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Private vs public health - A healthy future

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Mike Hall explains the challenges facing both the National Health Service and the private medical insurance industry and the inefficiencies of the current model

Since 1948, a publicly funded National Health Service has provided most of the healthcare for people in the UK. The NHS now treats around one million people every 36 hours, has a budget approaching £90bn, and is one of the largest employers in Europe.

Despite this dominance of the state sector, there is also a thriving market for private healthcare - around 11% of the population are covered by private medical insurance. Many people assume that PMI exists in opposition to the NHS as a complete alternative to the state sector. In fact, PMI works to complement NHS provision and patients will often benefit from both public and private care during their treatment. This co-operation between public and private sectors is set to increase as the NHS faces up to the challenges of an ageing population, new medical technologies and increasing patient expectations.

There are inefficiencies in the current system that could be removed to increase the amount of money available in total for healthcare. There is an argument that it is unfair for private patients to make a double payment for their healthcare, once through National Insurance and again through insurance premiums. Private patients benefit the NHS because every patient treated privately means one fewer person on a waiting list. The private sector treats around half a million inpatients each year - a total saving of around £700m to the NHS.

Brighter days

Because of this it is frustrating for providers that health insurance premiums are subject to taxation, having been exempt until Labour came to power in 1997. If this disincentive were removed then insurance would become more affordable, with more people able to take control of their healthcare. Unfortunately, it seems unlikely that the Chancellor of the Exchequer, Gordon Brown, will relinquish PMI tax revenues any time soon.

However, there are examples of public and private sectors working closely and successfully together. The Labour government has shown real political courage to bring private providers into the NHS - reducing waiting times, increasing capacity and encouraging innovation as a result. There are now dozens of Independent Sector Treatment Centres across the country, which provide services such as cataract operations in particular areas. Because ISTC are dedicated units that do not have to deal with the complexities of a general hospital, such as emergency admissions, they can treat patients more quickly with excellent clinical results.

Private provision in the NHS is here to stay, with 93% of people saying they do not mind private involvement if it means patients are treated more quickly at no extra cost. The barriers to private involvement in the NHS are truly breaking down and this can only be good for patients.

However, there are challenges ahead. The UK has an ageing population and a shrinking tax base - in the future there will be far more retired people relative to taxpayers. Consider also new and expensive drugs like Herceptin, and it is easy to see why many people are concerned that the NHS may not be affordable in the future.

And there are problems caused by preventable ill health too. A major Treasury report on the future of health funding concluded that the NHS may cost an extra £30bn by 2025 if people do not get much healthier as poor diet, lack of exercise and smoking result in increased NHS costs.

To deal with these cost pressures it will be necessary to bring more private money into the UK health service. A recent survey of European countries found that the UK has an unusually high proportion of public financing for healthcare. Most countries have a more balanced mix of public spending from taxation and private spending from the individual. The UK spends a higher proportion of public money on healthcare than even the former communist members of the European Union.

Cash injection

A proper public debate is needed about the right way to introduce more private money into the health system. A starting point might be to help employers to provide healthcare for their employees. Many companies now invest in health and wellbeing at work, helping to tackle public health problems like obesity. This has benefits for the whole of society after all everyone needs to get healthier. The government could also offer fiscal incentives to companies who promote health in the workplace.

More radically, a recent publication from 10 Downing Street suggested that in the future the NHS might provide a core package of care rather than trying to do everything as it does now. Private insurance could cover treatment outside this core package, helping to bring a sustainable mix of funding into the health system. This is only one of many possible options but one worthy of proper consideration.

To guarantee a healthy future for all there needs to be a proper public and political debate about healthcare funding. At the moment it is very difficult for politicians to talk about alternatives to the NHS. The current model is not always efficient, although there are positive examples of public and private co-operation. However, more is needed to cope with the impact of an ageing population and ever increasing demands for healthcare. The only sustainable future will involve a greater degree of private funding - now all parties involved need to talk about how to do it.

- Mike Hall is the chief executive of Standard Life Healthcare.

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