Feature

Home thoughts from abroad

With the NHS reforms hardly bedded down, the health debate has already turned to Europe and the US. Steve Iliffe surveys the lessons to be learned from experience elsewhere

In 1987 the Carlton Club conference that brought together Conservative politicians, senior NHS figures and right-wing think tank ‘experts’ produced a programme for changing our health service. Its key points were to establish the NHS as an idependent statutory body with financial accountability and move to a decentralised service; increase joint ventures between the NHS and the private sector, creating a ‘mixed economy’ of healthcare; extend charging and create a costed service; and devolve all responsibility to district health authorities, dismantling the regional health authorities, and allowing hospitals to opt-out to introduce competition.

The programme also recommended an end to national wage bargaining for NHS staff, retitling the NHS and creating, in conjunction with the private sector, a National Health Insurance Scheme.

The first four objectives have been achieved, to varying degrees, except for the abolition of regions (which seems imminent). National wage bargaining has yet to be abolished, but trusts are keen to alter pay and conditions for staff and have only been tardy in doing so because of union resistance and the Conservatives’ instruction to managers not to rock the boat before the election. An assault on pay and conditions is about to begin and wise unions are shifting to a local bargaining posture.

The NHS has yet to change its name, and the shift to an insurance-based system has not yet been mooted, although debate about what can be learned from the US and European health care systems (mostly insurance-based) has begun.

A number of characteristics seem common to health services in Canada (and to a lesser extent the US), North Europe and the EC.

First, all west and north European health services have been in a phase of cost-containment since the late 1970s, because of the escalating costs of health care.

Second, patterns of health and illness have changed since the post-war foundation of most European health services, with a widening class gap. Most west European nations have large relatively healthy medium-to-high income salariats (including the skilled working class) but also substantial (in some cases growing), unhealthy underclasses (unskilled workers, migrant labour, the permanently unemployed and the unemployable, and refugees). This divergence in health within populations also forces change upon health services because different class blocs have different health experiences and redefine ‘health services’ according to their own needs.

Third, in all countries there is dissatisfaction with the existing system and a search for new policies, so that centrally-funded health services (UK, Sweden) have looked towards competitive models, and market-oriented systems have sought greater regulation.

In a sense, this is a form of convergence in health service provision, although the models remain very different. Highly socialised health services like those of the UK, Sweden and Finland have proved particularly resistant to change, although more amenable to cost-containment measures. Like all command-and-control structures, these health services achieve the objectives for which they were designed, but cannot easily adapt themselves to meet new objectives. In Europe the trend in countries with social insurance funded services has been for widening public provision throughout the 1980s, despite vigorous cost-containment, and increasing state intervention in health service organisation and activity.

The Conservatives appear to have ruled out any departure from the principle of central funding from the NHS, but without a significant increase in the funding available there will continue to be a shortfall between public demand and NHS supply. Conventional wisdom at the DoH suggests that managed competition will extract better value from existing resources, but there is an evident limit to the amount of efficiency that can be squeezed out of the system.

Managed markets have a habit of spiralling out of control, especially if NHS budgets are cut by 1.5 per cent over the next two years, prior to fiscal relaxation in time for the 1996 election (the two plus two formula). While fundholding will slow down and any alternatives that give managers power over clinicians (like a salaried service for GPs) will be looked at, hospital and community services will be pushed into trust status by the fourth wave, and some trusts will be desperate for money as purchasers shop elsewhere and unit costs rise. Refocusing on lucrative specialities or patient groups may be their only escape, with an emphasis on servicing the private sector, or at least providing mainly for the salariat rather than the underclass.

If this happens, then we may move towards the US model of health care, with a significant minority excluded from good quality services. If extra Exchequer funding for the public sector is not forthcoming, an alternative which would restore comprehensive provision while maintaining the mixed economy of health care would be some form of German-style sickness fund whereby health services are paid for out of a flat-rate local income tax. This is less progressive than the NHS, but it allows for social solidarity (the well pay for the ill and the young for the old) and in practice requires continuous political input, particularly from trades unions, in deciding on tax levels and service provision.

Less out of step with the NHS tradition is the newly-reformed Dutch system, in which centrally gathered earmarked taxation is transferred to local insurance funds, which compete for custom and pay providers. Citizens pay income tax for medical care, but the tax is converted into premiums loaded for health status when it is transferred from the Exchequer to insurance companies. The citizen can opt for one of several competing insurance funds, each of which pays hospitals and community services.

Current moves towards capitation-based funding of hospital services, needs assessment and service-based payment in general practice (health promotion clinics and the like) would allow the NHS to convert to this model relatively easily.

American health care is both inequitable and in crisis; the upward trend in public provision of medical care was reversed by the Reagan administration and has yet to recover. If the medium-term choice is between US-style privatisation and European systems based on solidarity, public opinion may favour the latter. An ear-marked tax for the NHS is a possible transitional arrangement, which might well gain public support even if it upsets the Treasury’s traditional desire to control and distribute Exchequer funds.

The issue of equity in health care is likely to re-emerge as a political problem for the government as trusts stumble and fall, and local services shrink. Extra resources will be needed to restore some semblance of stability and equity, but it will be harder to hide subsidies because the internal market has made so many financial issues in the NHS transparent and explicit.

How will the government generate extra tax revenue, especially if the economy remains in a prolonged, if contained, recession? Converting national insurance payments into an ear-marked health tax would be a convenient way to introduce new taxation to a population apparently suffering from tax fatigue, and would be compatible with both with the Carlton Club plan and with European experience. The tax could be paid to the purchasing authorities and GP fundholders using a formula based on capitation and levels of illness, just as the Dutch tax is paid as a premium to insurance organisations. The market-oriented infrastructure of the NHS would be able to adapt easily to the new funding system, and the managerial initiative and effort released by the NHS reforms would not be compromised, but enhanced.

If a growing private sector and a cash-limited and cash-driven NHS (the US option) was the favoured model under Thatcher, a compulsory health tax (equivalent to a sickness fund) may be an option for Major’s administration if it needs a way out of a future political crisis in health care.