Adam Smith Institute

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The NHS needs to do more charging of patients

Yes, of course, The Wonder of the World it is, our National Health Service. Free at the point of use for all....well, except for things like drugs, spectacles or teeth of course. And being free at the point of use it has the usual problem of anything that's free at the point of use. That's it's free at the point of use means there's excessive demand upon its services. 

Thus there should be more charging:

Many years ago when I was a public servant the then Labor Government introduced a copayment for pharmaceuticals for pensioners. Up until then pensioners could get their scripts filled for free. After that there was a very small (two dollar) copayment introduced.

The then government had an estimate how much money this would save. And they were wrong. It saved more, much more.

It turns out that there were a surprising number of elderly women (and they were mostly women) whose idea of a social life was to go to a different doctor every day, get a different script filled every day and go to a different pharmacist. After all those young doctors really are handsome men.

Adding a trivial copayment drastically reduced these behaviors. It saved money and improved heath outcomes.

To get more rational use of healthcare you did not need to hit these people with the full marginal cost of their services. Just a little bit of market did most the work that market does.

And the lesson was learned, socialised medicine works better with just a little bit of market in it - just to make sure the incentives are lined up. Its a lesson I have held ever since.

I disliked the Abbott (conservative) government in Australia a great deal. But they did try to introduce a general copayment (five dollars) for visiting a doctor in Australia. It was howled down in political protest. Like a lot of Abbott policies it was a bit ham-fisted. The welfare effects could have been ameliorated by introducing for example a maximum number of copayments. But none of that was tried.

Those Nordic systems we're all supposed to admire so much do exactly this. There's a charge for seeing a doctor. Sure, the seriously sick pay only a few times a year as there's a cap on the number of payments you can be charged in any one year. The French system, the one that is routinely rated number 1 in the world, charges for everything. You might get the money back, from the government, from an insurance company, but you've got to pay it.

The charges aren't anything like the actual costs of providing these services. But they do get around that problem of things being free at the point of use.

We know what would happen if there were free coffee machines in the streets and we also know that even a purely nominal charge, 20 pence, would stop much of the resultant waste. Thus there should be more such charges in the health service even if they are of purely nominal sums.