With the NHS in a state of turmoil, Lucy Quinton explores the benefits of private medical insurance, and how important it is for the future health of the UK public.
On the verge of retirement, the baby boom generation is set to impose an irrevocable strain on the NHS in the UK. Already on its knees from an historic lack of funding and poor management, is it any wonder that people are having to seriously consider taking out private medical insurance (PMI)?
News in the mainstream media over the past 18 months has documented the appalling state of some hospitals in the UK, and the ramifications of this. Funding that is quoted as being poured into the NHS is not reaching its intended destination in the system, resulting in unhygienic wards and a lack of nurses.
Last month, the Euro Health Consumer Index revealed that the UK was low on the league table for healthcare. In fact the UK's system was ranked only 17th out of 29 countries, lagging behind all its northern neighbours.
According to reports, patients in the UK are being let down by poor cancer survival rates and high levels of MRSA infections. The index also found the NHS is still one of Europe's worst healthcare providers, and in the same league as countries such as Slovenia and Hungary, which both have low budgets on healthcare.
Prime Minister Gordon Brown may well have stipulated that there is to be a complete scrub down in each hospital in the country, but will that be enough to reignite people's faith?
Sarah Ravenscroft, head of provider strategy development at Axa PPP healthcare, says the main reasons why people turn to PMI are waiting list times; the ability to see specialists; access to direct specialist care rather than from a more junior doctor; and access to a private room, which includes en suite facilities and comfortable surroundings. These are the basic factors that raise concerns, although other benefits are also provided by different insurers.
Ravenscroft explains that Axa operates an open network policy if a policyholder enters hospital. This means that if a policyholder has to be hospitalised, then they are in a facility that is part of the network, so that Axa can pay out on a claim. In this situation, the provider has a number of agreements or contracts between different hospital providers. However, she adds that if this is not possible, policyholders can go to another hospital nearby.
There are several common misconceptions surrounding PMI. Colin Boxall, director of healthcare at e-xcellent health, explains: "People have PMI as an alternative to the NHS when it is actually designed to work alongside; to enhance it, not replace it."
He adds that the main benefit of PMI has been more choice and control for short-term 'curable' illnesses. This means the ability to choose who (the specialist in charge of the treatment), what (the type of treatment, perhaps the most effective rather than the most cost-effective), where (the hospital) and when (treatment at a time that suits the patient).
Boxall explains that one of the strengths of taking out a PMI policy is the choice of where treatment is available. However, he says how wide this remit is will depend on the policy: "Insurers have differing hospital listings based on the amounts charged to the insurer. The majority of insurers then grade these into categories. These 'lists' show where treatment is available under a policy - the more extensive the choice, the higher the cost of the policy."
Despite this, he adds that some insurers have no hospital bandings, such as Smart Health or WPA, which do not restrict choice but can price by postcode. Some insurers may allow a consumer to use a hospital not included in a list, but would then require the patient to contribute to the overall cost.
Private enterprises
There are currently around 300 privately run hospitals in the UK, and this figure is fairly static, according to Ravenscroft.
Furthermore, major insurers are backing out of owning hospitals. Axa used to part own shares in four hospitals in central London, but sold off its shares several years ago. In addition, Bupa sold its UK hospitals earlier this year. The reason for the decreasing number of private hospitals that insurers own is down to the financial implications of making money out of them.
According to Mike Williams, senior consultant at Watson Wyatt, insurers have also pulled out as the skills to run a hospital are not the same as running an insurance company.
The practice of providers looking to buy hospitals is clearly at an end, says Williams, adding he has yet to see a hospital/insurer tie-up work effectively. A similar scenario occurred in the general insurance arena, when motor insurers attempted to buy repair centres but it did not work. "It is best to separate purchase and supply," he says.
PMI is a good idea, but as people get older premiums rise, and when a person eventually retires their income declines. This means that PMI becomes too expensive and they cancel their policy, resulting in an increased burden on the NHS.
One way to combat this problem is to sell PMI as it is sold in Ireland. Williams explains that PMI premiums are community related, making it cheaper due to the fact that more people, especially the young - who claim least, help bring down the average price of premiums.
Boxall disagrees completely. He believes the market can expect to see more hospitals being bought by the PMI sector, with private providers continuing to merge through acquisition. As NHS restructures and foundation trusts emerge, he says some hospitals are being bought and sold either to other parts of the NHS or private providers.
Spire Healthcare, formerly Bupa Hospitals, released a statement last month confirming that it intends to build its position as a leading player in the private hospital market. The plan is to develop existing facilities but also look at new ways of delivering quality healthcare services.
Overall, the future looks bleak for the NHS in its current form. "Ideally, the private sector and the NHS should work together on tackling issues. However, under the current Government, an expansion of this is unlikely to happen," Ravenscroft adds.
Baby boomers are on the verge of retirement, but they are likely to live much longer than the generation before. However, while they may live longer, they are more likely to be seeing the inside of a hospital ward.
Increased pressure
Fiona Harris, head of personal markets at Bupa, says: "With a slow-down in funding post 2008, the NHS is likely to be under increased pressure to meet demand for its services from patients of all ages. In addition, as more people get older, this is only going to increase."
Bupa has predicted an £11bn gap in NHS funding by 2015.
Sadly, Boxall agrees: "This is likely to be the case if we do not have a general change in how we live our lives. A large majority of cancer and heart conditions is linked to lifestyle."
Therefore, he suggests that if people improve their lifestyles, then it will reduce the risk of serious illness. However, on the up-side, he says that improvements in procedures and technology will also continue to shorten time spent in hospital.
Harris agrees with Boxall, and believes the private sector can help the NHS in various ways. For example, by encouraging people to take a more proactive approach to their health and lifestyle, and earlier detection of abnormalities.
People often buy PMI for peace of mind, and to have more control and choice. PMI can be viewed as a 'luxury' product but not many people realise that a measure of cover can be obtained for less than what they pay for their Sky TV package. "Perhaps it is a matter of priority," Boxall says.
However, while it seems that the PMI sector has a duty to help alleviate the pressure from the crumbling NHS, it would seem the perception of PMI has changed - it is not seen as a luxury item anymore but an essential one.
Harris says: "Some say they value it more than going on holiday. PMI is affordable - some of our largest groups of customers are electricians, teachers, civil servants and taxi drivers."
However, while this may be the case, perhaps it suggests that while it may be essential to reducing the burden on the NHS, the key is still getting the message across to the consumer to consider PMI in the first place. n
