The vexed question of the future funding of healthcare in the UK is one that has plagued politicians...
The vexed question of the future funding of healthcare in the UK is one that has plagued politicians and economists alike since the introduction of the NHS more than 50 years ago, with successive governments struggling to find sufficient money to fund the service.
In recent months, there have been almost daily reports in the media on the crisis facing the NHS. It began in the New Year with the flu crisis and was followed by a succession of reports of cancelled operations and negligence cases. The most recent story to hit the headlines is the closure of Scotland's last remaining heart transplant facility in Glasgow. This situation is a typical example of the many difficult decisions the NHS has had to make as a result of the current funding predicament. As a result of the unit's closure, Scottish patients will now find themselves having to travel to Newcastle, which is the closest facility for this treatment.
These reports leave little doubt that the Government faces a major challenge. The NHS has been neglected for far too long and, despite the extra billions the Government is pouring into the system, the reality is that, as with any structure, if the basic repairs are not carried out when the cracks first appear, the cost of putting it right is much higher over time.
Addressing the issues
In response to the challenge, the Government has developed a strategy which recognises that people want a modern health service offering high quality and which delivers in a timely fashion. To achieve this, the Prime Minister has set out five areas the NHS must address.
The areas that have been identified are creating partnerships to ensure the best possible care; reviewing performance to deliver higher standards; recruiting the right people to deliver the right services; improving speed of access and introducing more convenient services; and promoting healthy living.
To support the delivery of the 21st century NHS, the Government has pledged to increase spending on the service to be equal to the average of other European countries' gross domestic product. However, there have been some questions raised over the sustainability of this funding.
Goldman Sachs has undertaken research which suggests that other Government departments will suffer if the projected health spending levels are achieved. Other research carried out by the Economic Intelligence Unit has confirmed that the public healthcare system cannot be maintained in its current form and that private sector co-operation will be needed to provide an effective health structure.
In its new strategy for the NHS, 'Creating a 21st century NHS', the Government lays the foundation stones for a stronger and more efficient health service. However, resolving existing problems cannot be tackled by the Government alone. Both public and private sectors should work together to find solutions and this is a strategy likely to evolve over time.
There are already indications that the Government recognises the private sector has a role to play, evidence of which can be found in the decision to consider using private nursing home facilities to reduce 'bed blocking' by elderly patients that stay in hospital even though they no longer need medical care, and by the policy to allow NHS hospitals to consider paying for private beds in circumstances where they cannot accommodate a patient.
A growing sector
In the meantime, the private sector is growing. The independent sector now undertakes 20% of all acute elective surgery and provides more health and social care beds than the NHS and local authorities combined. In 1999, 160,000 people paid to have treatment undertaken privately, an increase of 30% in two years, and the figure is expected to continue to rise.
But should we be surprised? The recent trend towards consumerism, along with rising awareness of health issues, has led to a more discerning patient with greater expectations than the average patient of 50 years ago. In addition, medical technology has grown at a rapid pace and new treatments are being discovered daily.
Research commissioned by Standard Life Healthcare and carried out by Taylor Nelson Sofres has shown that patients recognise this technology cannot be paid for by the existing direct taxation system alone. The research shows that two out of three people believe the NHS cannot realistically continue to provide free treatment for every condition and therapy that becomes available, and half feel that people expect too much from the NHS. Unsurprisingly, the strongest feelings come from the over 65s, who are more familiar than the younger age groups with the changes in the NHS over recent years.
Time for debate
After taking into account the factors involved, the call for a debate with the Government becomes more understandable. It is needed to move healthcare solutions in the UK forward in the longer term.
A strategic approach to how the public and private sectors could interact has great potential to deliver a more efficient healthcare system and treat more people within an acceptable time frame. The issue of public/private partnership is being researched by a number of think-tanks at present and it will be interesting to see the published results of their work.
Any debate with the Government would need to look at funding and making private healthcare more accessible to more people. Until such time broader discussions are forthcoming, one way of increasing the access to the private sector would be for insurers to consider shared-risk products. Some insurers have already developed products which do this - policies which provide the safety net of insurance while inviting the policyholder to share the cost of treatment in return for often significantly lower premiums.
Expanding the market
This kind of product is not designed for the traditional insurance customer but is intended to expand the market, ensuring that more people are able to consider providing for their healthcare needs within their financial planning.
High excess products, particularly those providing support for self-payment of treatment and a funding vehicle, open up the market for people concerned that one day they will need a heart transplant, cancer treatment or a hip replacement. They want the flexibility to decide whether the NHS can meet their requirements or whether to spend their 'excess' and have the treatment undertaken privately, safe in the knowledge that there is a 'ceiling' on their financial liability.
As evidence grows of the Government withdrawing support for social services or tightening up the existing system, for example in the case of disability payment guidelines becoming more stringent, we need to consider provision for healthcare in a broader context and that there is the opportunity to take the type of product described above one step further.
The Government is taking the opportunity to review its ISA system and what better time to consider how not only health but also welfare needs can be accommodated using this tax beneficial system? A welfare ISA could be created that would operate in addition to the existing ISA limits. The 'fund' would be ring-fenced and the policyholder could only draw out money to be used for health and welfare expenses. This may include provision of financial security in the event of disability or pay for either acute or chronic medical treatment. If the fund remained unused, it could be put towards long term or domiciliary care and any surplus would form part of a person's estate to be bequeathed as they see fit.
Insurer initiatives
The Government is not alone in recognising that 21st century healthcare has different requirements - insurers have identified these needs also. In recent months, there have been a number of initiatives from the insurance sector, as indicated earlier. These initiatives will form the first of a series of innovations. The industry is meeting consumerism head-on by delivering solutions for today's patient.
If it is to truly succeed, the private sector must be able to work in parallel with the public sector. There is no intention to devalue the NHS or reduce it to a mere safety net, and a move to the US system in any form is not being advocated. But we shall see a cautious move towards a system where the NHS, private hospital sector and insurers will work together to provide effective healthcare for all.
Of all the challenges the Prime Minister has set the NHS, the issue of partnership holds the key to the 21st century health service. The cure for the NHS's problems is about accepting its limitations rather than stretching them.
Mike Hall is managing director at Standard Life Healthcare
