Last week’s AMII Conference brought together some of the leading UK heath insurers, intermediaries and brokers and provided some valuable insight into the challenges faced by the NHS and the UK’s private healthcare sector.
The conference was held against a backdrop of concerns over the stagnation of the sector and media speculation over the future of the UK’s free to access National Health Service. 10 years ago private medical insurance covered 11.9% of the population through corporate and individual schemes. But insured numbers have been in steady decline, resulting in the loss of over one million consumers of private healthcare services. Medical inflation has contributed to significant increases in health insurance premiums while at the same time the recession has hit both company coffers and people’s pockets. In contrast, the low cost health cash plan market is seeing growth, and the number of people who are self funding private healthcare is on the rise. The private hospitals whose business is driven by insured patients are feeling the knock on effect and are turning to the NHS to keep private hospital beds occupied at marginal cost.
Just over the horizon, the industry awaits the recommendations of the Competition Commission into private healthcare which may bring further pain to the sector. The need for innovation in healthcare delivery payment models and funding were recurrent themes throughout the event.
A model for 21st Century healthcare
Professor Nick Bosanquet from Imperial College opened the conference with his view of the 21st Century model of healthcare. He outlined his four stage model:
- A focus on prevention rather than cure.
- The need for early diagnosis and screening.
- The development of active ambulatory services.
- The adoption of care programmes with the provision of care closer to home, and improved communication with patients in understanding and delivering their healthcare needs.
He highlighted the 38% increase in NHS inpatient admissions over the years 2000 - 2010, and compared this to Sweden where these have only risen by 1%. At the same time, the NHS budget has doubled in real terms, and the number of consultants working in the NHS has risen by over 50%.
In Bosanquet’s view, the NHS is now in its 5th crisis period, perhaps worse than those in 1950, 1968, 1976, and 1987:
- Public funds are reliant on tax income from younger tax payers, and these are becoming fewer putting increasing pressure on NHS funding.
- The number of over 65’s will increase from 10.5 million to 14.2 million over the next 3 parliaments, fuelling the demand for NHS care.
- We’ll see a 66% increase in hospital admissions of the over 75s.
- Skilled staff shortages are becoming apparent within the healthcare sector.
- A North-South divide is developing in provision.
- And “soft option” politics mean that voluntary redundancy, agency cuts, and reduction in management numbers are often the route to greater efficiency.
A business with ageing customers will die (as do its customers!)
Like the NHS, the private health insurance sector is facing a crisis due to its “consumer profile”. Private health insurance subscribers are drawn from the older, middle and high income groups. But as they age, and require more (and more expensive) healthcare, the cost of health insurance premiums is escalating for individual and corporate scheme members. Professor Bosanquet had a very stark message for the health insurance businesses: “Insurers need to have 20% of their customers under 40. A business with ageing customers will die (as do its customers!)”.
The route to growth...Cost cutting or innovation?
Discussion was focused on fixing the problem. Panel members put forward their views on how the industry could meet the challenges. There was widespread conviction that there is a need for the PMI market to grow...but how could this be achieved? Through cost cutting to reduce premiums or innovation? Here are some of the views expressed:
Paul Moulton from AXA PPP believes that industry participants must work more closely together, providing a broader package, case management and involving a combination of private and public sectors. The market can’t withstand medical inflation at 10%pa., resilience of market will come crashing down.
Nick Reynolds from Aviva is in favour of greater tailoring of services to different audiences, and putting more emphasis on prevention, screening, and the use of specialised providers. For him, the biggest challenge is the cost of distribution of PMI. Direct-only products may represent an opportunity. On the provider side, there’s a need for new entrants to stimulate some innovation.
Liam Kennedy from Pruhealth pointed out that nowadays patients have more freedom of choice under the NHS. Restrictive networks and cost containment are constraining consumer choice and making private health insurance less rather than more attractive.
The NHS in crisis...Is it the end of the free public healthcare system?
The demographic “time bomb”, and pressure on government funding mean that a “do nothing” approach is not an option. Now is “moving the deckchairs around on the NHS ship”.
According to Damian Marmion from BUPA, structural change is essential. Lack of competition and lack of price transparency is expected to be covered by the Competition Commission review of private healthcare. But the recommendations may fall short of re-structuring the private hospital market in areas such as London. Quality and outcome measurement will become more important. Both the NHS and private sector will need to find ways of delivering better value to consumers. Damian’s solution to the NHS would be threefold - separate the NHS from government control, create a health system that is the most productive in the world, and the most admired by its staff and the UK population.
Paul Shires from Westfield believes that referral management by the Clinical Commissioning Groups will become more prevalent in an attempt to restrict access. In the long term, the NHS has to focus on prevention and health education. In the medium term, a co-funding, co-payment is needed.
Andrew Halden from Reform pointed out that the NHS spotlight is often on A and E performance, waiting times and hospital performance. But the real problem is the pattern of care. In the past decade the NHS budget has doubled in real terms. Andrew and the rest of the panel saw little hope of tax incentives being introduced to encourage adoption of private healthcare. It would be seen as a subsidy for the better off. Although a voucher based approach might be a possibility where ultimate choice was given to the patient. The policies of all three of the main political parties policies are very similar. The integration of health and social care is a common theme. In Andrew’s opinion, cuts in other publically funded services have led to greater efficiency, more accountability and a more flexible workforce (e.g. the police). Whereas university education was heavily subsidised in the past, the public has come to accept (but not like) consumer funding or part funding of tuition fees. Perhaps, we are at “the beginning of the end of the welfare state.”
Fergus Craig from AXA PPP highlighted two key drivers for PMI: whether people (and companies) have money to spare in a recession and the relative cost of PMI. Even if the NHS fails to deliver and waiting times rise, people may still not see PMI as an affordable alternative. At present, the industry provides cover for people with high incomes. Providing healthcare through low cost company schemes could be the way forward.
Wayne Pontin, Chairman of AMII had the last say. Payment by results... Money is being spent inside hospitals when it could be better spent on diagnosis and prevention. Whether people are “buying” their healthcare through taxes which pay for the NHS or through private healthcare schemes, they need to understand the cost of healthcare. The NHS isn’t free.
So, some interesting perspectives on the future of the NHS and the private healthcare sector at a worthwhile and thought provoking event. We await the outcome of the Competition Commission enquiry with baited breath...