Chris Lancelot on ... Funding healthcare

The nationwide delivery of healthcare is not easy. Our much-vaunted NHS has serious defects.

Private insurance schemes are a failure: look at the dreadful situation in the US where large swathes of the population are neither able to afford medicine themselves, nor covered by government insurance schemes. Yet the US spend on healthcare as a percentage of GDP is double that of the UK, because of huge administrative overheads. All this extra money provides a worse overall quality of healthcare than the UK - not that we do so well in the global league tables, either.

There are two difficulties of principle here. Any scheme that is free at the point of need, as in the UK, results in a finite amount of taxpayers' money trying to support infinite demand. On the other hand, generalised personal insurance schemes disadvantage the poor; and the chronically ill either can't get insurance at all or pay extortionately.

There is a third way, described in the economist Tim Harford's recent book The Undercover Economist (Abacus): give everyone the responsibility for spending their own healthcare money. Everyone contributes to their own healthcare fund which is held in a separate bank account, from which they pay for their treatment. The government supplements the individual funds of the poor or the chronically ill. Each citizen also has to take out private insurance against catastrophic illness. Finally - and here's the crunch - unspent funds in the account are eventually returned to the individual or the family.

As a result, everyone has healthcare. Everyone has an incentive to spend their healthcare money wisely and economically. The poor and the chronically ill are not excluded from treatment. Everyone is insured against catastrophic, unpredictable events. There is true competition in medical care: market forces ensure supply meets demand. Dedicated, competent professionals are rewarded and incompetents fall by the wayside. Demand is kept to reasonable levels. Bureaucracy is reduced to a minimum. Costs are kept down and patients have real choice.

A scheme like this has been running in Singapore for two decades. It performs much better than the NHS or the US systems, and for far less cost. We should give it a try in the UK: we might be pleasantly surprised.

Do read the book. It's a cracking good read.

Dr Lancelot is a GP from Lancashire.


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