Institute For Public Policy Research argues that there is no evidence that insurance-based healthcare systems outperform tax-funded systems.
The Institute For Public Policy Research (IPPR) argues that there is no evidence that insurance-based healthcare systems outperform tax-funded systems.
A new report, which analyses 22 high-income countries, concludes that switching the NHS to a European-style insurance system would not improve performance across measures of capacity, access, quality, efficiency and equity.
The report says that health system outcomes vary far more within funding models than between them. However, the research finds that tax-funded systems have some key advantages. First, they are cheaper for patients. People in the UK spend 2.6% of household income on out-of-pocket health costs, compared to 3.5% for those in insurance systems.
Second, they have lower admin costs. Administrative costs consume 2.2% of health spending in tax-funded systems compared to 3.5% in insurance systems.
The authors of the report also point out the high risks of transitioning from one system to another, saying any such move could cost billions and potentially take decades.
“The social insurance systems of France, Germany, and the Netherlands are regularly invoked as superior alternatives, with little scrutiny on what those systems actually deliver or what it would take to replicate them here. There is no systematic evidence that social health insurance models outperform tax-funded systems,” said Ara Darzi, Baron Darzi of Denham and former health minister.
No silver bullet
The findings undermine claims that social health insurance systems such as those in France or Germany are inherently superior. The think tank warns that politicians risk pursuing costly distractions instead of addressing the real causes of the health service’s decline.
Instead, the report says the real reason for the NHS’s poor performance against comparator countries is partly driven by chronic underinvestment.
While the NHS has received record funding, its increase in spending in recent years has predominantly been focused on staff, salaries, and other costs that have risen due to inflation.
Spending on capital investment – including beds, diagnostic equipment, and infrastructure like buildings – remains lower than it was in 2010. Spend on capital was 0.358% of GDP in 2023, down from 0.395% in 2010. This is roughly half the average of comparators.
The think tank argues that the government can turn the NHS around, but only if it prioritises capital investment, such as spending on the crumbling NHS estate and diagnostic equipment; moves care out of hospitals and into the community, to focus on prevention and public health; and tackles the social care crisis, to reduce preventable admissions and poor post-discharge outcomes.
“There is no structural silver bullet for the NHS. The idea that simply switching to a European-style insurance model would fix its problems is a pointless distraction and not supported by the evidence,” said IPPR’s head of health, Sebastian Rees.
“The NHS’s challenges are real – but they are the result of a decade of chronic underinvestment and choices on how money is spent, not the funding model itself,” he continued.
