The rising cost of healthcare is forcing the government to consider new forms of financing - leading to many calls for further public-private partnerships. Although this solution is the frontrunner, is the government's fear that it will create a two-tier health system founded? Jakki May investigates
Death and taxes: the only two certainties in life, according to Benjamin Franklin. Both are key issues for the National Health Service - the first because it means however hard people may try to avoid doctors and healthcare, there will inevitably be a need for both; and the second because it is the public's taxes that fund the system. But as the NHS celebrates its 60th birthday, the stresses between the need for healthcare and the required budget are becoming ever more evident.
The cost of healthcare provision has continued to soar as new and expensive drugs are developed - with consumers understandably eager to receive drugs that will save, ease or prolong their lives. But there is also a continuing reluctance for the state to allow a mix of private and public funding, apparently fearful that by allowing some private funding to support the NHS system, it will open the door for a two-tier system and a divide between those who can afford more care and those who cannot.
A recent Swiss Re sigma report into the state of global health provision sums it up: "In view of the budgetary pressure and the expected cost trends, governments will increasingly have to address the dilemma between equity and efficiency in the system." The report also finds: "Private medical insurance is a way to strike a balance between access to healthcare, costs and preferences. It allows people to buy additional coverage according to their individual needs and preferences, while alleviating burdens on public health plans."
But in the UK it seems the political will for a major shift has yet to emerge. Fergus Craig, commercial director at Axa PPP healthcare, believes the current government is more comfortable with the polluter pays principle, rather than a straight link between public health care and the PMI sector. There are some small signs of change, however. Some hospitals, for example, are using private companies to help with procurement services, but so far only a handful of contracts have actually been agreed.
No cure all
Mr Craig says: "There is no magic pill to cure the problem. PMI is pretty small while the NHS is enormous so we always respond to changes in the NHS and not the other way around." But he also believes there are some tremendous opportunities emerging for the private sector.
He continues: "Either way there is an opportunity. We can launch top-up products or we can offer an opt-out product. But what we need most is certainty. We cannot come up with a policy unless we know what we need to cover."
Nancy Hempstead, head of healthcare Europe, the Middle East and Africa for Crawford and Company, says: "I am very much in favour of public-private partnerships because I think there are elements that both can benefit from in terms of working together."
But like Mr Craig, she sees politics interfering. "Anything that is seen as privatisation is frowned upon," she says. "I think people should see it as a positive and see how it could help people."
The classic example of this is the current Richards Review into cancer treatment by Professor Mike Richards, the government's national cancer director. People who have been denied certain drugs on the NHS and have used their own funds to finance treatment, consequentially have found themselves denied all NHS support because they 'stepped out of the system'. The Richards Review is considering whether this system should be changed and is due to report this autumn.
Charlie MacEwan, director at WPA, believes change should follow: "If you drill down to what medical insurance does, we plug the gaps in NHS care; that is the purpose of our existence."
WPA has recently launched a top-up policy and Mr MacEwan believes that such policies make private care affordable for more people because the limits are targeted, bringing premium costs down. But he stresses such policies need to be carefully handled; customers need to be well informed about exactly what they are buying. He adds: "Top up is key because 88% of the UK population doesn't have medical insurance. There is a phenomenal market for us to help people find healthcare so top up is the way to go. I think it will happen - the question is how and within what parameters."
However, Dr Doug Wright, head of clinical governance at Norwich Union Healthcare, says: "It is more to do with perception management and political dogma, but the NHS does not have the mechanisms in place at the moment either."
New product problems
He continues: "The reason why it is becoming a problem is because we have new drugs coming along that are very expensive and it is not necessarily clear what the benefits are. The National Institute for Clinical Excellence makes the rationing decisions of where we spend public money while all the patient interest groups will always call for making something available."
With a limit on how much tax people will pay to fund the NHS, Dr Wright explains "it is unrealistic not to expect people to say I have the money and I will pay", while he acknowledges it is a hard political decision at where to draw the line.
He points to education where some people choose to pay additionally, while still paying tax to fund the state system; for example, where public and private partnership has widened the choice for the end consumer. For the first time the public has become fully aware of the choices facing government and the NHS, he believes. "We are going through a painful stage. We have lived through the era where the NHS could provide and now it is obvious there are limits. We should move on very quickly."
Insurers are already developing products, he says, to cater to a top-up style market - such as that launched by WPA - but if the Richards Review is positive then Dr Wright believes the pace of development will be much more rapid. He points to the 'waiting time-related' products that have been selling successfully where "premiums can be lower if a customer is after shorter waiting times and is not so concerned about other benefits".
But top-up options or not, one thing is sure: something will have to be done about the increasing shortfall in funding. Fiona Harris, head of personal markets for Bupa, says the problem has been highlighted by a growing number of government commissioned reports such as the Kings Fund report from Sir Derek Wanless.
Bupa too has commissioned its own report. Mind the Gap looks at the funding challenges the NHS is facing and provides some solutions as to how this issue can be addressed - co-payment being among them. The trouble is, says Ms Harris, "we have an insatiable appetite for healthcare" that is not going to go away.
Public-private partnerships have been developed in the past, particularly in terms of big capital projects. More recently Bupa has been involved in one of the procurement projects cited by Axa PPP's Mr Craig. Ms Harris explains that Bupa is providing purchasing expertise to Hillingdon Primary Care Trust, helping it to make the best use of available funds. But none of this solves the Kings Fund and Mind the Gap concerns about future funding.
Mind the Gap points to a £11bn shortfall by 2015 that, warns Ms Harris, is not based on the worst case scenario. But she also recognises the political difficulties of introducing a mixed public and private solution.
"People immediately jump to the US example, but it is not a good example," she says. "Australia, however, is. Around 40% of Australians have privately funded health care but there is a degree of community care in there.
"I think there are many ways of resolving the funding challenges. One of the ways is through top up where you add a piece of care, and another is co-payment is where you pay a portion."
In France, the system of co-payment is long established and seemingly successful. Jason Powell, chief executive officer at Premier Medical Group, believes the French system gives consumers greater choice but fears that in the UK there is no political will to push change through: "The government seems happier with the private sector becoming involved on the commissioning side or with capital projects."
But he says there is already evidence that stronger links can help. "On the rehabilitation side it has relieved some of the pressure on the NHS. Insurers and employers have realised the advantage of early intervention. They have been quite courageous in driving this proactively."
The cost benefits have been realised, both in ultimately saving the insurers money, getting people back to work and also relieving pressure and cost for the NHS, he adds.
Helen Merfield, chief executive officer at rehabilitation provider HCML, agrees "Public and private sector partnerships are more utilised now than even a few years ago although they are still far from common.
"We are seeing a growing interest from the public sector in outsourcing certain services such as rehabilitation case management to niche private providers. Demonstrating how this will make a substantial difference to both the level of service and the end result for the patient is key."
She explains: "From a rehabilitation point of view the benefits of such a partnership could be substantial with the injured person essentially getting the best of both worlds. Where the NHS offers a more acute service, the case management function would be looking at getting the injured person back into suitable employment."
And there are obvious benefits for insurers as they can ensure the NHS provisions are used when possible, supported by private rehabilitation and case management if and when it would benefit the patient. "Early intervention dramatically improves the chances of successful rehabilitation," Ms Merfield adds. "Insurers that don't hear about the injury or illness until the patient is struggling to recover would be able to make a decision early on regarding potential benefits of rehabilitation or other treatment options.
"If case managers were involved from the beginning, they would be able to notify the insurers of any complications, advise on further treatment and reduce the burden on the NHS. Getting patients out of hospital and, later on, back to work will benefit all parties involved and a partnership between the public and private sector could develop a seamless transition between hospital, rehabilitation and return to work."
Alex Bennett, head of health at Aon Consulting, believes employers are starting to see the cost benefits. Accessing the right data is critical in convincing employers - and their employees - of the benefits to the business of getting staff back to work as rapidly as possible.
"Businesses want a return on spend," he says, particularly in a poor economic climate but there is a realisation that acting quickly does improve the chances of getting people back to work and Mr Bennett does not expect much of a dip in terms of healthcare cover purchases.
However, Ms Harris is quick to stress that one single solution is unlikely: "It is much more complex; it is not just an insurance mechanism."
One of the biggest challenges for any healthcare system is the element of choice. Patients with the same condition may well choose different medical solutions. Ms Harris gives the example of those suffering with prostrate conditions being given a choice of treatments, each of which carry different risks and it will be up to the patient to decide which suits their lifestyle and capacity for invention better.
Ultimately, though, she says those who find the right treatment from the right person at the right time and place will almost certainly face a better outcome, which will be more cost effective. In the next five to 10 years, she believes, the private and public sectors will need to work together to provide solutions but it will also be up to individuals to assess the financial liability they are prepared to take on and to consider an element of shared risk.
The recent headlines over cancer treatment costs and allocation of care has given the government a wake-up call, resulting in the Richards Review, while the even more recent row over arthritis treatments is only likely to fuel public concern.
However, politically this topic remains a hot potato and it seems while everyone agrees the situation is likely to get worse, it will be a very brave government indeed that chooses to make the sea-change required - leaving insurers with the potential nightmare of continuing uncertainty about what the NHS will and would not provide in the future.
- Top 100 Insurtech: Quarter four update
- Roundtable: Is a single customer view taking off in insurance?
- I work in insurance: Stephanie Horton, River Canal Rescue
- Charles Taylor bolsters liability team by hiring senior sextet from Vericlaim
- Travel insurtech Pluto begins beta test
- Insurtech diary: Getting stuck into insurance
- Gallagher Bassett acquires claims management firm