A r a di ca l ch a n g e i n th e

U K from the exis tin g syst em to th e pr oposed a lter na tive

would , h owe ver , be to e m ba r k on an expe rim en t of politi-

cally un accept ab le scale an d r i sk . Ins tead, t h e les son s t h a t

ar e available to us from t he U nited S tat es a n d e ls e wh e r e

sh ould be used t o identify ways in wh ich the curr ent U K

system migh t be modified, to preserve what it is ach ievin g

a n d to deve lop wh a t i t cu r r e n t l y d oe s n ot offe r . A t a

fu n d a m e n ta l l eve l , t h i s r e q u i r e s t h e c o m p l e t e

di sa ggr ega t ion of t h e pa y er or com m i ss ion i n g fu n ct ion of

t h e N H S fr om a l l p r ov is ion , t h e in t r od u ct i on of a fu lly

diverse p rovider sec tor which p rov ides rea l compe tit ion

between providers to de liver the comm iss ioned serv ices ,

t h e clear description of wha t hea lthcar e services the

govern men t i n t ends to fu n d for t h e p op u la t ion , t h e s ignifi-

ca n t expa ns ion of th e level of pr ovider res our ce to en ab le

gen uin e compet i t ion between p r ov id e r s , i n s t ea d of t h e

cu r r e n t sit ua tion of significa n t u n d er -p r ov is ion , a n d t h e

d evelopmen t of a cultu re which r ecognises th e r ight of

e a ch individual t o obta in a d d it ion a l ca r e or h i gh e r p r ior ity

of access by private m ean s outside th e sta te-fun ded

system .

31

Th e N e e d Fo r Co m p e ti ti on

N ic h o la s Be a zl e y

D r Green ’s an alysis identifies three is s u es a s b ei n gl on g -s t a n di n g problems of t h e N H S a n d w h ich need tobe resolved :

• U n d er fu n d in g

• La ck of com pet ition

• La ck of i n di vid u a l ch oice

Th is p a pe r com m e n t s on t h e se is s u es a n d Dr G r ee n ’spr oposa ls to rem edy th em t h r ou g h s t a k eh older ins ur an ce.

U n d e r fu n d i n g

T h e P r i m e M in i s t er s e em s t o a g r e e w it h t h e fi r s t of these,

a n d h i s r e ce n t pla ns for t h e N H S concen t r a t e on it, a t le a st

at t his sta ge. He, and m an y others, expect improvemen ts

in t h e se rvice s t o flow ine vita bly from great er fu n d in g . Bu t

u n d er fu n d ing is a complex i ss u e a n d impossible to answer

w it h ou r cu r r e n t i n for m a t i on on t h e N H S . C le a r ly t h er eh a s been insufficien t money spe n t t o k e ep t h e ca p it a l

a s s e t s in good r ep a ir , t o m eet t he dem an ds placed on i t byt h e expect a t i on s of p a t i en t s a n d p r ofe s si on a l s , a n d t o

en s u r e en ou gh flex ibi lit y t o cope wit h va r ia t ion s in

d em a n d as we l l a s new dev e lo p ments . Wai t ing li s t s and

times a n d t h e short ages of beds a re tes t amen t s t o this . Th eN H S a ls o look s un derfun ded wh en compar ed w it h h e a l t h

services in other developed coun tries.

B u t there a re un cer ta int ies . How do we k n ow t h a t w h a t

is bein g sou ght or pr ovided is se ns ible a nd a ppropr iate?W h a t is t h e r ea l ex t en t of n ee d or d em a n d t h a t ca n

p r op er ly be met a nd im proved by health care int erven-

t ions? What a re the i ssues in th e sy s t em w h i ch l ea d t o

STAKEHOLDER HEALTH INSURANCE32

inefficient use of both t ime and money? These a r e im por -t a n t qu est ions in a ny a re na , an d p ar ticu lar ly so in a

sys te m th a t i s ve ry la rg ely fu n de d ou t of t a xa ti on.

La ck O f Comp et i t i on

T h e fact th a t som e of t h es e q u es t ion s cann ot be ans weredis in pa rt a reflection of the s econ d i s su e : t h e l a ck o f

com pe t i t ion . Suppor ters of the NH S f requent ly assum et h a t t h e low levels of m a n a gement act ivity, a n d in pa r t i cu -

lar t h e v ir t u a l a bs en ce of a n y n ee d fo r billin g system s , a r e

si gn ifica n t adva nt ages in t hem selves. They believe th at

t h is absen ce of t r an sa ction cost s m ak es t he syst em high ly

d e si r able a n d p r e fe r a b le t o, for examp le, t h e system in th e

USA. In de ed th is m onop olist ic pos it ion a n d p ower is, s o

s u p p or t e r s argu e, a t t h e ce n t re of w h a t m a k es t h e N H S

good . I t is su rpr ising tha t th is begging of the qu est ion ofwhet her com p e t it ion is m or e or les s p r odu cti ve of a n

efficie n t sys tem than cen t ra l i sed organ isa t ion an d fund-

in g, is r a re ly ch a llen ged .

Those respon si ble for r egu la t in g m on opol is t ic in d u s t r ies

m a k e the o pposit e as su mp tion , na me ly th at a la rge

mon opoly, fa r fr om b ei n g a n e ffi ci en t w a y of p rovid ingserv ices , is l ikely to be un able or u n w il li n g t o ch a n g e a n d

de vel op in w a ys t h a t be n efit th e cu st om er . In cen t ive s fori m pr ov em e n t a re difficult to generat e. Different a p-

proaches t o ca r e a ri se on l y coi n ci de n t a ll y i n s t ead of as a

m e a n s of d i ffe r e n t ia t i on a n d m a i n t e n a n c e of h i gh q u a l it y

serv ices .

L a c k O f I n d i v i d u a l C h o i c e

T h e lack of individ ua l ch oice i n h e r en t in t h e cu r r e n tsystem is n o longer sust aina ble. The a bsence of s ign ifica n t

ch oice rem ain s a ma jor deficit i n t h e G ov er n m e n t ’sN a t ion a l P l a n , desp ite s ome of th e rh etor i