Towards a new health care system?
Authors: P Day, R Klein
Journal: BMJ (1985)

Over the past decade Britain has been moving, hesitatingly and haphazardly, towards a mixed economy of health care. The assumption that health care policy could be equated with what was happening to and in the National Health Service, an assumption that shaped national debate and decision making for more than three decades after the creation of the NHS, is beginning to look frayed at the edges. The expansion of the private sector has meant that no analysis of health care provision in Britain can ignore its role. Whether our concern is with equity or efficiency, issues of access or questions about the level of provision, the activities of the private sector have to be taken into account. In this paper we address some of the implications raised by this development, drawing on three newly published surveys of the field that between them provide a comprehensive picture of what has been happening.'3 Our starting point is that the NHS will continue to be responsible for most of the health care for most of the people for most of the time. For the trends analysed in the three reviews confirm the prediction of the Nuffield study, published three years ago, that the rate of expansion in private health care would not be sustained at the pace achieved at the turn of the decade.4 There has been a conspicuous drop, as the Economist Intelligence Unit analysis shows, in the annual rate of increase in the number of people subscribing to insurance schemes. In 1979 there was a rise of 16*2%, followed by one of 25*9% in the following year. By 1982 the annual rate of increase had fallen to 2 9%, dropping to 19% in the following year. And although there is evidence of a pick up since then, there is no sign of a return to the boom years. Equally, although there continues to be a rise in the number of beds in independent hospitals, it is questionable how long this can be sustained. The numbers rose from 6758 in 1979 to 10 174 in 1985?and will have increased, it is estimated, by a further 850 by the end of 1986. Expansion, however, seems to have led to a drop in occupancy rates, indicating that there may be an oversupply of private beds at least in some parts of the country. The Economist Intelligence Unit survey quotes an estimate by the Association of Independent Hospitals that average bed occupancy rates in 1984 were no more than 65%, compared with the notional break even point of 70% needed for financial viability. In the case of nursing homes providing care for the elderly the picture is somewhat different. Here, too, there has been an expansion in the number of beds provided: the annual rate of increase was just over 8% between 1982 and 1984.5 The dynamics of expansion, however, are somewhat different. Private acute care is overwhelmingly financed by private insurance. The Economist Intelligence Unit estimates that whereas in 1975 patients themselves paid 40% of the accounts in private hospitals, the rest being borne by insurance, by 1984 the proportion had fallen to 25%: a reminder, perhaps, that some of the expansion in the private insurance market may represent a shift in the way that private health care is financed. In contrast, nursing home care is largely personally financed, with an increasing share being taken not by the private insurance market but by state social security as a result of changes in the supplemen? tary benefit rules in 1982.6 The figures of social security payments do not distinguish between residents in nursing and residential homes. They therefore indicate the trend, rather than the size of the state's contribution to the private sector. But the trend is remark? able. In 1982 social security paid all or part of the fees of 15 700 residents at a total cost of ?39 million. By 1984 the equivalent figures were 42 500 and ? 190 million respectively.7 The provision of care for the elderly therefore reflects a new pattern: the private provision of publicly financed care. It is not clear whether or not this trend will continue. The Department of Health and Social Security seems to have stumbled