Adam Smith Institute FUNDING UK HEALTH CARE Innovation to avert a crisis Key Points

q The UK system of financing health care through taxation is now unique in the world. Virtually all other countries have moved towards mixed systems, which combine equity with commercial incentives. q Tax funding alone will not give us world class health services. Despite big budget increases in the past, NHS facilities and services remain shocking by European standards. Taxes equivalent to a VAT rate of 27% would be needed to match the spending levels of our Northern European neighbours. q Tax funding cannot keep pace with the upward pressures on the cost of health care. People resist tax rises because they fear the extra money will be lost in the general pot, or wasted within a politicized system that is unresponsive to their individual needs. But without structural change, private spending will not fill the gap. q The European social insurance models channel much larger sums into health care, and deliver a better service with significantly higher levels of patient satisfaction. Europe's sensitively structured copayments systems encourage patients to be more responsible users of health care and generate additional revenues that can be ploughed back into essential services. q The UK too should take note of the world's experience and move towards the mixed funding model. It should adopt compulsory social insurance in which people can choose between different funds that can vary the service they provide around guaranteed access to a comprehensive healthcare package. q This arrangement will preserve equity, the greatest strength of the NHS. It will also increase transparency, provide choice, empower users, spur innovation and attract new spending into health care. It is compatible with private insurance, through which choice could be extended even further.