What are we afraid of? Universal healthcare in market-orientated health systems

From the new IEA (Institute of Economic Affairs) report on the UK’s NHS (National Health System) by Kristian Niemietz 2 Apr 2015:


…….The NHS is often unduly eulogised for minor achievements, because it is being held to unrealistically low standards. The NHS should not be compared with the state of healthcare as it was prior to 1948, or with a hypothetical situation in which all healthcare costs had to be paid out of pocket. Rather, it should be compared with the most realistic alternative: the social health insurance (SHI) systems of Continental Europe, especially the Netherlands, Switzerland and Germany.

SHI systems are far more market-oriented, competitive and patient/ consumer-driven than the NHS. They show a much greater plurality in both provision and financing, usually with a mix of providers (public, private for-profit and private non-profit) and a mix of payers (for-profit insurance, non-profit insurance, out-of-pocket payments, supplementary insurance). For example, in Germany, fewer than half of hospitals are government-owned.

SHI systems still redistribute from the healthy to the sick, and from the rich to the poor. This happens mostly through risk-structure compensation schemes, which redistribute from insurers with a high proportion of ‘good risks’ to those with a high proportion of ‘bad risks’ and thereby make ‘cherry-picking’ of healthier clients economically unviable. Low-income earners also receive demand-side subsidies to help them pay their health insurance premiums.

SHI countries consistently outperform the NHS on measures of health outcomes, quality of healthcare provision and efficiency. Cancer and stroke survival rates are higher, fewer patients suffer from complications after a hospital operation, and the number of deaths that could have been prevented through better healthcare (‘mortality amenable to healthcare’) is lower. On the latter measure, the UK could avoid at least 14 unnecessary deaths per 100,000 inhabitants each year if it rose to the standards of the SHI countries.

SHI systems do not just outperform the NHS in terms of average outcomes, they also achieve more equitable outcomes. The extensive use of market mechanisms does not have to conflict with the aim of reducing health inequalities. According to reasonable indicators of equity, the performance of the NHS is about average amongst developed countries; the performance of SHI systems are amongst the best in the world.

The only visible advantage of the NHS model over SHI models is that it is better at containing costs. However, part of the difference is explained by the fact that SHI systems make it much easier for patients to top up and/or upgrade statutory healthcare privately if they wish. NHS patients are not allowed to do this……..

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