Election: Conservative Party causes a storm with its plans to subsidise private sector health costs with £1.2bn of NHS funds
The Conservative Party's pre-election proposal to use £1.2bn of NHS funds to subsidise the treatment of patients who opt to use the private sector has rocked the healthcare sector.
Under the proposals outlined in the Party manifesto, a Conservative government would contribute 50% of the NHS tariff for an operation toward the cost of having the procedure at a private hospital.
The proposal has sparked controversy, with Health Secretary John Reid attacking the plans as "a regime where charging will be brought in for early treatment." The Conservatives counter this suggestion claiming that rather than creating a two-tier system that favours the wealthy, the scheme will free up space within the service and allow those who cannot afford to go private, to receive quicker treatment.
The plan was first mooted back in 2003 when the proposed contribution was 60% of the NHS tariff. The scheme was dealt a blow however, when 95% of nurses voted against the proposals at the Royal College of Nursing congress in 2004. Despite similar schemes having proven popular elsewhere in Europe, criticism of the plans has been fierce. One group that has conspicuously avoided joining the debate however, is the private medical insurance (PMI) sector.
Andrew Lansley, Shadow Health Secretary, met with the Association of British Insurers' PMI Working Party in March 2004 to discuss the intricacies of implementing the Conservative plans. Although the details of the meeting have not been made public, Jenny Parsons, press officer for health at the Conservative Party confirmed: "Yes, we did consult and our plans were deemed feasible." Parsons refused to specify however, how many consultations had taken place and whether there had been discussions with individual providers and private hospital firms.
Despite the wealth of publicity that the scheme has received, much confusion remains as to just how expansive the Tory plans are. The emphasis of the manifesto announcement seems to be on elective surgery, which leaves doubts about whether conditions such as cancer, which require prolonged periods of care and multiple courses of treatment, will qualify for the tariff.
"There is no doubt that this plan is feasible but it is all contingent on a Conservative victory," said Mike Hall, chairman of the ABI PMI Working Party. "No political party will have plans in any great detail before they are elected. It will take about a year for the proposal to move through the legislative process and in that time they will liaise with the private sector on the implementation and details of the scheme."
Implications
If the proposals were implemented, the implications for the PMI industry would be profound, giving patients the freedom to choose to pay for faster treatment. It would not be the first time that the NHS has taken advantage of the spare capacity available in the private sector however.
Last year, Nuffield Hospitals was one of two firms to be awarded contracts to carry out 25,000 knee and hip operations. Nuffield has also begun restructuring in a plan to bid for the next generation of NHS independent treatment centres, which should be treating 250,000 patients by the end of this year.
"While we cannot comment on any specific political policies, we welcome any initiative that will have a tangible impact on NHS waiting list times," said a spokesperson for Nuffield Hospitals.
Despite its reluctance to endorse one policy over another, Nuffield, and other private hospital firms, stand to reap considerable rewards if the Tory plans become a reality. Although current NHS outsourcing may well be proving lucrative, the possibilities presented by the Conservative scheme are immense, far exceeding the NHS work now available. Although undoubtedly good news for private hospitals, what do the proposals mean for PMI providers?
"This scheme should impact the private medical insurance sector positively. It will lead providers to produce new products that cater for the new plans," claimed Hall. "We should see new policies emerging that fill the gap between the Government contribution and the charge levied by the private hospital."
New plans that fill such a gap will presumably be for a smaller sum assured, so inevitably premiums would fall. While this may mean that more people will be able to take advantage of PMI, the reduced premiums would hit insurers in the pocket. Then there is the question of existing policyholders. What options are available for those with comprehensive PMI? Would they be able to switch over to a plan that takes advantage of the Conservative scheme?
"We have not done much detailed work on the implications for existing policyholders and I'm not willing to comment on that issue at this stage," said Hall. The group sector holds an even bigger concern. It seems likely that employers with full PMI would seek to change cover to take advantage of the Government subsidy and lower their premiums. If most decided to switch, this could be very bad news for group PMI providers.
One company that will find itself in a unique position is BUPA. While the private hospital network should experience a strong upsurge in business, the PMI sector will be hit with a drop in premiums in the same manner as other providers who have redesigned products to take advantage of the NHS tariff. Unfortunately, BUPA did not want to comment on the issue, which it deemed "too sensitive" in the run up to the general election.
Unique position
Concerns have been raised about the impact that a flood of new patients will have on the quality of service available within the private sector. A sharp rise in admissions would surely be detrimental to the standard of treatment. Hall disagreed: "An increase in the number of patients does not naturally mean that the quality of care they receive will suffer. To suggest that it will, simply isn't correct."
Criticism has also come from the health think tank The King's Fund, which has suggested that the new scheme may lead those who do not have PMI, but can afford to pay for private treatment if necessary, to take advantage of the subsidy, adding "deadweight" to the NHS.
Parsons is quick to dispel such fears however: "The likelihood of those who currently have health insurance and those who go for one-off treatments all needing operations in the one year is highly unlikely. The deadweight cost is a gross overestimate," she added.
The Conservative plan is certainly an ambitious one. It is very difficult to predict whether the scheme would succeed in relieving pressure on the NHS or simply create a two-tier health service and compromise the calibre of care offered by the private sector. Predicting the impact for the PMI sector is similarly precarious; it may well mean that more people than ever will be able to afford medical insurance, but at the same time lower premiums may mean insurers would suffer. The jury is well and truly out.
