Can we ignore NHS charges any longer? This is the second in a series of guest blogs that we’ll be publishing in the run-up to the launch of the final report from the Commission on the Future of Health and Social Care in England.
Each blog will focus on one of the possible options for funding future health and social care considered in the commission’s interim report. Here, Andrew Haldenby and Cathy Corrie of independent think-tank Reform discuss why new NHS charges are necessary and why no political party wants to talk about them.
The commission will make its final recommendations on 4 September.
The independent Commission on the Future of Health and Social Care in England has produced an admirable and comprehensive interim report. One of the few things that might be added is the grim fiscal context for the next period of health financing. It can’t be stated often enough that public finances for the next three decades are in a completely different position to when Sir Derek Wanless carried out the last landmark review of NHS financing in 2001/02.
When Sir Derek reported, the national debt was an entirely manageable 40 per cent of GDP. The country was (too) relaxed about running annual deficits during a time of economic growth across the Western world. Times have changed since then. The coalition government has implemented historic policy changes such as the means-testing of Child Benefit and the cutting of the police budget by 25 per cent in real terms. Even so, the annual deficit on public finances will be around £70 billion on the day of the general election.
When the deficit is eliminated in around 2019, debt will peak at 80 per cent of GDP, its highest level since 1966. No political party will want to leave it there, if only because the size of interest payments at that point will be more than half the annual budget of the NHS in England. Looking further ahead, the Office for Budget Responsibility forecasts that national debt will only come down to 60 per cent of GDP before heading back towards 70 and 80 per cent from the 2030s, driven by the costs of health and pension entitlements.
The point of all this is to emphasise that new ideas will be needed to finance the NHS and social care. Ideas that are different from the increases in tax-funded spending which Sir Derek Wanless advocated. Taxation is already going to have to stay unusually high to finance the recovery from deficit and debt. It will be extremely difficult to raise new hypothecated income taxes for the NHS and social care on top of this. An extra penny on income tax or National Insurance, which is all that could be imagined, would raise only enough to fund the NHS for a fortnight (around £5 billion). It would not be a game changer.
This is why the commission is right to suggest new thinking on efficiency and charges. The first of these is the bigger opportunity but the second should not be ruled out. As the commission says, charges have been part of the English NHS since 1951. In the early years of the NHS, they raised a greater proportion of the budget than they do now.
They are also common internationally. All countries in the Organisation for Economic Co-operation and Development charge for prescriptions. Two-thirds charge for GP appointments and half charge for elements of secondary care (typically the ‘hotel costs’ of overnight stay in hospital).
Since 2008, France has introduced a range of small but broad-based charges, non-reimbursable by health insurance, for prescriptions (€0.50), GP appointments (€1) and ambulance transport (€2) as well as higher charges for parts of hospital care (€13.50 to €18). Italy has introduced and Ireland has increased controversial charges for unnecessary A&E attendance. The Australian government announced a new £3.90 charge per GP consultation earlier this year.
There are obvious concerns over equity for those on low incomes and the potential to deter patients from preventative care. Income-based exemptions would therefore be key to ensure that essential services are always within the means of those who need them. As the commission says, England is unusual in providing exemption from payment for nine out of ten prescriptions. A more positive idea is that charges could be designed to encourage positive behaviour. Norman Warner, the former Minister of State for Health Reform, has suggested that an annual NHS membership ‘fee’ could be used as an incentive for a yearly health review.
Research by Reform, carried out last year, found that a £10 charge for GP consultations (with exemptions on the basis of age and income) could raise £1.2 billion each year for the NHS. Reforming prescription charges could raise an additional £1.4 billion each year. This would help plug the annual funding gap of £4 billion, estimated by NHS England.
In England though, there is absolutely no sign that the political parties want to open up a debate on charging. The parties neither want to abolish existing charges nor alter their scope. As the fiscal backdrop worsens, a political debate is nevertheless underway. A recent poll of the general public found that 48 per cent of respondents were in favour of tax rises to fund the NHS, 21 per cent in favour of charges, and 19 per cent would introduce some form of rationing. As noted above, tax rises will be hard to deliver.
Few will want to debate higher charges but tough choices on NHS and social care funding are becoming increasingly difficult to ignore.
This is a guest blog post. The views expressed are the author’s own and do not necessarily represent the views of The King’s Fund.
Each blog will focus on one of the possible options for funding future health and social care considered in the commission’s interim report. Here, Andrew Haldenby and Cathy Corrie of independent think-tank Reform discuss why new NHS charges are necessary and why no political party wants to talk about them.
The commission will make its final recommendations on 4 September.
The independent Commission on the Future of Health and Social Care in England has produced an admirable and comprehensive interim report. One of the few things that might be added is the grim fiscal context for the next period of health financing. It can’t be stated often enough that public finances for the next three decades are in a completely different position to when Sir Derek Wanless carried out the last landmark review of NHS financing in 2001/02.
When Sir Derek reported, the national debt was an entirely manageable 40 per cent of GDP. The country was (too) relaxed about running annual deficits during a time of economic growth across the Western world. Times have changed since then. The coalition government has implemented historic policy changes such as the means-testing of Child Benefit and the cutting of the police budget by 25 per cent in real terms. Even so, the annual deficit on public finances will be around £70 billion on the day of the general election.
When the deficit is eliminated in around 2019, debt will peak at 80 per cent of GDP, its highest level since 1966. No political party will want to leave it there, if only because the size of interest payments at that point will be more than half the annual budget of the NHS in England. Looking further ahead, the Office for Budget Responsibility forecasts that national debt will only come down to 60 per cent of GDP before heading back towards 70 and 80 per cent from the 2030s, driven by the costs of health and pension entitlements.
The point of all this is to emphasise that new ideas will be needed to finance the NHS and social care. Ideas that are different from the increases in tax-funded spending which Sir Derek Wanless advocated. Taxation is already going to have to stay unusually high to finance the recovery from deficit and debt. It will be extremely difficult to raise new hypothecated income taxes for the NHS and social care on top of this. An extra penny on income tax or National Insurance, which is all that could be imagined, would raise only enough to fund the NHS for a fortnight (around £5 billion). It would not be a game changer.
This is why the commission is right to suggest new thinking on efficiency and charges. The first of these is the bigger opportunity but the second should not be ruled out. As the commission says, charges have been part of the English NHS since 1951. In the early years of the NHS, they raised a greater proportion of the budget than they do now.
They are also common internationally. All countries in the Organisation for Economic Co-operation and Development charge for prescriptions. Two-thirds charge for GP appointments and half charge for elements of secondary care (typically the ‘hotel costs’ of overnight stay in hospital).
Since 2008, France has introduced a range of small but broad-based charges, non-reimbursable by health insurance, for prescriptions (€0.50), GP appointments (€1) and ambulance transport (€2) as well as higher charges for parts of hospital care (€13.50 to €18). Italy has introduced and Ireland has increased controversial charges for unnecessary A&E attendance. The Australian government announced a new £3.90 charge per GP consultation earlier this year.
There are obvious concerns over equity for those on low incomes and the potential to deter patients from preventative care. Income-based exemptions would therefore be key to ensure that essential services are always within the means of those who need them. As the commission says, England is unusual in providing exemption from payment for nine out of ten prescriptions. A more positive idea is that charges could be designed to encourage positive behaviour. Norman Warner, the former Minister of State for Health Reform, has suggested that an annual NHS membership ‘fee’ could be used as an incentive for a yearly health review.
Research by Reform, carried out last year, found that a £10 charge for GP consultations (with exemptions on the basis of age and income) could raise £1.2 billion each year for the NHS. Reforming prescription charges could raise an additional £1.4 billion each year. This would help plug the annual funding gap of £4 billion, estimated by NHS England.
In England though, there is absolutely no sign that the political parties want to open up a debate on charging. The parties neither want to abolish existing charges nor alter their scope. As the fiscal backdrop worsens, a political debate is nevertheless underway. A recent poll of the general public found that 48 per cent of respondents were in favour of tax rises to fund the NHS, 21 per cent in favour of charges, and 19 per cent would introduce some form of rationing. As noted above, tax rises will be hard to deliver.
Few will want to debate higher charges but tough choices on NHS and social care funding are becoming increasingly difficult to ignore.
- Nick Pearce’s guest blog, An NHS tax is needed to keep the NHS free to all at the point of need
- Latest on the Commission on the Future of Health and Social Care in England
- Download the interim report: A new settlement for health and social care
- The commission’s final report will be published on 4 September 2014
This is a guest blog post. The views expressed are the author’s own and do not necessarily represent the views of The King’s Fund.
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