Few people selling or providing private medical insurance would have escaped a frisson of concern on hearing the results of a major new survey of independent hospitals.
In his research, Brian Williams, professor of public health medicine at the University of Nottingham, noted a sharp rise in the number of pay-as-you-go patients.
These appear to be people who are saying: “Blow medical insurance for a game of soldiers. I may as well stump up the £6,000 for a hip replacement, the £1,400 for a hernia or the £2,000 for a cataract when I need it. If I am at death’s door there’s always the NHS. And at least self-pay surgery is good value – as little as half the cost to insurers according to the papers.”
The trend to self-pay has certainly been fuelled by the abolition of PMI tax breaks for the over 60s, rising levels of insurance premium tax and consistently rising premiums. Labour’s commitment to tackling hospital waiting lists will have discouraged the waverers from buying insurance, even if consultant waiting times have rocketed.
And, at the same time, a plethora of newspaper stories about how independent hospital chains were slashing rates to attract self-pay patients may also have made people think twice about buying PMI.
It’s an issue that Western Provident Association has higlighted. Managing director Julian Stainton publicly acknowledges an element of risk in an insurer broadcasting the wide gap between what patients are charged when they walk into a private hospital waving a credit card, and the bill that is sent to insurers. What drives Stainton is the conviction that PMI policyholders – including WPA’s 500,000 customers – are being ripped off. “The self-pay rate is the true rate and the rate charged to insurers is unjustifiably and scandalously high,” is how he puts it.
But behind the frantic desire of hospital managers to attract self-payers lurk worrying bed vacancy figures.
In his study Williams dashes any hopes that occupancy rates in Britain’s 220 independent hospitals might have improved through the 1990s.
His report examines the public/private mix of care in 1997/8 with that five years earlier. It puts occupancy rates at 48 per cent at both dates. Since the economics of running a hospital are similar to that of a hotel or airline, it is easy to see why hospitals are slashing rates to get self-payers into their beds.
So how serious a threat to PMI is the self-pay bandwagon? Almost 20 per cent of patients in Britain’s private hospitals paid their own way in 1997/8, according to the report. Latest soundings from hospital chains suggest that figure could since have risen to 25 per cent. In 1992/3, Williams tells us, only 13 per cent of patients met their bills direct.
We do not know how many self-payers are refugees from the increasingly pricey world of PMI – those who have experienced private treatment but have been forced out of the insurance market. We do not know how many are long-standing self-payers by deliberate choice and hence beyond capture by insurers. Nor do we know how many never intended going private but got fed up with NHS waits.
But Williams’ careful analysis drops plenty of hints. One steer is that the older the patient, the more likely they are to self-pay. Thirty per cent of 73,300 private patients aged 75 and over selfpaid in 1997/8. Five years earlier, 25 per cent of 40,725 over-75s self-paid. Contrast that with a younger group. Among males aged 15-44, only 15 per cent of 88,000 self-paid in 1997/8. (Twelve per cent of 79,000 five years earlier.) The link between increasing self-pay and increasing age holds good in all age bands and in both sexes. The only exception is females aged 15 to 44 who bought cosmetic surgery in large quantities – the independent sector is now the largest provider of aesthetic cosmetic surgery.
A further clue to the identity of self-payers is contained in the operations they bought. Across all age groups, the most popular self-funded procedures were cataracts. Here 10,502 individuals, or 36 per cent, settled direct. The proportion self-paying was almost identical for hip replacement (35 per cent). A quarter of knee replacements were self-paid – a total of 1,160. Insurers paid for 3,642. For all these procedures NHS waits are notorious.
Williams says such cases are “painful and restrictive and may, to the sufferers, warrant a straight item-of-service payment in order to gain relief’.
If conclusions can be drawn about the identity of many self-funders, it therefore seems most likely that they are elderly patients fed up with waiting for the NHS and unfulfilled promises of politicians.
As Paul Kind, senior research fellow at the Centre for Health Economics at York University, says: “It has got to be a fair assumption that patients with access to the necessary funds go for private treatment as a result of the pain they anticipate while waiting for NHS treatment.”
And William Laing, director of private sector healthcare analysts Laing & Buisson, said there was no doubt that most self-payers would opt for State care if it was quickly available.
He comments: “You could say that all private patients are refugees from the NHS and that must certainly be true of elderly self-payers identified in the Williams report.”
A bit of good news for insurers is that Williams himself told a recent Laing & Buisson conference that some of the self-payers might not be uninsured after all, but might be claiming back later from their insurers. However, even if this is the case for some, it is unlikely to alter the overall trend significantly.
Another encouraging factor is Williams’ observation that the proportion of all surgery that is performed privately had remained pretty static (about 14 per cent) over the 17 years he had been monitoring it. Demand had stood up “despite considerable effort to crack the waiting lists problem”.
Williams told the conference that this might point to a residue in the population who would not contemplate NHS surgery in any circumstance.
The political climate forms the backdrop to all these speculations. Despite Labour’s traditional tub thumping at its annual conference, doubts that the health secretary would ever get fully on top of waiting lists seem well founded.
And one has to question the logic of a government which gaily abolishes PMI tax relief for the over 60s while signalling concern to get unacceptable waiting lists under control as a major plank of policy. Certainly, Labour is trying. That at least is the view of David Hunter, professor of health policy and management at Leeds University, and a leading authority on waiting lists.
Hunter told a recent European conference in Paris on health targets that Britain’s government was determined to deliver on its promises on waiting lists – or at least get the political kudos for doing so.
Significantly, however, he added that NHS managers were easily able to cook the books. “It is easy to manipulate results and that is happening in terms of waiting list targets,” he told the conference. That must throw a long-term question mark over future government claims on waiting lists.
Among insurers, too, scepticism about planned improvements to State medicine continues to run high. Robin Payne, development manager of Exeter Friendly Society, doubts whether politicians will ever get on top of waiting lists, alias rationing by queue.
The corollary is that people must go private. Human nature dictates that most will take out insurance rather than self-fund in the knowledge that when it comes to the crunch they might not have enough in the bank.
Payne says: “The proportion of self payers may have gone up from 20 per cent to 25 per cent, but frankly, so what? There has always been a certain proportion of self-pay. But how many of those self-payers could pay for a triple heart by-pass?
“The NHS will never cope. There is a steady stream of deaths of people waiting for NHS heart surgery. Self-pay will never replace the peace of mind that PMI brings.”
Incidentally, Williams’ report, commissioned by the Association of British Insurers and the Independent Healthcare Association, dismisses suggestions of one-way patient traffic between private and public sectors.
In fact, when abortions are counted in, Williams shows that roughly equal numbers of State-funded patients were cared for privately in 1997/8 as privately insured patients were treated in the private wings of NHS Trusts. Many of these patients were undoubtedly covered by Norwich Union, which has built up a close association with the Trusts.
Overall, the contribution of the private sector to solving Labour’s waiting list problem was significant. Private money paid for one in four hip replacements and one in five operations on coronary arteries.
The report says that if the 800,000 operations a year performed privately were dumped on the State sector, NHS queues would grow by a sixth.
Given that finding, why is Labour so keen to stamp on the private sector? It shows the danger of putting ideology before the more pragmatic approach that is supposed to be hallmark of New Labour.