A major new report from think tank, the Institute for Public Policy Research (IPPR), finds that there is no evidence that insurance-based healthcare systems out-perform tax-funded systems. Instead, it argues that the best way to fix the NHS is to change the way money is spent, not the funding model. This includes a recommendation to prioritise capital investment.
‘Bismarck versus Beveridge revisited: does the model shape the outcome?’ analyses health systems in 22 high-income countries concludes that switching the NHS to a European-style insurance system would not improve performance across measures of capacity, access, quality, efficiency and equity.
The report says that health system outcomes vary far more within funding models than between them. However, new research finds that tax-funded systems have some key advantages, including:
• They are cheaper for patients: people in the UK spend 2.6% of household income on out-of-pocket health costs, compared to 3.5% for those in insurance systems
• They have lower admin costs: administrative costs consume 2.2% of health spending in tax-funded systems compared to 3.5% in insurance systems.
‘Costly distractions’
The authors of the report also point out the high risks of transitioning from one system to another, saying any such move could cost billions and potentially take decades.
The findings undermine claims that social health insurance systems such as those in France or Germany are inherently superior. The think tank warns that politicians risk pursuing costly distractions instead of addressing the real causes of the health service’s decline.
Instead, the report says the real reason for the poor performance of the NHS against comparator countries is partly driven by chronic underinvestment.
While the NHS has received record funding, its increase in spending in recent years has predominantly been focused on staff, salaries and other costs that have risen due to inflation.
Spending on capital investment – including beds, diagnostic equipment and infrastructure like buildings – remains lower than it was in 2010. Spend on capital was 0.358 per cent of GDP in 2023, down from 0.395 per cent in 2010. This is roughly half the average of the comparators.
The think tank says that the government can turn the NHS around, but only if they:
• Prioritise capital investment, such as spending on the crumbling NHS estate and diagnostic equipment
• Move care out of hospitals and into the community, to focus on prevention and public health
• Tackle the social care crisis, to reduce preventable admissions and poor post-discharge outcomes.
Sebastian Rees, Head of Health at IPPR, says: “There is no structural silver bullet for the NHS. The idea that simply switching to a European-style insurance model would fix its problems is a pointless distraction and not supported by the evidence.
“The NHS’s challenges are real – but they are the result of a decade of chronic underinvestment and choices on how money is spent, not the funding model itself.
“Policymakers should focus on what actually works: investing in infrastructure, strengthening primary care and tackling the drivers of poor health.”
Lord Ara Darzi, former Health Minister, says: “The social insurance systems of France, Germany and the Netherlands are regularly invoked as superior alternatives, with little scrutiny on what those systems actually deliver or what it would take to replicate them here. There is no systematic evidence that social health insurance models outperform tax-funded systems.”
