A report by the IFS shows that tax subsidies on PMI fail to benefit the NHS
Tax subsidies for PMI do not offer an effective solution for reducing NHS costs by increasing use of the private sector, according to new research by the Institute for Fiscal Studies (IFS).
The report was compiled from research following the Government's abolition of tax subsidies on PMI for people aged 60 and over in 1997. It found that although some patients reverted to the NHS, the cost of treating the extra patients was far less than the amount previously being spent on subsidies.
According to the report, the removal of the subsidy reduced PMI coverage among those aged 60 and over by 1.2% ' a total of 6,600 policyholders. When com- pared with the amount of Government spending needed to support tax subsidies, the report concluded that the influx of new NHS patients actually cost less.
Carl Emmerson, one of the authors of the report, said: 'Many argue PMI should be subsidised by the Government as less people will then be relying on the NHS. But we found that when the subsidies were abolished in 1997, the amount of people reverting back to the NHS was too small to outweigh the cost of the subsidy.'
But Stephen Walker, specialist PMI intermediary at Medical Insurance Services, said he remained confident that tax subsidies could help to increase PMI sales and take unnecessary strain off the NHS. 'I am very surprised at the findings of the research as we found that there was a much higher reduction in the take up of PMI with our own clients after the subsidy was abolished. There should be a tax subsidy on all PMI, not just for the over 60s. The biggest problem with PMI sales is cost. If there was some sort of subsidy to reduce cost then it would encourage more people to take out PMI, taking some of the strain off the NHS,' added Walker.
Other findings in the report revealed that there are approximately 6.4 million PMI policyholders in the UK. But private sector health spending accounts for only 16.3% of total health spending in the UK ' a figure lower than any other G7 country.
