The cost of our health: the role of charging in healthcare

Reform has published new research on the funding of health and care and the role of user charging in healthcare. 

The Twitter hashtag for the report is #costofhealth.



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"The cost of our health: the role of charging in healthcare" argues that new charges could raise nearly £3 billion per year to fund NHS services,.  Most other developed countries commonly charge for a greater range of prescriptions, for visiting GPs and for elements of hospital care. Similar reforms in England could raise up to £1.4 billion, £1.2 billion and £0.2 billion per year respectively. The think tank recommends that any reform should provide exemptions for people on low incomes, although not necessarily all pensioners.

The funding gap facing the service, estimated by NHS England to be up to £30 billion by 2020, is the reason to consider higher charges in future.  Writing for Reform previously, Simon Stevens, the incoming Chief Executive of NHS England, said that, “partly because of the NHS’ tax-funding mechanism … whenever the post-war British economy sneezes, the NHS catches a cold”.  The think tank argues that new charges would broaden the base of NHS funding, reduce its reliance on taxation and generate valuable revenue.

The think tank focuses on reforms to prescription charges, which it sees as most politically acceptable. It proposes a series of options.

A simple increase in the level of the charge for prescriptions from £7.85 to £10.00, and in the cost of a Prescription Prepayment Certificate from £104 to £120, would raise an additional £130 million annually. The certificate allows patients to make one payment per quarter or year for all prescriptions in that period.

Some countries such as Spain and Denmark have reduced exemptions for elderly people. In England, nearly 60 per cent of all drugs are dispensed to those over the age of 60 free of charge.  Ideas such as limiting exemptions to those of retirement age, or removing the exemption for elderly people altogether, would be fairer to young people as well as yielding significant extra income. For example, doubling the number of charged prescriptions from 10 to 20 per cent could raise an additional £420 million each year, or £650 million under a raised fee.  

The most radical reform would be to move to a French-style system. In this case only 20 per cent of drugs would be dispensed free of charge, for example to people on low incomes. The prescription charge itself would drop from £7.85 to £3.00. The think tank estimates that such a reform could raise an additional £1.4 billion a year.

The think tank notes that other countries routinely charge for other aspects of healthcare. 22 out of 31 developed countries charge for GP services. The cost ranges from €1 per consultation in France to as much as €20 in Sweden. 16 out of 31 developed countries charge for elements of hospital care, for example a small fee towards the costs of overnight stay (“hotel costs”).  Italy and Ireland charge for some attendances at accident and emergency departments.  The think tank recommends that policy-makers consider these ideas after a reform of prescription charges. 

Concerns will centre on the likelihood that patients on low incomes will be deterred from seeking healthcare. The think tank emphasises that any reform should include exemptions for people on low incomes, as is common in all developed countries.  It argues that concerns should be balanced against the improvements in service that charges could deliver. A charge to visit the GP, for example, could help finance extended hours and weekend consultations.

Prescription charges rose in real terms in three of the last four decades.  Key facts include:

  • Prescriptions in England are currently charged at £7.85, for those not exempt. 
  • Prescription charges rose between 1970 and 1980 by 67 per cent in real terms.
  • They rose between 1980 and 1990 by 68 per cent in real terms.
  • They rose between 1990 and 2000 by 57 per cent in real terms.
  • They fell between 2000 and 2010 by 5 per cent in real terms.
  • They rose between 2010 and 2013 by 3 per cent in real terms.
  • 90 per cent of prescriptions are currently dispensed free of charge.
  • Nearly 60 per cent of all drugs are currently dispensed to those over the age of 60 free of charge.