2. History
The NHS was launched on July 5th 1948.
Aimed to create, “ comprehensive health and rehabilitation services for prevention and cure of
disease”.
Initially funded through general taxation of the residents as well as National Insurance as part
of the introduction of a wider Welfare State.
Some prescription charges were introduced soon after in response to economic difficulties.
“The NHS was created out of the idea that good healthcare should be
available to all, regardless of wealth”
When launched, it was based on three core principles:
• that it meet the needs of everyone
• that it be free at the point of delivery
• that it be based on clinical need, not ability to pay
These three principles have guided the development of the NHS for more than 60 years and remain
at its core.
4. The Funding Problem
How have the demands placed on the NHS changed since it was established in
1948?
Why do these demands cause a funding problem for the NHS? Why is the
problem likely to continue to worsen?
6.
The greater the population, the more people there are to treat
Puts strain on the NHS due to the increased population
Increase in elderly population (65+)
Unable to deal with patients’ needs effectively
Due to advances in technology & better awareness
Unable to satisfy demand placed on them
Over 65s represent 17% of the population
But take up 68% of emergency bed use in A&E
8.
Though the general population are healthier and living for longer,
There is an increase in the number of preventable illnesses
E.g. obesity – leads to high blood pressure, heart attacks etc.
24% of men and 36% of women were obese in 2011.
Drug & alcohol misuse is still very high
Private Benefit: Enjoyment of food
Social Cost: Increase in demand for healthcare due to illness caused
9. General costs incurred by the NHS
The average visit to A&E costs the NHS an average £117.
Delivering a child without any complications costs on average £1200
A hip-replacement surgery costs around £6000.
10. Funding Problem
Funded through taxation
Under-funded and unable to deal with the number of patients
Understaffed or excess demand due to closures of hospitals to save money (eg
A&E department in Chase Farm)
Unnecessary demand placed due to illnesses caused by obesity and other
preventable illnesses.
The problem is likely to worsen if nothing is done about this. Population
growth is inevitable and there is not much that can be done to slow the rate
of growth down.
12.
Two types of healthcare in the UK – NHS & Private Healthcare
Most use NHS healthcare because it is free (though paid for by their taxes)
Demand for private healthcare has decreased, due to the recent recession
P
and loss of income to spend on healthcare
S
Private healthcare has a number of
advantages compared to NHS, but has its own issues
that cause market failure
P1
P2
D
D2
O
Market failure is when the price mechanism fails to deliver efficiency and
results in a misallocation of resources
Positive externalities – Positive third party effects external to an exchange
and ignored by the price mechanism
Negative externalities – Negative third party effects external to an
exchange and ignored by the price mechanism
Q
Q2 Q1
14.
Private healthcare is healthcare provided by another party other than the
government. In the UK, any healthcare provided apart from the NHS would
be private healthcare.
Benefits Include:
. A greater choice (choice of consultant etc.)
. Better continuity of care from diagnosis to treatment
. Private rooms
. Shorter waiting lists
. Modern facilities
. Some treatments offered by private hospitals and clinics are not available on
the NHS.
. Flexible appointments
15. Existence of Market Failure in Private
Healthcare
The existence of private healthcare has both positive and negative
externalities
These externalities cause market failure;
Private healthcare allows for the
public to be treated quicker
(avoiding waiting lists) and leads to
a healthier workforce
Asymmetric information can lead to
patients being exploited by doctors
and medical staff
16. Inequality
One of the biggest challenges of imposing private medical healthcare is that it
can be expensive.
Insurance schemes are available so you are covered by insurance if you need
treatment (monthly/yearly premium)
However, not everybody can afford private healthcare.
If private healthcare was imposed for all, many would be unable to afford
treatment.
The social optimum of those going to hospital would be lower is the NHS was
providing it
Market failure is therefore created
19. Solutions
There are various solutions to solve the market failures associated with UK
healthcare
Change in government spending
Measures to improve efficiency in the NHS
Direct payments (user charges)
Provision of healthcare through private insurance schemes
Expansion of the Private Finance Initiative
20. Government Spending
To support the NHS in the short term, the Government has made an extra £500 million funding available
over the next two years. The Health Secretary set out how £250 million would be used by 53 NHS Trusts this
winter.
Of the £250 million:
Around £62 million for additional capacity in hospitals
Around £57 million for community services
Around £51 million for improving the urgent care services
Around £25 million for primary care services
Around £16 million for social care
Around £9 million for other measures – for example to help the ambulance service and hospitals work better
together.
£15 million of this money will also be spent on NHS 111
However, this is for the short term only. More must be done to
permanently allow the NHS to work more efficiently.
21. Findings from recent Government policy
There have been improvements in transactional aspects of care (access and waiting times) but concerns
remain about relational aspects of care (emotional support, dignity and empathy).
Levels of public satisfaction with the NHS have fallen.
Smoking rates continue to fall and obesity among children is stabilising, but excess alcohol consumption
continues to rise, as does adult obesity.
Mortality from cancer and cardiovascular disease has fallen but the United Kingdom still has higher levels of
avoidable mortality than other countries, and health inequalities persist.
22. Measures to improve efficiency in the NHS
This chart shows the tasks set out by the
NHS in order to improve efficiency.
This will also include toughening up on
doctors and other medical staff to ensure
that they perform their duties to their
highest of their ability
However, judging the quality of healthcare
is very difficult and hard to put a value
on.
23. Direct Payments (User Charges)
On top of the NHS, patients could be charged for medical treatment (eg. £15
per A&E visit)
This could deter some from going to A&E because they would have to pay
So more people would be tempted to use the 111 non-emergency service and
find alternative methods of treatment (e.g. several are known to go to A&E
for having the common cold
However, this may put off some people coming to hospital due to the charge
and they may have a serious medical issue
Health also has inelastic demand. Even if charges were brought along, it may
not bring down the numbers visiting the NHS by a significant amount.
24. Provision of healthcare through private
insurance schemes
This would ultimately solve the funding problem.
However, could lead to the emergence of monopoly powers in the industry.
Monopoly powers could be inefficient and go against the consumers’ interest
with high pricing
Would be a major deterrent of those unable to pay for private insurance
schemes.
Income inequality is introduced and leads to a marginal social cost.
Would bring the social optimum visiting hospital down
compared to NHS
25. Expansion of the Private Finance Initiative
The private finance initiative (PFI) is a way of creating "public–private partnerships"
(PPPs) by funding public infrastructure projects with private capital.
However, it is very difficult to manage and has led to dozens of hospitals falling into
large amounts of debt
It costs the government approximately £1bn over the duration of the contracts to keep
the hospitals open by bailing them out.
The cost efficiency case for PFI is weak because public finance is always cheaper than
private finance. In lending to government, creditors are not taking very high risks with
their money – governments, unlike private companies, are unlikely to go bankrupt and
default on their payments.
Therefore, the PFI is not well-suited for the NHS environment, but has been successful
in other sectors (eg. Housing and roadway maintenance).
26. Recommendation
A valued judgement suggests that direct payments (user charges) would be the most effective. Efficiency
must also be improved in order for the solution to work
This is because:
Government Spending will continually increase but the NHS must be run efficiently. Simply pumping money
in will not solve the problems at hand.
Provision of healthcare through private insurance schemes will ultimately cause market failure as income
inequality is created and those unable to pay will not have any access to healthcare whatsoever
Expansion of the private finance initiative has proved to be ineffective and could potentially lead to high
amounts of debt for the government to repay out of taxpayers’ money.
If the government can implement fair user charges for basic treatments, it will reduce the demand placed
on the NHS. Efficiency must also be met as strict guidelines should be followed in order for the scheme’s
success.
Patients should receive the best care possible, and with an ever-increasing population, the NHS must stay
on top.
Therefore, the state should still be in charge of running public healthcare.
