Britain is suffering from an identity crisis, a growth crisis and a health crisis. The identity crisis lies in the lack of consensus about its place in the world. The crisis of growth lies in the stagnation of real income. The health crisis lies in the plight of the National Health Service.
Alas, the reaction of the government and many of its supporters was magical thinking. Her Brexit and tax cuts for the UK are a magical take on identity and growth crises. Refunding the NHS from general taxation to health insurance would amount to a health crisis.
Magical thinking is perhaps the worst feature of populist politics. Politicians promote simple solutions to complex problems. They fail, further undermining the trust on which democracy depends.
So let’s consider whether, and if so, how changes in funding models could fix the healthcare system.
The most important point in the economics of health is that it is both a public good and a private risk. The former means that everyone benefits from living in a healthy society. The latter means that all but the richest need insurance. But if there are no healthy people in the pool who like to take risks, insurance premiums will be exorbitant and insurance companies will go to great lengths to exclude those most likely to need insurance. Spend. That’s how the disaster in the United States, the world’s most expensive and least effective healthcare system, lies. The solution lies in coercion. Everyone should be in the insurance pool.
This is the UK solution and the pool is tax funded. In many other high-income countries, it is funded by something called “social insurance.” However, payment for this is obligatory. If it walks like a duck and quacks like a duck, it’s a duck. If you are obligated to pay for something, it’s a tax. Such charges are included in the standard calculation of tax revenue. In fact, they represent a significant portion of tax revenue in many countries.
So, at first glance, the shift from tax-financed to compulsory social insurance-funded is just a relabelling. Looking at our current predicament, it’s hard to believe that such relabeling could be anything more than magical thinking. These feel like taxes (and they are). Moreover, there is no reason to expect spending to be lower across the board. For example, France and Germany share roughly the same share of GDP as the UK.
There are three arguments for this dismissal of social insurance as a solution for funding health in the UK.
The first is that people will see a clearer link between their income and expenditure on health and be more comfortable with paying for it. I could not do it. If so, we would have to cut it just because there was a recession.
The second argument is that health decision-making can be decentralized and depoliticized. What makes the NHS special compared to most other systems is that it is a nationalized industry under tight political control. It’s hard to see how some of the decisions made as a result (e.g. having few free beds is “efficient”) undermine the system’s resilience in the face of large fluctuations in demand. is not. The parallel decision to underinvest was a classic example of the “penny-wise, pound-silly” approach I’ve long associated with Treasury.
But even if we believed in some abstract way that a drastic restructuring of the supply side could make the UK health service work better, the political and organizational turmoil would be enormous and possibly devastating. It will be something. You have to start somewhere. Revolutions usually fail. Conservatives understood that.
A third argument is that shifts may give you more options. It may also be possible to add co-payments to the system and introduce an element of material incentives. However, both can be deployed on the NHS if desired. For example, it is entirely possible to introduce means-tested fees. In fact they already exist. For example, for drugs. Whether billing is a good idea is another matter. need trip to the doctor. And they will hurt you much more than others.
Moreover, it is clear that the biggest failure is not in the NHS itself, but in the underfunding of social care. This is why so many people block their beds on the NHS. The solution is not to change the healthcare system, but to spend more elsewhere.
Is magical thinking all this country can do now? Instead, why not try a coherent way of thinking about the goals, structure and organization of caregiving services?
martin.wolf@ft.com
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