Is the grass greener? Social Insurance versus general taxation as a form of funding for health care in the UK. Sofia, Vaseleios, Sian, David

Introduction n Militant doctors? - ‘Doctors for Reform’ n Some level of government intervention is inevitable and unavoidable in health care. n What is the extent and form of that intervention in different systems? n There is a variety of arrangements that exist for funding and providing health care.

Public-Private mix in financing and provision n Public finance does not have to match public provision, nor private finance does private provision. n EG: (b) public finance – provision by self-employed doctors n EG: (c) private finance (private insurance, direct charges)– public provision

Historical foundations n Healthcare financing has historically been inspired by three competing “models” 1 : –Bismarck in Germany, relied on professional enrolment, to social insurance –Beveridge introduced, in the after war UK, a public health monopoly, ensuring universal social protection –Mixed system, which prevails in the U.S., and to some extend Germany, the Netherlands and Switzerland. 1 Summary on Private Health Insurance in OECD (Organisation for Economic Co-operation and Development (OECD) Health Data) countries, 2002,

Mixed systems Private markets in funding and provision Public funding and provision Alternative systems for funding health care Heavy reliance on user charges ↓ Least developed countries Private insurance and some safety-net programs ↓ US Social insurance ↓ Canada, France, Germany, Greece, Netherlands, Singapore General taxation funding, public and private provision ↓ UK, NZ User charges in all systems but in different levels

Health care spending 2 2 A compendium of published information on healthcare systems. International Health Comparisons The National Audit Office team consisted of: Ashley McDougall, Paul Duckett and Manjeet Manku under the direction of James Robertson.Website:

Financing of health care 3 3 A compendium of published information on healthcare systems. International Health Comparisons The National Audit Office team consisted of: Ashley McDougall, Paul Duckett and Manjeet Manku under the direction of James Robertson.Website:

General taxation n Part of total tax payment n Flat rate n Employers and employees contribute n Closer to social goals of equity (health status/income) n Consumer is able to use the health service at zero price n Nominal user charges so as to restrain unnecessary demand by consumer (how nominal is nominal?). n Control of Moral Hazard - rationing devices (waiting times, waiting lists, GP consultations), user charges, different payment schemes for doctors and hospitals

General taxation n Control of Adverse Selection. Absence of competition between financial intermediaries, 100% coverage of population n Efficiency: Collection simple and redistributes according to both health status and income n Cost containment n Political influence - change in government n Not protected from other sectors n Technically inefficient n Finance and provision combined within one organisation

n Contributions are related to ability to pay n Private not-for-profit insurance companies n Coverage is universal n Private insurance might not be permitted or it might be permitted as a top-up to the basic system n The package of services covered and user charges vary n Provision may be by private or public hospitals Social Insurance

Social Insurance variations n Germany –Greater choice in selecting where they want to rely for healthcare provision –Active role, not only in choosing their healthcare providers, but also in deciding on what is best for them, without having state interference –Employers and employees make contributions equally. –The unemployed, homeless, and immigrants are covered through a special sickness fund financed through general tax revenues. –User charges apply to the first 14 days in hospital or rehabilitation each year, ambulance transportation, non- physician care and some dental treatment, but some groups are exempt (e.g. low income and elderly).

Social Insurance variations n France –Compulsory social health insurance contributions from employers and employees –The population have no choice of insurer. They are automatically affiliated to a health insurance scheme on the basis of their professional status and place of residence. –Private insurance is voluntary for those who do not contribute to the national health insurance system –Why are France moving toward general taxation system?

Social Insurance n ‘Protected’ funding from economic downturns n Debates about funding are more explicit

Conclusions n Health care is different than other commodities exchanged in the market place. Some level of government intervention is inevitable and unavoidable in health care n The control of finance of health care by government is important in the pursuit of social objectives n In the absence of empirical evidence, no financing system is necessary the correct one. All systems have both advantages and disadvantages. n A system that has been developed and is working well in one country may not be acceptable to the population of another country. n Dissatisfaction with current health systems. Attempts for reforms. There are common features of these reforms. n Analysis of the relative performance of health care systems is a key issue. However, how should performance be measured?

References ¶ Donaldson, C., Gerard, K. (1993) Economics of health care financing: the visible hand. Macmillan. · Santerre, R.E., Neun, S.P. (2000) Health Economics: theories, insights and industry studies. Dryden Press ¸ Summary on Private Health Insurance in OECD (Organisation for Economic Co-operation and Development (OECD) Health Data) countries, 2002, ¹ Nancy Devlin, Health Economics. Module notes, City University, 2003/2004 academic year º A compendium of published information on healthcare systems. International Health Comparisons The National Audit Office team consisted of: Ashley McDougall, Paul Duckett and Manjeet Manku under the direction of James Robertson.Website: