Select Committee on Health Written Evidence

Memorandum submitted by the Social Market Foundation (CP 33)


  The Social Market Foundation is an independent public policy think tank established in 1989 to provide a source of innovative economic and social policy ideas. Steering an independent course between political parties the SMF has been an influential voice in recent health, education, welfare and pensions policy reform. Our current work reflects a commitment to understanding how individuals, society and the state can work together to achieve the common goal of creating a just and free society.

The Social Market Foundation set up a Health Commission in July 2002 to look at healthcare funding. [81]As part of its deliberations it published reports on current charges in the NHS and the potential for, and desirability of, increasing user charges in health care. [82]A further publication on the wider use of co-payment in public services is due to be published shortly. [83]Responses to the following questions mainly draw on these documents.

Question 1

(a)   Whether charges for treatments, including prescriptions, dentistry and optical services are equitable and appropriate?


  The SMF's Health Commission concluded that scrapping prescription charges altogether could lead to unnecessary demand for medicines which would increase the NHS bill. Moreover, the NHS would lose a substantial income of more than £400 million. It was felt however, that the current arrangements for prescription charges were illogical, unfair and inequitable for some groups, and therefore ought to be reformed.

The most obvious area of unfairness is in relation to exemptions from payment for people with certain chronic conditions. There seems to be no clear rationale for exempting people with diabetes for example from payment, while people with asthma have to pay for life-saving medication. The SMF Health Commission proposed a new system for prescription charges which would link the charge to the therapeutic value of the medicine. This would mean chronic conditions that are currently not included in the list of exemptions would attract lower cost-sharing rates, even down to 0%.

Another group which is affected by prescription charges is those on low incomes just above the threshold for help. This group is hit with a double-whammy—they do not qualify for the exemptions (because they are not receiving benefits) and yet they suffer a greater likelihood of becoming ill as compared to people with higher incomes. There is evidence that people on lower incomes delay or forgo their prescription medicines. For example, a survey by NACAB suggests that around 750,000 people in England and Wales fail to take up their prescription because of cost. [84]This can lead to further health costs down the line as patients' conditions worsen and need more expensive treatment. The SMF Health Commission proposed the introduction of an annual limit on the amount an individual should pay on prescription charges which would replace the current season ticket arrangements. The Commission considered the need for tapered help for people on low incomes just outside the threshold for exemption, but rejected it on the grounds of increased administration costs.

The inequities in the current system of prescription charges are further compounded by exempting older people and expectant or new mothers from charges, even when they could afford to pay them. The BMA has argued, for example, that there is no need to exempt women from prescription charges in the year following childbirth, because the medical problems that used to occur in the twelve months after birth are much less common now. [85]Older people who can afford it are expected to pay a proportion towards the costs of their social care, so it seems illogical that prescription costs are excluded. The SMF Health Commission proposed scrapping the automatic exemption for pregnant women, nursing mothers or older people, and that free prescriptions should be provided free to children and others only on the basis of low income.


  The current system of charges for dentistry is widely considered to be confusing and inefficient. There are too many charges for NHS treatment, and a lack of awareness among patients that they are required to pay 80% of the cost. Moreover, there are concerns that the piecework system creates incentives to over-treat patients, wasting NHS funds. The SMF Health Commission proposed that there should be a greater focus on prevention, and that treatments that qualify for NHS funds should do so according to clinical effectiveness. Treatments that are not essential to treat a medical condition should therefore be subject to full cost recovery. The Commission's favoured approach was for the NHS to pay for everyone to have free check-ups, though at longer intervals than is currently the case. It was felt that greater use should be made of dental capitation schemes to cover the costs of treatment, and that the government should consider arrangements to cover some or all of the costs of enrolment in a capitation scheme for people on low incomes.

Optical charges

  As with other charges, there is evidence that optical charges discourage take-up of services. However, the situation is complex, because even groups which are eligible for free eye tests (the over 60s for example) appear not to be utilising the opportunity which suggests that something else, potentially the cost of glasses, is acting as a disincentive. The optical market is complicated by the fact that it is dominated by designer brands which is not the case with other physical aids, and this can leave the consumer vulnerable. The SMF Health Commission's approach was to emphasise prevention. It proposed that sight tests should be made free to everyone to encourage early diagnosis and treatment, with the increased costs to be partially offset against the savings from preventing advanced eye disease. The Commission also proposed that vouchers for people on low incomes to pay for glasses should reflect the real costs of glasses, and that glasses within the value of NHS vouchers should be available from all optometrists participating in the scheme.

 (b)   Whether charges for hospital services (such as telephone and TV use and car parking) are equitable and appropriate?

There is much evidence that charges for car parking and travel do put people off seeking healthcare and once again there is much confusion about eligibility for reimbursements. [86]The SMF Health Commission proposed that help with the costs of travel should be provided on the basis of low income only. It was also suggested that people who are eligible for help with the costs of travel to hospital should also be given help with travel to other NHS services such as GP and dental surgeries.

The Commission did not believe there was a problem with charging for non-clinical services, such as for TV use, from an equity perspective, but information about such charges should be made more available to patients before their hospital stay.

Question 2

What is the optimal level of charges?

The optimal level of a charge depends on many factors including the purpose of the charge (eg to reduce demand on a particular service, or to increase revenue), equity considerations, and public acceptability. In general, clinical services ought to attract very few charges and those that do must have sufficient exemptions to ensure that those on low incomes are able to access services. Charges should not be relied upon to form a substantial part of health service funding. Even countries which have much higher levels of co-payment in healthcare, only raise around 10-20% of income from charges with the rest generated through taxation or social insurance. Moreover, the amount raised through a charge will always be reduced through exemptions and the costs of administering the charge. As has already been shown, some charges actually increase costs to the NHS in the long-term because they dissuade patients from accessing treatment which results in higher costs of treatment further down the line. Assumptions, therefore, that more charges will result in increased revenue must be treated with caution.

Question 3

Whether the system of charges is sufficiently transparent?

Most systems of charges are complex and widely disliked by patients. The illogical nature of some charges such as prescriptions means that people do not view them as fair. The flat rate of prescription charges, for example, gives no indication of the true cost, or more importantly the therapeutic value, of drugs. In some cases this can be overcome by developing a clearer rationale for the charge with exemptions based on whether the charge is unduly hindering access to the service, rather than on historical precedent. In most cases charges, along with their exemption criteria, should be better advertised to the public.

Question 4

What criteria should determine who should pay and who should be exempt?

Exemption criteria should be strongly linked to principles of equitable access to health services. In our opinion, this means that generally people on lower incomes and children should be exempt from charges, while everyone else should be expected to pay, including older people on higher incomes. Another important consideration is whether the charge negatively impacts on the general objective of a healthier society. We would argue that some charges (such as for eye tests) work against the preventative approach, and therefore should be abolished. Similarly, our suggestions for linking the amount that patients pay for prescriptions to the efficacy of the treatment ensures that those people who need vital medicines to treat chronic diseases will be eligible for free treatment. This will reduce costs in the longer term because more people with those conditions will take-up the treatment they need.

Question 5

How should relevant patients be made more aware of their eligibility for exemption from charges?

All health professionals should be more active in promoting the exemption criteria to their patients, but patient groups can also play an important role in informing their members of their rights. The Expert Patient Programme could also do more to inform patients of their right to exemptions from charges.

Question 6

Whether charges should be abolished?

Charges provide a necessary function in increasing health service revenue and ensuring that some health services are used efficiently by reducing demand. In the absence of direct prices, a situation of "moral hazard" may develop where patients use health care unnecessarily thereby increasing costs for the NHS. This could be compounded by "supplier induced demand" in situations where doctors or others rely directly on attracting business to generate their income. Charges help to send signals to patients about the costs of healthcare and make them consider their use of services more carefully.

Many health charges in England, however, suffer from a lack of clear rationale and in some cases work against wider health objectives. We suggest that in most cases charges need not be abolished, but should be rationalised to better help people on low incomes or with chronic conditions, to link charges to the value or benefit of the treatment or service, to encourage a preventative approach if possible, and to simplify the system of exemptions. Moreover, we would urge that issues of equity and take-up of essential care must be at the forefront of policy-maker's minds when considering the introduction of any new charges for health services.

Jessica Asato

Social Market Foundation

12 December 2005

81   The members of the SMF Health Commission included: Lord David Lipsey (Chair); Rabbi Julia Neuberger; Professor Ray Robinson; Dr Chai Patel CBE; Dr Bill Robinson; and Fergus Kee. Back

82   See A Fairer Prescription for NHS charges: The Social Market Foundation Health Commission Report 1 (June 2003) and User Charges for Health Care: The Social Market Foundation Health Commission Report 2D (September 2004). Back

83   Charging Ahead? The use of co-payments in UK public services (forthcoming January 2005), Ed. Jessica Asato. Back

84   National Association of Citizens Advice Bureaux (2001), Unhealthy Charges: CAB evidence of the impact of health charges. Back

85   British Medical Association (2002) Funding-prescription charges. Back

86   Social Exclusion Unit, (2003), Making the Connections: Final Report on Transport and Social ExclusionBack

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