Sharing the burden, by Ann Rossiter

2 Nov 06
A surge in new medical treatments combined with an ageing population mean the demands on the NHS are set to rise just as it faces a financial squeeze. A co-payments system, with built-in protection for the poor, long-term ill and vulnerable, might be the answer, argues Ann Rossiter

03 November 2006

A surge in new medical treatments combined with an ageing population mean the demands on the NHS are set to rise just as it faces a financial squeeze. A co-payments system, with built-in protection for the poor, long-term ill and vulnerable, might be the answer, argues Ann Rossiter

Since 1997, the NHS has been perhaps the most reformed of our public services. These reforms have been accompanied by an unprecedented increase in funding. Even so, the service is struggling to keep pace with the rising demands of patients for access to new drugs and medical technologies. News stories of indignant patients who have been denied a life-enhancing drug are increasingly common. Most recently the National Institute for Health and Clinical Excellence has come under fire for its rejection of the bone cancer drug, velcade, which is available in Scotland and the rest of Europe.

Such pressures are likely to increase over the coming years, with the focus on personalisation, Patient Choice and the growth of new treatments. Medical science continues to progress at an astonishing rate, greatly increasing the amount and types of treatment available. So it is inevitable that yet more treatments will be vying for public funds.

The significant demographic shift currently taking place in Britain will also intensify the pressures. A recent study in the British Medical Journal predicted a 53% rise in the number of people in the UK aged 65 and over between the years 2001 and 2031. Taking just three common diseases (coronary heart disease, heart failure and atrial fibrillation), these same researchers predicted rises in incidence rates of 44%, 54% and 46% respectively. This is likely to have significant cost implications for the NHS since the class of drugs commonly used to treat these diseases – statins – is already the single largest component in the NHS drug budget.

An ageing population also points towards a growing disparity in the UK between the numbers of retired (and therefore non-taxpaying) and non-retired (taxpaying) persons, creating a mismatch between 'net contributors' to the NHS – younger, healthier taxpayers – and 'net consumers' – older, less healthy non-taxpayers.

Sir Derek Wanless's review for the Treasury in 2002 estimated the amount of money needed to fund the NHS up to 2023. This paved the way for the unprecedented level of funding the service has received in recent years and the chancellor's decision to increase annual funding by more than 7% until 2008. Wanless estimated that for the period 2008–2013 the NHS would require funding growth of between 4.4% and 5.6% per annum, well above the likely growth in the UK's economy.

Despite forecasts for improvements in staff productivity and efficiency gains through improved commissioning and IT in the NHS, there is no convincing justification for reducing Wanless's estimates. But the Exchequer's ability to pay for such an increase is another matter. Gordon Brown indicated in his last Budget that overall public expenditure in the period 2008–2011 would grow by only around 2% in real terms. With other government departments all vying for the public purse, the NHS's funding is likely to fall significantly after 2008.

In the light of the above developments, the Social Market Foundation is undertaking a major programme of research investigating the challenges the NHS will face over the next ten to 15 years. These include the likely changes to the demography of the UK and the likely shifts in patient expectations arising from such changes; the success or otherwise of the current NHS reform programme; the impact of new medical developments and technologies; and the impact of reform and health inequalities.

As part of this 30-month project, 'The future of health care in the UK', we will map out various potential policy options, including possible alternative revenue streams for the NHS over and above general taxation and ways to control costs.

One of the areas we will be exploring is co-payments, where patients make a direct payment for the health services they receive. This would be means tested to ensure equity.

All countries use some form of co-payment. In the UK, this has had a less central role thanks to the development of the welfare state, with prescription charges the notable exception. The introduction of charges in the UK has tended to be due to political expediency, rather than the result of a well-thought-out and long-term strategy. Consequently, the use of co-payments in the UK follows no logical pattern.

As we enter a time of squeezed public spending, there appears to be a degree of political consensus that co-payments need to be looked at more seriously. The Commons health select committee recently called for a study to examine the scope to introduce charges for certain health services and to overhaul the current system of exemptions from England's very limited set of co-payments.

Co-payments can prevent over-consumption and make the public's use of services more responsible. Economic theory – and common sense – suggest that free public services lead people to over-consume. Patients are more likely to be price-conscious if they are directly paying for a treatment, so the rationale is that co-payment can reduce demand, help prevent waste and lead to better targeting of resources.

Recent innovations appear to support this claim. For example, since 2004 Germany has experimented with charging patients €10 for the first appointment with a doctor. Initial findings suggest some reduction in the average numbers of appointments made, with no evidence of a disproportionate impact on the poor or sick. This could lead us to be cautiously optimistic that such a scheme has the potential to reduce intensity of use without harming patients.

In addition, some have pointed to co-payments as a means of raising additional revenue without raising general taxation. The BMA, for example, has estimated that a £10 GP consultation fee could raise £3.3bn for the NHS.

However, we must be extremely cautious of such claims. First, while user fees might deter people from using public services unnecessarily, they might also discourage necessary use. This has led to many co-payments systems developing quite complex exemptions, which can greatly reduce the revenue generated. For example, the vast majority of prescriptions in the UK are exempt from charges on grounds of age, particular chronic conditions, maternity or low income, with only 8.9% of prescription charges attracting the full £6.20 fee.

Second, if co-payments discourage people from using a service, there might be costs to public services further down the line – a low uptake of prescriptions might result in conditions worsening, so that the patient requires a more expensive treatment later on.

There is a third concern: namely, can a system of co-payments be equitable? There is a shortage of reliable evidence on the impact of co-payments on the take-up of services in general and the way it affects the poor and the sick in particular.

The US Rand Health Insurance experiment, under which 2,000 patients were randomly assigned to one of four charging regimes, is the major exception. The researchers concluded that – for most of the population – charges succeeded in encouraging less reckless use of health care without serious health consequences. The one important exception was the finding that charging had seriously adverse effects on the sick and the poor – for example, when charges were imposed, hypertension was less well controlled in this group, to the extent that likelihood of death rose by approximately 10%. Early analysis would seem to support these findings – in the UK, the Citizens Advice Bureau has provided evidence showing that prescriptions, dental and optical charges put off people on low incomes from seeking treatment, particularly those with long-term health problems.

While there are evidently justifiable concerns about the impact of co-payments on equity, this can be taken into consideration in the design of the system. If, for example, poor people had been exempted from any charges in the Rand experiment, the negative impact that the charges had on this group could have been avoided. Charging will, of course, always appear unattractive compared with the principle of a comprehensive NHS, free at the point of need. Yet it is becoming increasingly apparent that it will not be feasible to adhere to that principle indefinitely, as the scope of health care rises relentlessly and we reach the limits of the public's willingness to pay the necessary taxes.

It will take political courage to moot significantly extending co-payments, but the alternative might be a steady decline in the scope and quality of the NHS by stealth: an outcome that policy makers must seek to avoid for the sake of us all.

Ann Rossiter is the director of the Social Market Foundation

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