Memorandum submitted by the King's Fund
This paper is a formal response by the King's
Fund to the House of Commons Health Select Committee's consultation
on co-payments and charges in the NHS. The King's Fund is an independent
charitable foundation working for better health, especially in
London. We carry out research, policy analysis and development
activities, working on our own, in partnerships, and through funding.
We are a major resource to people working in health, offering
leadership development programmes; seminars and workshops; publications;
information and library services; and conference and meeting facilities.
The Committee's inquiry into the topic of patient
charges poses a number of questions:
Whether charges for treatments, including
prescriptions, dentistry and optical services; and hospital services
(such as telephone and TV use and car parking) are equitable and
What the optimal level of charges
Whether the system of charges is
What criteria should determine who
should pay and who should be exempt?
How relevant patients should be made
more aware of their eligibility for exemption from charges.
Whether charges should be abolished.
These are all relevant and pertinent questions.
However, we would suggest that patient co-payments and charges
are part of a broader issue concerning access to health care.
Apart from the impact on a person's disposable income, the health
"cost" of imposing charges is to reduce access for some
sections of the (charge-exempt, but not well-off) population.
However, improving access has been and
remains a key policy goal for government in many areas, such as
access to services (eg walk-in centres), advice and information
(eg NHS Direct) plus the plethora of targets for reducing hospital
waiting times. Improving access in these areas has cost an (unknown)
amount of money, but we believe it to be substantial.
The broad question regarding charging and co-payments
is two-fold: first, is this policy consistent with the rest of
the government's access policy? And second, given that charges
raise money and that their abolition has a cost to the NHS, would
it better to spend money (that is, forego charge income) abolishing
charges rather than on other ways of promoting access?
In this memorandum, while the King's Fund, like
many others, acknowledge
the inconsistencies of the current system of charging, but given
the broader question about access to care, here we set out our
views on the key issue: should current patient charges levied
by the NHS be abolished?
ON NHS PATIENT
The principal reason for the creation of a health
service free at the point of use was that access to health care
(and by implication, health) was considered not only an important
right but also a socially desirable goal that should not be restricted
by any non-health attributein particular the ability of
an individual to pay for their own consumption of health care.
This principle is as correct today as it was in 1948, and is supported
by the overwhelming majority of the population. 
Nevertheless, while the vast majority of services
are provided by the NHS according to this principle, NHS patients
have for many years been charged a proportion of the cost of their
individual consumption of certain services and facilities, notably
dentistry, eye tests, prescribed
medication, "amenity" rooms in hospital and services
such as telephones and car parking. In addition, some services
(for example, the supply of spectacles) have been moved out of
the NHS and are largely paid for privately (with a voucher discount
scheme for certain population groups).
The key justifications for such charges is that:
Charges raise essential revenue for
the NHS in addition to Exchequer funding;
Charges act as a deterrent to "frivolous"
or inappropriate demand and thus combat the "moral hazard"
of over-consumption in a service without a price restraint;
Some services are not generally considered
part of the basic NHS "package of care" and therefore
should not be paid for from general taxation
The introduction of charges/payments
in the context of a private market stimulates innovation and higher
quality through competition.
However, the King's Fund is not convinced that
these arguments either justify the adverse or undesirable consequences
of chargingin particular the known risk that some people
will be dissuaded from seeking clinically needed care, or that
they constitute an efficient means of achieving their goals such
as raising money for the NHS or dealing with the moral hazard
of "over-consumption" of a service free at the point
Below we critique the main arguments put forward
in favour of patient charging.
1. Charges raise essential revenue for the
NHS patient charges undoubtedly raise revenue
for the NHS: overall, prescription charges raise around 6% of
the total drugs bill and dental charges around 30% of the total
cost of the General Dental Service. As a proportion of the total
cost of the NHS, however, patient charges account for a much smaller
fractionaround 1%. This revenue will be reduced by an unknown
amount due to the costs of administering the charging system.
However, charging patients for a proportion
of the costs of their own consumption of health care is inimical
to the basic principle of the NHS founded principally on breaking
the link between health care consumption and ability to pay in
order to promote the socially desirable goal of equity of access
to health care.
An associated equity argument is sometimes proffered
as a reason for at least retaining charges (if not extending them).
Abolishing patient charges will lead not only to unfairness, but
inefficiency: those who could easily afford to pay charges will
receive services free of charge. However, this muddles the roles
of the taxation and health care systems; it is the job of the
former to deal with society's views about the equity of contribution
to funds which pay for health care, and the job of the NHS to
ensure equity in delivery of services.
Furthermore, while the NHS will benefit in the
short term from the additional revenue raised by charges, there
is an unknown cost associated with increased ill health the NHS
may have to deal with in future as a consequence of charging deterring
needed health care. For example, in a review of prescription charges
in the UK, Theodore Hitiris,
"Prescription charges have an
inverse effect on the demand for drugs by patients liable to pay
the charge. Increases in charges are associated with a significant
reduction in utilisation of prescribed drugs among non-exempt
patients . . . there is also evidence that the short-term target
of using charges to raise revenue is pursued at the expense of
the long-term health of persons, and this may cost more to the
NHS than the increase in revenue. Therefore, the introduction
of co-payments is not an efficient policy [our emphasis]."
Overall, if the NHS needs to rely on the money
raised by charges, there are alternative ways in which to raise
such revenue which avoid potential adverse health and utilisation
consequences; money from a taxation system which, in a mildly
progressive way, goes some way to equalising the tax sacrifice
born by different income groups already funds the vast majority
of services provided by the NHS and should be used in place of
2. Charges act as a deterrent to "frivolous"
In relation to demand managementin particular
the argument that charges act as a financial disincentive to "frivolous"
or unnecessary demandcharges are generally misapplied:
levying patients when demand is actually a supply side issue.
Patient "demand" for prescription medicine and dental
care is mediated by the "suppliers" of health care (eg
it is doctors who prescribe, not patients).
If "frivolous" demand is a problem
(although there is little hard evidence of its scale) then there
are more effective and less inefficient ways of dealing with itprimarily
on the supply side, through, for example, the incentives faced
by practitioners, their clinical training and support through,
for example, review of individual prescribing by prescribing advisers
and monitoring of variations in levels of dental activity.
Moreover, charges unrelated to ability to pay
disproportionately burden the poorfor
whom there is no reason to suppose have a greater tendency to
"frivolous" demand than the rich, and impact on clinically
Although the current system of exemptions alleviates this burden
somewhat, and while a system based on ability to pay would go
further in this regard, as we have already noted, why invent such
a system when there already exists a charging mechanism which
embodies such exemptions and variations based on ability to payit's
3. Some services are not considered part of the
The argument that some clinical services are
not really medical or that they are unrelated to an individual's
health status and should not therefore be supplied and paid for
by the NHS has some validity. While, in the current charging system,
this argument may apply to the more cosmetic end of dentistry,
it is hard to see how it applies to other aspects of dentistry,
or ophthalmic services, or prescription medicine. Although all
the charging regime in all these services operate a system of
exemptions of one sort or another, it seems difficult to make
a coherent or logical argument in favour, for example of exemption
from charges for eye tests for people suffering from certain illnesses,
but not others; is the optical correction of myopia purely a cosmetic
However, there is a general problem in deciding
what should be in and what should be outside the NHS (and hence
funding on a universal basis from general taxation). Although
historically some services and treatments have been excluded from
the NHS on the grounds of clinical ineffectiveness, and, more
recently, on the basis of NICE appraisals, on the grounds of lacking
cost effectiveness, the NHS has never defined in a systematic
way its basic "package of care". There is also the question
of what could or should be supplied by the NHS: for example, given
the health-enhancing benefits of exercise, should gym membership
be wholly or partly subsidised by the NHS?
There are perhaps more obvious non-clinical
servicessuch as bedside televisions and telephones, and
car parkingwhich are offered to NHS patients at a charge.
While it could be argued that access to, for example, a bedside
telephone in hospital contributes to a patient's quality of life
during their stay, the contribution to the main purpose of the
NHSpatients' health-related quality of lifeis perhaps
more difficult to establish. Given competing calls on a limited
NHS budget, therefore, it is equally hard to make a case for the
free provision of such clinically-peripheral services.
4. Charges/payments in the context of a private
market stimulates innovation and improves quality
The argument that charging patients in the context
of a private market improves innovation and quality (through competition)
perhaps goes beyond the Committee's agenda on NHS charges, but
is, we think related (particularly to argument 3, above). For
example, one argument put forward for the deregulation of ophthalmic
services was that opening up this service to more extensive market
competition would improve the range and quality of spectacles
on offer. And indeed, this is what has happened.
Of course, such improvements have come at a
price (literally) for those no longer eligible for free sight
tests. And the voucher system introduced to offset up to 100%
of the full cost of spectacles for children and eligible adults
is of course dependent on the prices charged by opticians as the
vouchers are fixed in value. A government survey in 2001 indicated
that only 37% of vouchers were redeemed within the value of the
voucher and that between half and a quarter (depending on type
of prescription) of all opticians surveyed could not supply the
required spectacles within the value of the voucher.
Whether the optical market in general is operating
in the best interests of consumers is an open question (and one,
perhaps, worth investigating). But, there is a prior question:
should certain services (for certain people) be excluded from
the general NHS package of services in the first place? As we
noted above, not only is it hard to make a logical argument in
favour of exemptions from sight test charging on some grounds
and not others, but also hard to argue that optical correction
of poor sight is not a clinical intervention similar to many other
therapies available on the NHS which are paid for from general
The King's Fund's view on charges and co-payments
in the NHS is that while the current system is, in the words of
Lord Lipsey, ". . . a dog's dinner lacking any basis in fairness
or logic and stuffed with anomalies and inconsistencies",
more fundamentally, co-payments are generally an inefficient way
of achieving objectives which could be obtained more easily and
with fewer undesirable consequences by other means.
However, we would recognise that abolition of
existing charges raise a number of issues depending on the service
incurring a charge. However, the general question is whether the
costs of abolition are worth the benefits.
Although research has been proposed into the impact of the phased
abolition of prescription charges in Wales,
in general there is little or no empirical analysis of the costs
and benefits of abolition for the UK. Nevertheless, there is,
for example, international evidence of the detrimental health
effects of co-payments and charging and evidence in the UK that
charging reduces utilisation of non-exempt services. Moreover,
there is the principled argument that given the fundamental founding
objective of the NHS, it is anomalous to maintain patient charges
for, primarily prescriptions, but also including aspects of dentistry
and ophthalmic services.
16 For example, the New Labour 2005 General Election
manifesto stated that, "Healthcare is too precious to be
left to chance, too central to life chances to be left to wealth.
Access to treatments should be based on your clinical need not
on your ability to pay." And. As the Wanless review of future
NHS funding noted, "The system of free prescriptions in the
United Kingdom is illogical, irrational and works against the
principles of the National Health Service." (Wanless, 2002). Back
For example, the latest British Social Attitudes Survey for 2004
show that nearly eight out of 10 people-a proportion that has
hardly changed since the first BSA survey in 1983-oppose the idea
of making the NHS available only to the poor, and with a consequent
reduction in taxes and the better off purchasing private medical
insurance. (Appleby Jand Alvarez A, (2005) Public responses
to the NHS reforms In British Social Attitudes, 22nd Report
(Eds: Park A et al), Sage, London, 2005. Back
There is some irony in the fact that dentistry and ophthalmic
services were most in demand on the inception of the NHS. Back
For prescriptions, this may in fact exceed 100% if the actual
cost of the prescribed item is less than the charge. Back
Indeed, as the Government's own NHS Plan has stated: "Charges
are inequitable in two important respects . . . [they] increase
the proportion of funding from the unhealthy, old and poor compared
with the healthy, young and wealthy . . . [and] charges risk worsening
access to health care by the poor." (NHS Plan, 2000). Back
Hitiris T (2000) Prescription charges in the UK: A critical review.
Discussion paper 2000-04. Department of Economics, University
of York. Back
The RAND Health Insurance Experiment, considered the definitive
study on this issue, found that co-payments led to a much larger
reduction in the use of medical care by low-income adults and
children than by those with higher incomes (see: Newhouse J, (1996)
Free For All? Lessons from the Rand Health Insurance Experiment,
Cambridge: Harvard University Press, 1996). Back
For example, The RAND Health Insurance Experiment of user charges
which took place in the US during the 1980s showed that clinically
needed care is just as likely to be cut back as care that is not
needed. There are many other studies which have also shown the
adverse health consequences of user charges, especially on low
income groups and the elderly-see for example, Robyn Tamblyn,
et al, "Adverse Events Associated with Prescription
Drug Cost-Sharing among Poor and Elderly Persons," Journal
of the American Medical Association, 285(4): 421-429, January
However, there remains a question concerning the reasonableness
and consistency of charges for such services across the NHS. Back
Government Statistical Service (2003) Optical Voucher Survey,
July 2001. (http://www.dh.gov.uk/assetRoot/04/06/09/92/04060992.pdf). Back
SMF Health Commission (2004) User charges for health care.
SMF, London. Back
Costs would not only include loss of net revenue, but also knock
on consequences such as greater take up of previous charged for
services (although this may also be considered a benefit, of course). Back
Prof David Cohen, University of Glamorgan, has submitted a research
proposal to the Wales Office for R&D to study the effects
of abolishing prescription charges in Wales on behalf of the Welsh
Health Economics group: Personal communication. Back