The National Health Service (NHS) is seemingly in a state of crisis, with 7.2 million people now waiting for treatment.
Yet the UK electorate remains fiercely loyal to the service, although few would argue that urgent corrective action is needed if the NHS is to continue to serve future generations.
Reducing those existing – and potential – waiting lists must be the key. That process will take years, and can only happen if the NHS is provided with adequate levels of funding, facilities, and staffing. Committing to all three requirements is a big political ask, not least because of the national financial constraints of 2023.
Yet the government must be seen to react to the crisis, particularly as the next general election is now less than two years away. So what are the choices for the government to consider?
More NHS funding will certainly help, yet building hospitals and recruiting qualified and trained employees takes time. Continuing to use private hospitals for some NHS procedures will also feature in the short term, but the government must also stem the flow of potential future demands on the service if the NHS is to catch up. Other solutions should be under consideration.
The easiest way to relieve future waiting list pressures is to encourage many more people towards private healthcare insurance and treatment. And the best way to achieve that – at scale and speed – is to encourage many more employers to offer all their workers company-funded group private medical insurance (GPMI).
Yet employers will often need some financial help to make this transition, and many in the healthcare industry are likely to advance tax breaks as a solution to that problem.
But do tax breaks actually work? The evidence from the group pensions market is far from convincing. For decades governments have been incentivising pension savings with vast amounts of tax relief. Yet the majority of that relief has gone to existing schemes, existing savers, and higher earners. Ultimately it took the legislative cosh of auto-enrolment to significantly increase the numbers of low and moderate-earners saving for their retirement.
So why not a version of auto-enrolment for healthcare? The UK may well end up there, but right now the legislative process would simply take far too long to make a rapid difference to the NHS. The NHS crisis needs solving right now.
Notwithstanding my earlier comments about the success, or otherwise, of tax breaks, there are several possible options, and associated obstacles, for the government to consider here
Removing P11D liabilities for employees won’t help their employers fund new GPMI offerings. The removal of Insurance Premium Tax (IPT) for GPMI would help both employers and employees financially, but may not be sufficiently understood to act as the catalyst for mass new membership. And reducing National Insurance (NI) rates is probably off the table, not least because the government won’t want to remind the electorate of all those NI changes made to accommodate the short-lived Health and Social Care Levy.
This leaves one final option: incentives rather than tax breaks.
But what do I mean by incentives? I’m talking about a direct financial payment from government coffers to meet some of the initial premium costs for genuinely new GPMI schemes. I would suggest 30 per cent of premiums in year one, 20 per cent in year two and 10 per cent in year three. From year four there would be no subsidy, but experience suggests that very few employers withdraw a GPMI offering once in active use.
Incentive payments are easy to explain and tangible, and should therefore make a real difference in many corporate buying decisions. Incentives could therefore go a very long way towards increasing GPMI coverage across the UK.
The cost to HM Treasury would of course be significant in the short term, but it’s a cost that is controlled, rapidly reducing, and offset by savings in NHS treatment, fewer state benefit claimants, a more productive nation, and of course those annual employee P11D tax liabilities too.
And any such change is also likely to spark some welcome product development by both insurers and intermediaries.
Realistically the spring budget statement may be the last chance for the government to make announcements that will make a real difference to the NHS before the next general election.
Premium incentives for GPMI policies should perhaps form part of that statement.
