As the population realises it cannot rely on the NHS, demand for PMI will grow, says Paul Casey
The Government's recent decision to jump into bed with the private sector is welcome news ' not least to the 1,033,000 or so people who were on the waiting lists in England alone at the end of October 2001.
Once agreement between the parties has been reached, this inaugural Diagnostic Treatment Centre (DTC) will provide fast-track surgery for day or short-stay patients, with an expected turnover of 12,000 NHS patients a year by the end of 2002. But of the 20 DTCs planned for development by 2004, only eight will be operational by then. It remains unclear at this stage exactly which treatments will be available under this regime. It is clear, however, that the NHS cannot fully support the population's healthcare needs as a comprehensive and 'free at the point of treatment' service.
Against almost any comparative European benchmark, UK health spending and services rate poorly. Chancellor Brown proposes to address this by devoting more of the public purse to healthcare, but it seems this has its problems. International Montetary Funds economists have voiced their concern to Brown's planned increases in public spending by warning that 'additional spending increases should only be undertaken if clear-cut economic justification can be found'. For the health service, this means the added expenditure needs to be accompanied by significant efficiency gains in the way the service works to ensure that the long-term commitment of extra cash ' estimated at an extra £10bn per annum ' is not wasted. So it looks like this added spend will not provide a quick fix to our healthcare problems either.
Finally, we can be fairly confident that, at least in the short term, we will not be seeing introduction of the continental style 'social insurance', as Mr Blair has just publicly ruled this out.
However, the Government is clearly intent on developing further public-private partnerships and this concordat with the private hospital sector will prove to be just the start of this process. As with other Government initiatives, it is anticipated that over time and with the right communication, the population will become gradually acclimatised to the new environment and the realisation that they can no longer rely on the State to support all of their healthcare or welfare needs. Although we cannot expect to see those in nearing retirement today rushing out to purchase insurance cover for their health needs, it is likely that as the population ages the current 'middle-agers' and below will be more open to self provision.
The current PMI market is estimated to cover 6.8 million lives or 11.5% of the population and generates a premium income of £2.45bn. But below these headline figures there is very little penetration in the lower social economic groups and considerable variation by region. Approximately 23% of the population are covered in London and the Home Counties, falling to only 5% in Scotland and the north east of England. There is clearly considerable opportunity for growth.
While it is fair to say many current products may only be finding a limited audience, it is clear that wider coverage will only be achieved through offering more flexible and tailored solutions.
The private sector provides this in abundance and with new innovative products entering the market, people will be able to buy the product most suited and most cost-effective for their particular circumstances. Over the past 18 months we have seen the introduction of five and 10-year fixed rate plans, individual lifestyle underwriting, specified condition plans, self-pay/franchised excesses, investment-linked PMI and the first steps towards integrated product solutions. We can expect to see more of the same in 2002 and beyond.
