As the Tory conference gathered, one-time Brexit secretary David Davis became the latest mouthpiece for the hoary old argument for scrapping the NHS as a tax-funded system and opting instead for so-called “social insurance”.

The predictable platform for this latest outpouring of hackneyed and false assertions was the Daily Telegraph, but similar arguments have been retailed time and again in the last few years in the Times, the Daily Mail, the Spectator, and sadly, taken too seriously by BBC correspondents.

Liz Truss herself is one of an 8-strong Parliamentary Board of the ‘1828 Committee’, whose ‘Neoliberal Manifesto’, published jointly with the Adam Smith Institute in 2019, condemns the NHS record as “deplorable” and states:

“We believe that the UK should emulate the social health insurance systems as exist in countries such as Switzerland, Belgium, the Netherlands, Germany and Israel, among others. Under these systems, individuals pay regular contributions — as they currently do for the NHS through taxation — to their chosen insurer. They are then free to seek treatment from a medical provider of their choice and their insurance company subsequently reimburses the provider for the expenses incurred.”

Of course some of the information used to argue for change is correct, and we can all agree that the NHS – especially after a decade of real terms cuts in funding and the extraordinary problems posed by the pandemic – is far from perfect. 

But it’s consistently people who supported the decade of declining real terms funding, ignored the growing shortages of NHS and social care staff, and who have endorsed the policies that have undermined public health and widened the gap in healthy life expectancy between the richest and poorest in society, who delightedly point to statistics showing the NHS performing less well on measures such as cancer and heart attack survival than other European health systems.

They are delighted because they feel they can use the NHS’s worsening problems to argue for changes that would otherwise be dismissed out of hand, and propose changing to health care systems that offer more openings for the private sector to cash in. 

Winding back the clock

Indeed they feel they can exploit widespread ignorance of the systems they are advocating to make ridiculous arguments that the NHS as launched in 1948 is ‘out of date’, but it should be replaced by a social health insurance system … dating back to 1883.  Indeed Davis is trying to make a case for winding back the clock to reinstate the failed system that was in place in Britain before the NHS. 

Social health insurance began in Germany as workplace health insurance, covering only the elite workers in the initial schemes, and only while they were working: it did not cover their families, retired workers or of course the millions of people, working or unemployed, who were left outside the scheme. By 1885, just 10% of the German population was insured – by a total of 18,776 sickness funds.

This is similar to the system that prevailed in Britain prior to the establishment of the NHS in 1948, and left more than half the population without adequate access even to primary health care.  The German and other social health insurance systems have only developed towards universal health systems as they have been extended to cover the other groups through increased levels of tax funding (i.e. become more like the NHS).

Davis claims “successive Conservative governments have shied away from large-scale reform of this most fundamental public service,” – completely disregarding the succession of massive, costly and disruptive “reforms” to the NHS rammed through by Margaret Thatcher in 1989-90, David Cameron’s coalition (Lansley reforms) 2010-2013 and the latest ramshackle Health and Care Act pushed through under Johnson and implemented in July.

He argues with no evidence that “The NHS is plagued by ineffective bureaucracy …  the ramshackle nature of the organisation is clear for all to see.” 

But he is apparently blissfully unaware of the much larger and more complex bureaucracy that would be required to run a social insurance system. Germany’s health insurance system consists of 110 sickness funds – meaning that health spending also funds an extraordinary and complex bureaucracy. 

Davis also ignores the additional fragmentation and complexity that have been the result of decades of outsourcing and privatisation under Tory (and New Labour) governments.

Why social health insurance?

For many years the more savvy advocates of more privatised systems have recognised the folly of suggesting any kind of US-style system based on private insurance – which is notorious for its extravagant waste, inflated costs, and the numbers of people left uninsured or under-insured, facing huge and unpayable bills for health care. Hundreds of thousands of Americans each year are bankrupted by hospital bills. 

The favoured models are therefore systems that can be portrayed as relatively close to the NHS – apparently offering universal coverage, free at point of use. David Davis names no specific model, but a recent article by BBC health correspondent Hugh Pym takes the example of Germany, where the first ‘social insurance’ system for health care was set up under authoritarian Chancellor Bismarck  in 1883.  

Pym quotes Dr Kristian Niemietz, of the Institute of Economic Affairs, who argues it could be a blueprint for reform in the UK, and claims: “Social health insurance systems tend to have better healthcare outcomes.”

Of course outcomes are related to inputs, and the figures show Germany spends a lot more than the UK on health – and has done for a very long time.  Misleadingly, Pym asserts: “Funding of the two systems is similar. Germany spent just under 13% of its gross domestic product on health in 2021, … The equivalent figure for the UK was around 12%.”

There are several problems with this. The first is that German GDP is much (34%) larger than the UK, and Germany spending an additional 1% of GDP means that its total health spending in 2021 was 45% higher than the UK.

The second problem is that the comparison of spending is based on 2021, a year in which health spending – especially in Britain, even though much of it was wasted – was heavily distorted (inflated)  by the Covid pandemic.

And the third problem is that what really matters in terms of resources on the ground is not the share of GDP spent on health (which has been recalculated several times since 2009, to include more social care) but the amount spent per head of population. On this measure, UK spending is much lower than many of the countries that appear to be delivering better health outcomes. OECD figures show that Germany for example spent 46% more per head on health than the UK in 2019, and 38% more in 2020 when the NHS budget was apparently inflated by Covid spending.

So it’s no real surprise to find that after several decades of much higher spending on health, Germany is much better equipped to deliver good outcomes, as Hugh Pym notes:

“The German system is better staffed and stocked than the UK, relative to the population. Analysis by Nuffield Trust shows in 2019 the UK had around nine nurses per 1,000 people, while in Germany there were about 14. The disparity in bed numbers was wider – with Germany’s eight beds per 1,000 patients more than three times higher than the UK figure.”

Spending: comparing like with like

It’s also important to remember that the overall spending figures include ALL spending, whether by public sector, on private care and out of pocket payments by individuals.  Anita Charlesworth of the Health Foundation points out the significant difference if we compare only public spending on health care:

“Using another common measure, public spending on health care was equivalent to 8% of GDP in the UK in 2019. This is more than the OECD (6.4%) and the EU14 (7.2%), but less than the G7 (9.4%). It is notable that the UK spent more as a share of GDP on health care than the EU14, and yet had a lower spend per person. This is explained by the UK’s relatively low GDP per person, which in turn illustrates how spending is determined both by the relative priority afforded to health care and by wider economic prosperity.”

Other issues are also often glossed over in discussing the German system. Pym notes that “around 86% of the population there are enrolled in schemes run by not-for-profit insurance organisations known as sickness funds.” What he doesn’t say is that German self-employed and employees who exceed a certain income threshold may choose to stay with the main system or opt for private health insurance (PHI), which is provided by 41 insurance companies. PHI covers around 10% of the population, including civil servants; the remainder (e.g. military) are covered through special schemes. So the German system is a two-tier health care system, not universal health care. 

Another important difference is that social health insurance schemes are largely funded by payroll taxes levied on the employed workforce (and their employers) – so those, including very wealthy people, who live off unearned income (shares, rents, or inherited wealth) or are not on company payrolls make no contribution to the wider pool of health insurance. This is much less equitable than a system funded through general taxation levied on the whole population. 

Nor is health care free to access in Germany. It is one of the systems that levies a fee for hospital care: adults have to pay €10-15 per day, up to a maximum of 28 days in a year.

Other social insurance systems

In case anyone thinks we are picking a select example here, or believes other social health insurance schemes are more akin to the NHS, it’s worth noting that Switzerland, Belgium, and the Netherlands  (the other countries cited as preferable models by the IEA and by Truss and her ‘1828 committee’ colleagues) all spend significantly more per head on health than the UK. 

Switzerland is the highest spending country after the US, and spent 58% more per head on health than the UK in 2019 and 43% more in 2020; Belgium spent 22% more than UK in 2019, but bizarrely CUT health spending in 2020, remaining 5% higher; and Netherlands spent 29% more per head in 2019 and 23% more in 2020.  

It’s also important to note that not only do these countries spend more, they also leave patients stuck with more of the cost of care:

Switzerland is one of the wealthiest countries in Europe, yet the proportion of private ‘out of pocket’ spending on health is exceptionally high at 26% of total health spending. This means that low and middle income households pay a higher proportion of their income for health care than the richest. Swiss patients wanting health care have to pay a “deductible” (fixed amount to be paid before insurance cover begins to reimburse costs) as well as a copayment (a percentage of the cost of treatment) which cannot by law be covered by insurance. There is a £12 per day fee for hospital inpatient treatment.

Belgium, with slightly higher population than London, levies higher user charges for mental health and dental care, again limiting accessibility especially for the poorest. 

The Netherlands has a complex combination of mandatory and voluntary health insurance in which costs fall disproportionately on poorer people. Even the right wing US Heritage Foundation points out that low and lower-middle income individuals end up paying between 20-25% of their income in healthcare costs: this is far less equitable than the UK system. Competition has increased the bureaucratization of the Dutch healthcare system, with over 1400 different insurance packages, making choice for consumers extremely complicated.


A health service, not insurance

It seems the right wing’s ideal models aren’t so ideal after all if we look more closely. But David Davis and others also try to reinforce their case with a lie. They insist, against all of the evidence that our own NHS is an insurance system. Davis argues:

“Insurance-based system” is considered a dirty phrase by some. But the truth is that we already use a principle of insurance to fund our health service: National Insurance.”

But the argument for this is flimsy in the extreme: “Indeed, NHS England’s budget is of a similar scale to the total National Insurance take. The recent arguments about raising NICs show that people understand healthcare has to be paid for.”

This is as downright dishonest as the recent claim by new health Secretary Therese Coffey that the Tories were the Party that conceived the NHS in 1944. 

Davis knows full well that only in exceptional circumstances have governments turned to use National Insurance money to fund the NHS, which has always mainly been funded from general taxation – effectively sharing the risk and the costs of ill-health across the whole tax-paying population, the widest possible pool. Liz Truss and co have just reversed the most recent plan to use NI funds for the NHS.

Aneurin Bevan, the Labour minister who pushed through the legislation to establish the NHS in the teeth of opposition from the Tories, who vote 21 times against it, clearly rejected any notion that the NHS was an insurance scheme and any confusion with National Insurance. It seems the right wing ‘think tanks’ and their allies prefer to recreate the confusion. 

But why is David Davis so keen to suggest that the NHS is an insurance scheme? He wants to argue for a greater private sector slice of the action. He says so in so many words: “Involving private firms in the provision of health insurance … would simply mean sharing the burden (and the opportunity) between the state and the private sector.”

Of course there is no “sharing” involved, other than allowing the private insurers to carve out a profitable niche for themselves. The private insurance industry has no interest in chipping in to the cost of running the NHS – or indeed in paying out for patient care if they can possibly avoid it, which is why they are so reluctant to insure older people and those with pre-existing conditions who are more likely to be making a claim. 

So how would private insurance become an issue under Davis’s view of social insurance? Only if it’s linked with preferential access to hospitals, mental health and GPs, all of which would presumably be levying fees. So it’s no so much changing the mechanism of funding that’s at stake, but privatising and commercialising the provision of health care, again to the benefit of the rich, and disadvantage of the poor.

It’s clear that once the myths and falsehoods are discarded social health insurance is not the answer to any of the big questions facing the NHS today. As Roy Lilley recently argued:

“There are huge waiting lists, an exodus of staff, wages are poor, working in health and care is unattractive.

“Would a social insurance system, fix it? No.

“We don’t have enough health professionals nor enough beds.

“Would a social insurance system fix it? No.

“There are some outcomes that are better elsewhere… but it depends on what comparator you pick. 

“Would a social insurance system fix it? No…”

We could add that there are long queues of ambulances outside A&E, long delays in emergency admissions, long delays accessing mental health care. 

And social insurance and private provision are absolutely no use in dealing with these problems, either.

In 1948 The NHS moved decisively beyond the social insurance system that had prevailed from 1911, and established a system that was universal and more forward looking, allowing services to be planned on the basis of need, patients to access services regardless of ability to pay, and national training systems to be put in place for doctors and professional staff. 

Nobody but the crackpot right wing of the Conservative Party and neoliberal lobby groups now wants the discredited old system back.



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