Health care is a question of priorities

PRIVATE HEALTH; A SPECIAL REPORT; Alison Eadie introduces a three-page special report on private health care

The future of the National Health Service is one of today's most hotly debated issues. The notion of a cradle to grave service free at the point of delivery to all is crumbling. Rationing, once considered a dirty word, is now being accepted as inevitable.

Spiralling costs have been caused as much as anything by advances in medicine. Cancers that were untreatable 30 years ago, now stand a good chance of being cured. Cancer treatment, however, takes 7 per cent of the total NHS budget of pounds 32 billion a year. Heart bypass operations only began in the 1970s, but this year there will be 25,000. Transplants are increasingly performed, but hugely expensive. A heart operation costs the NHS pounds 28,000.

As drugs and medical technology improve, so people live longer. The number of people living beyond their 65th birthdays is expected to rise steadily through the first half of the next century and the proportion of working population supporting the pensioners will shrink. The strain on the NHS will rise and the debate on the quality of funding of care for the elderly will intensify.

Last week the debate was laid bare in a report from the think tank Healthcare 2000, sponsored by the pharmaceutical industry. Led by Sir Duncan Nichol, former NHS chief executive and now a non-executive director of private medical insurer BUPA, the report concluded that the NHS could no longer fund a comprehensive, free service to all.

While it found no conclusive evidence that the NHS was underfunded, it said that international comparisons, explicit rationing of some health services and public opinion "lead us to conclude there is a gap between resources and demand which shows signs of increasing". It added that putting up taxes would not be enough to plug the gap. One answer, it suggested was "increased private expenditure through, for example, an extension of user charges and patient co-payments".

Health Secretary Stephen Dorrell was quick to quosh the notion of a two tier NHS where better off patients paid for better service. He insisted that access to healthcare should not be determined by the size of a person's wallet, but he admitted that if the NHS was to remain a tax funded service, decisions about priorities would have to be made.

Despite increasing public anxiety over the state of the NHS, there has not been a stampede to the private sector. Commitment to the principles of the NHS and the cost of private medicine are the chief causes. Numbers of people with private insurance (PMI) grew from 3 million in 1980 to 6.5 million by 1990 and has remained largely static since. The latest Review of Private Healthcare from Laing & Buisson showed a 4 per cent rise in 1994 in numbers of medically insured to 6.6 million, the first measurable rise since the beginning of the 1990s.

Some providers of PMI do not expect to see much growth over the next five years. Peter Dalby, managing director of Prime Health, believes the recession , high unemployment, insecurity and the imposition of insurance premium tax have conspired to limit the expansion of the industry. Another adverse factor is the re-emergence of a high rate of medical inflation which is currently running at between 10 and 14 per cent. Mr. Dalby pointed out that while underlying medical inflation was running at 3 to 4 per cent the incidence of claims and the use of more high tech tests and precedures caused total medical costs to rise at a significantly higher rate.

Insurers have responded by marketing budget plans, which make PMI more affordable. But Mr. Dalby believes the exclusions and limits of these policies have brought them into disrepute with the public. Prime Health has responded by revamping its Primecare full cover benefits at prices it believes are affordable to people who previously could only have considered a budget plan. Its features include a 50 per cent no claims discount and no permanent exclusion of pre-existing conditions.

Tim Baker, commercial director of Norwich Union Healthcare, believes there is a strong underlying demand which will lead to real growth in the long term. But in the short term he says that spending on PMI is linked to the consumer economy and that at present is flat.

Laing & Buisson is more upbeat. It projects that nine million people will have PMI policies by the turn of the century. However it also points out that the hoped for co-operation between public and private sectors is not taking off. Less than 5 per cent of independent hospital revenue came from the NHS and despite continued Department of Health promotion of the Public Finance Initiative, there is unlikely to be any major shift within the NHS towards `outsourcing' of core acute treatment this side of the next general election, the Laing review concludes.

The NHS share of private patient business has crept up in recent years. With 1400 pay beds in NHS hospitals, the NHS share rose to 15.1 per cent last year from 11.2 per cent in 1988.

Although there has been no rush to the private sector in the past five years, there has been strong growth in the number and type of policies on offer. Once BUPA, PPP and WPA, the three provident associations, had the field to themselves. Now there are some 30 insurers, many from overseas, offering 400 variations of policy.

PMI is not the only private health cover available, MME or major medical expenses insurance pays out a cash lump sum if the policyholder has to undergo surgery. Hospital cash plans pay out a cash lump sum for each day spent as a patient in either an NHS or a private hospital. Permanent health insurance (PHI) replaces income if the policyholder is off work for a long time. Critical illness insurance pays out a lump sum on diagnosis of specified illnesses like cancer or a stroke. Long term care insurance, aimed mainly at the elderly, pays an income to be used for nursing home bills.

Finally there is the pay as you go option. Because of the cost of insurance, many people prefer to pray for good health and pay for private operations as and when they are needed. Nuffield, the private hospital group, is offering up to one year's interest free credit to pay for treatment provided patients can put up a 10 per cent deposit.