ANALYSIS
differing models of provision and contracting with healthcare providers compared with tax based systems. Current challenges in NHS financing may prompt consideration of new mechanisms to fund healthcare, such as a social health insurance model adopted by several other European nations. However, assessing what funding system is “ best ” isa tricky exercise. Adam Smith suggested a set of criteria for assessing the worth of a taxation system (which could equally apply to other ways of raising funds for healthcare). These included some notion of fairness, certainty, convenience, and efficiency. 9 To these could be added other desirable features, such as simplicity, ease of administration, minimised distortion of general welfare and economic efficiency, and not least the ability to raise desired amounts of revenue in a stable and sustainable way. 9 Evaluating non-taxation based insurance models of healthcare financing against these criteria is, as noted, not straightforward. One broad based attempt to do so looked at the switch made by some OECD countries between tax and social health insurance funding models from 1960 to 2005. It concluded that: “ [social health insurance] systems, on balance, have certain characteristics that make them more expensive than tax-financed systems, do no better in terms of most health outcomes that are amenable to medical care despite the extra spending, may do worse in respect of outcomes that require strong population-level public health programs, and do worse in terms of encouraging informal labor markets and discouraging employment. ” 8 On the other hand, although a financing system for healthcare based on general taxes may tick Smith ’ s four boxes for a good system, it can be made up of a variety of different taxes, structured and levied in different ways. It is not, at least in that sense, “ simple. ” Moreover, the connection between revenues raised and public spending across competing services will, over time, be subject to political control and pressures that may not always fairly serve the population as a whole. Nevertheless, the UK ’ s tax system overall is progressive in its structure, 10 is comparatively cheap to collect, and, with virtually everyone contributing through one tax or another, encourages a contributory social solidarity in line with the founding principles of theNHS. Overall, limited empirical evidence suggests that any benefit from switching from a tax based to a social health insurance based funding system for healthcare is at best equivocal. Of interest, four countries that changed to a social health insurance system between 1960 and 2005 (the Czech Republic, Hungary, Poland, and the Slovak Republic) represented a certain special group of post-communist era countries that reverted to their pre-soviet social health insurance model in the 1990s. Meanwhile, eight countries (Denmark, Greece, Iceland, Italy, Norway, Portugal, Spain, and Sweden) all switched to predominantly tax financed systems between the 1960s and 1980s. We therefore conclude that, with little compelling evidence to suggest that switching to a social health insurance model would justify the upheaval and costs of doing so, funding for the NHS should continue to be raised from general taxation. This is also the view of the public, across all demographics, including individuals ’ political allegiances, with around 82% supporting a tax funded NHS. Similar proportions also supported the principles that the NHS should be free at the point of use and available to all. 2 Such support not only reflects a general belief in the right to care as a shared responsibility but also recognises the inequitable financial burden that ill health imposes in the absence of a universal healthcare system. Dividing the annual NHS spend by the total UK population gives some indication of this burden, with a current annual average
additional negative impact on performance, worsening trends that were clearly evident up to 2020. Increasingly poor performance is reflected in plummeting public satisfaction with the NHS which, in 2022, fell to just 29% being very or quite satisfied with the NHS, the lowest level since the British Social Attitudes survey started in 1983. 6 Given this historical context of rising demand, rising costs, and worsening performance, the BMJ Commission set itself three fundamental questions about future funding of the NHS. How should we finance the NHS? How much do we want to spend? And how do we decide how much to spend? As we elaborate below, we have decided to focus on the future process for determining NHS funding rather than recommending a particular future spending path. This is not to ignore the need to set a budget for the NHS or the pros and cons of how money is raised. We summarise the costs and benefits of alternative funding sources as well as key factors driving pressures to spend more on healthcare. However, the main thrust of this paper is our view on a need to try to reorientate debate about these matters among the public and policy makers to recognise the fundamental economic choice in deciding how much to spend, which involves the inevitable limits to growth in healthcare spending and the opportunity costs involved in spending on healthcare rather than on other competing calls on scarce public finances. How should we finance the NHS? Historically, the NHS has been funded from a combination of general taxation (income tax, VAT, and other duties and taxes), National Insurance contributions, and charges to patients. The proportions from these sources have fluctuated slightly over time, particularly from 2003 onwards when National Insurance contributions were raised and the extra in essence hypothecated to the NHS owing to political promises at the time. 7 Broadly, today, funding from general taxation contributes around 80% of the NHS budget, National Insurance contributions around 18%, and charges to patients 2%. Although the absolute amount of privately funded healthcare has increased over time (from around 1.6% of GDP in 2000 to 2.1% in 2022 3 ), so too have public sources, leaving the proportion of healthcare funded privately in the UK roughly stable at approximately 20%. Of course, many other ways of raising money to pay for healthcare exist from, at one extreme, out-of-pocket payments, through to private or voluntary insurance and various forms of collective compulsory insurance. Although non-tax (and non-compulsory) ways of paying for healthcare, such as direct payments or voluntary insurance, are common features of most health systems, they generally account for a relatively small proportion of overall spending. They reflect the freedom for individuals to spend their income as they see fit, but they tend to be additional rather than alternatives to compulsory payment schemes (either in the form of taxes or compulsory social health insurance) as they are at odds with the general principles of universal healthcare systems with equity of access. More common across health systems are some form of compulsory payment scheme such as tax based schemes or social health insurance, essentially earnings related and raised from employers and employees. Across 29 Organisation for Economic Co-operation and Development (OECD) countries in 2006, for example, the split between tax and social health insurance funding systems was around 50:50. 8 However, distinctions are not clear cut, with some variants of all types of funding — including, as noted, private/voluntary insurance — evident in all countries. Countries that predominantly rely on social health insurance also have
the bmj | BMJ 2024;384:e079341 | doi: 10.1136/bmj-2024-079341
2
17
Powered by FlippingBook