Head To Head

Could private top-up insurance help fund the NHS?

BMJ 2016; 355 doi: https://doi.org/10.1136/bmj.i5424 (Published 12 October 2016) Cite this as: BMJ 2016;355:i5424

Re: Could private top-up insurance help fund the NHS?

"Free at the point of delivery" is understandably cherished by the vast majority - but why must it be available universally, regardless of both personal and national economic circumstances? Surely, if the well-off were required to contribute somewhat to their own personal care, it would in no way conflict with the original underlying principle of the NHS: that no citizen be denied essential healthcare for want of personal means.

What if those over a relatively high income threshold – say, £60,000 p.a . – paid a graduated contribution per NHS usage event? This would be broadly similar in principle to the French scheme's use of both means testing and various contribution rates by category of illness - but applicable only to the relatively well off. Its progressive nature could be further enhanced by making the contribution rates set at progressively higher levels per income band (above the threshold). The Australians also target only the well off, albeit with a very different contribution scheme.

Contribution payments, where due, would be invoiced at point-of-delivery (as effectively in NHS dentistry and pharmacies at present). Payment would be made either directly (e.g. by credit card for a relatively small amount such as a GP or other consultation) or alternatively for collection retrospectively through the HMRC Income Tax collection mechanism - to be decided at the time by the patient.

A patient's contributory status would be established prior to invoicing and payment, as indicated via the patient's NI or NHS number (ideally, through a portal to a HMRC-controlled subsystem). The patient's status would be recorded as either exempt or a specific contriutory income band (similar to "Basic Rate" and "Higher Rate" Income Tax bands, but with different thresholds). For simplicity, additional higher rate contributions might best default to collection in arrears by HMRC, thus allowing the basic rate only to the charged at the point of delivery (comparably to deduction at source of basic rate tax on savings interest payments).

Most importantly, the “tax contributions” raised would be hypothecated - in the extreme: an individual taxpayer's total annual contribution could be itemised on their PAYE coding notices &/or annual Tax Calculation. Strictly speaking, these contributions would not be income tax but a service charge. Use of the tax system for rating and collection would actually be for administrative efficiency and presentation purposes.

However, whilst presented as predominantly tax-based, the scheme in no way precludes supplementary use of private insurance. Use or otherwise of PMI could be entirely a personal choice and claim settlement would be direct between insurer and patient. (This might help avoid inevitable accusations of "privatisation of the NHS by the back door".) However, existing private health insurers would clearly be well placed to supplement the basic scheme with optional “NHS Top-Up” insurance schemes, French style. (The prerequisite “insurable risk” is potential treatment cost, not “tax liability”.)

Key elements for implementation already exist: means testing within HMRC, common use of NI number by HMRC and Social Services/NHS (assuming integration of the latter two is already in hand), electronic networking within both the NHS (e.g. GPs to pharmacies) and HMRC (for PAYE coding for employer payrolls). This suggests the scheme could be piloted - or at least prototyped, with only notional payments and funds changing hands - without too much cost (relative to the problem) or generating too much angst in the media.

Clearly even this modest proposal would be difficult to swing politically. It would inevitably be regarded by many as an incursion on the “free for all” mantra. Also, beyond any prototype, it would undoubtedly incur very significant roll-out and running costs. Most of all, it would inevitably be viewed – quite correctly – as the thin end of the wedge, ripe for extension deeper in contribution rates and/or wider in social penetration. Fiscal drag alone would clearly widen the net, albeit hopelessly too slowly to address the scale of the dramatically increasing funding gap.

To avoid unacceptable electoral damage, any initial implementation would necessarily have to be very modest in terms of both social penetration and personal impact. Thus, applicability thresholds would have to be set high and contribution rates low. Consequently, total contributions collected would likely prove fairly insignificant relative to the scale of the total funding gap. However, the scheme could, at least, establish both the principle and the infrastructure for extension both in penetration and contribution rates.

Finally, there’s nothing inherent in this scheme to stop any future government, of whatever political hue, adjusting the initial contribution parameters for any desired level of progression and yield. So, might it - just - offer a relatively painless way forward for our dithering politicians to begin to address this hitherto intractable problem?

Competing interests: No competing interests

19 October 2016
Ian C Harmer
Retired management consultant
Hampton, Middlesex