A Roadmap to a More Mixed Healthcare Model

Steps to grow alternative healthcare provision and take the strain off the NHS

By Nick White, Medical Director and Consultant Surgeon

Amongst commentators critiquing the NHS and suggesting alternative healthcare models, the conversation does not progress particularly far. It tends to start with a suggestion that we need to look abroad for inspiration, followed, in some cases, by the authors naming their favourite overseas healthcare model – and then that’s it. There is rarely any depth, or detail, or comparisons made, and no aspect of policy recommended for adoption.

To have meaningful conversation about healthcare reform (not just NHS reform), we need to be clear on what we want to achieve, and then how we propose to get there. This needs to be done in the context of where we currently are in the UK. A start would be three guiding principles:

1. an absolute commitment to universal coverage free at the point of need,

2. the use of choice as a driver for change and

3. the development of a road map to a mixed model of provision.

Photo by National Cancer Institute on Unsplash

Universal coverage is central to any developed healthcare system, an accepted norm delivered all across the developed world (and to a lesser extent, beyond), and through by a myriad of different systems.

Choice is the most effective way to manage resources to meet the needs of healthcare users, and can stimulate supply side responses, reward success and identify failure. The arguments for choice imply that successful organisations will prosper and unsuccessful ones will wither. The lack of accountability in the NHS means that neither really happens.

The roadmap will be key as it is the route by which policy changes are introduced without the disruption of a big bang of complete change. Any sudden change alienates the electorate, so there is a need to do things sequentially, step by step, in a pragmatic manner.

To increase choice, there needs to be an increase in both healthcare purchasers and providers. What policies would encourage the development of new entrants? Currently in the UK, the NHS provides 90% of healthcare and the independent sector 10%.

Some independent sector activity is self-funded by out-of-pocket cash payments (especially amongst the young) but the majority is by medical insurance policies. However, this market is not particularly well developed. It is fundamentally a small market with 90% of policies provided by five organisations, and 50% provided by just one. Of the premiums paid, 65% are spent on actual healthcare which is low with international comparisons of both private and public social healthcare insurers. In the USA legislation ensures 80% of premiums have to be spent on claims or customers are refunded. This suggests more competition would be beneficial and demonstrates a need for policies to be introduced to encourage new market entrants as health insurers.

These could be a combination of public social health insurers, mutual associations which can perhaps be based on geography or profession, and private medical insurers. Good examples of benevolent funds exist, such as the National Police Healthcare Scheme which was established in 1989. It is a self-financing discretionary scheme where members pay subscriptions and benefits are provided including access to private treatment and some cash benefits for NHS hospital stays. It is available to serving officers and police staff.

The road map would need to be a sequence of multiple reforms. Not just new purchaser/insurers but new provider market entrants as well. The independent sector provider market is also not as well developed as people might think. For the secondary care providers, there are approximately 100 independent hospitals in the country. Many of them are quite small compared to NHS hospitals, with an average of 30 inpatient beds. The 250 or so NHS hospitals have a minimum of 300 beds and many much more. The independent sector hospitals are owned, predominantly, by six large chains. Two of these own a third of the total each. These chains tend to be owned, in turn, by large multinational companies, investment firms or overseas sovereign wealth funds. Beneath them, there are a large number of insourcing and outsourcing companies providing a range of diagnostic and therapeutic services. These tend to be owner-run (quite often by practicing clinicians who work clinically for their organisations), but they lack capital to develop large premises. This provides an opportunity to support emerging small and medium-sized enterprises to enable them to expand.

Primary care is much better developed in terms of plurality of provision and choice, though this is hard to measure. GP practices, mostly run as partnerships, are held up as an exemplar of value for money. They are mainly dependent on general medical services contracts with the NHS; though many do offer additional services to insured or cash-paying patients. However, long-term sustainability considerations, particularly for small or even single-handed practices, are bringing this model into doubt. This has caused a trend for the formation of large, multiple-site groupings of practices. This is in part to remove duplicate costs and reduce fixed costs.

What steps can be taken to grow alternative provision to take the strain off the NHS based on experiences from around the world?

France

A single state health insurer tends to struggle as they run into the same financial problems as a state provider such as the NHS. This is exemplified by France where there is no choice of insurer. Its state health insurance runs an ever-increasing deficit every year and is funded by employer and employee contributions and earmarked taxes set by central government. This results in 90 percent of the population having top up private insurance to cover co-payments and shortfalls. France does have a very wide choice of provider which is one of the reasons for outcomes being better than the UK.

Japan

Universal health insurance is compulsory and provided by a multitude of insurers (some employer-based, some based on location where people live); but the policy purchased is universal with no variance in terms and set by the national government. People can choose any provider, private or public. There is also a universal fee schedule set by government which is fixed every 2 years. Co-payments of 10-30% exist, but with exemptions for children, the elderly and the unemployed. This model has maintained the development of many small healthcare facilities: perhaps too many which is causing fragmentation of services. A lot of these small facilities are doctor-owned and run. This model has an average cost (when measured as a percentage of GDP) and delivers above-average outcomes.

Australia

Being part of the Anglosphere and a popular destination for emigrating UK healthcare workers, Australia is frequently muted as a system to copy. There is genuine plurality with public and private sectors playing a major role in both the funding and provision of care. Over 50% of the population have private cover resulting in Government accounting for 66% of healthcare spending against OECD average of 75%. Private hospitals have one third of all hospital beds and carry out two thirds of all elective procedures. The figure for the UK is around 20% of all elective procedures being carried out in the private sector. Again, it is another system with average health care costs and above average outcomes.

Israel

Israel has a healthcare system where, despite having below-average GDP spending, the outcomes are above average. The system operates through compulsory membership of one of four non-government, not-for-profit organisations. These organisations provide uniform benefits with premiums regulated by the government, although the actual fee schedules paid to providers are not set nationally. Some citizens opt to enhance their coverage by purchasing additional private insurance for extra benefits. The healthcare system in Israel is notably primary care-led, with a strong emphasis on primary care services.

Sweden

Since 2010, every patient in Sweden has had the right to choose between public and private primary care, funded on their behalf by government. This enhanced patient choice in healthcare service has resulted in private large primary care centres developing, which cater to roughly 12% of the population. This system allows for a blend of public and private healthcare provision. Additionally, for outpatient and other care in hospitals, patients are subject to co-payments, where fees are determined by the regional government and vary across the country.

Holland

In Holland, the healthcare system mandates compulsory private insurance where insurers are obligated to accept all applicants seeking coverage. Government influences the prices for these private policies rather than leaving it entirely to the insurers themselves. Customers have the freedom to switch insurers once a year. Alongside this, many individuals choose to purchase additional, non-compulsory enhanced insurance for broader coverage. Primary care financing is structured with two-thirds coming from capitation payments to GPs, and the remaining one-third from fee-for-service arrangements. Over the last decade, the landscape of insurance providers has consolidated dramatically, reducing from 57 to just 9, with four insurers now dominating 90 percent of the market. The government maintains a hands-off approach by establishing a regulatory framework without micromanagement.

Germany

In Germany, health insurance is statutory, but some individuals can choose between social health insurers or private insurance. The cost of insurance is split evenly, with both employees and employers contributing half each, automatically deducted from payroll. The baseline premium levels are fixed by the government (although insurers can charge top-up premiums). Local governments contribute to the capital requirements of providers whereas revenue is from the insurers. This includes capitation payments for primary care, and there was, until recently, a €10 co-payment required for each visit to a general practitioner. Overall, it is an expensive healthcare system, but with good outcomes.

Switzerland

The Swiss have a choice of compulsory private insurance from over 50 insurers who cannot refuse cover. Premiums can vary between insurers and locations, but an insurer cannot charge different premiums to different people in the same location. Additional top up insurance is available and 40 percent of the population have it, mainly to cover co-payments when using the wide choice of providers which is available. This approach is expensive but with good outcomes.

All eight of the above healthcare systems have above-average outcomes. Costs are controlled particularly in those where there is a choice of insurer and provider with the choice of insurer not just limited to a single state (social/public) provider. Currently in the UK we restrict choice for both purchaser/insurer and provider. If we are to introduce more choice what are the options for one or both going forward? In charting the course towards a more varied healthcare landscape in the UK, five policies have been identified based on the discussion above:

Tax Relief on Private Medical Insurance: The first step involves introducing tax relief on private medical insurance (PMI). This initiative is designed to enhance consumer choice in insurers, increase the size of the market and spur further investment by providers, broadening the healthcare sector

Legislation for Not-for-Profit Purchasers: A policy to establish not-for-profit insurers, such as mutuals or benevolent funds, could be introduced. These could be tailored to specific professions or geographic areas, similar to the model of the Police Benevolent Fund, fostering a community-based approach to healthcare funding.

Increasing the Number of Private Medical Insurers: There is a need for more coverage options. While new market entrants currently offer low-premium, limited-coverage plans aimed at young, healthy individuals, a policy approach could encourage new insurers to provide broader, more comprehensive coverage. It could be achieved through secondary or tertiary legislation via the Competition and Markets Authority.

Legislation to Promote Not-for-Profit Providers: Drawing inspiration from global healthcare models where a significant portion of healthcare is delivered by not-for-profit entities like charities or academic institutions, new laws would support the growth of such providers in the UK. This would diversify the types of healthcare institutions available, potentially focusing on community health or specialised care. They in turn could contract to carry out work for the NHS, mutual insurers, private insurers and paying patients.

Supporting Private, Owner-Run Small and Medium Enterprises in Healthcare: Finally, legislation could be enacted to bolster the expansion of private, owner-run SMEs in the healthcare sector. This could be through tax breaks, seed funding, loan security and development grants. This approach could stimulate local healthcare provision, potentially increasing innovation, responsiveness to need, personalisation of services, and competition in the market.

These policies aim to develop a system where patients have more options, and where both profit and not-for-profit entities can thrive, ultimately leading to a more accessible, resilient, financially sustainable healthcare system in the UK.

Nick White has worked as medical director in both the NHS and an independent sector hospital. He still works as a NHS Consultant Surgeon.