7 August 2023

There is a health system the NHS could learn a lot from – and it’s certainly not America


Although some commentators regard criticism of the NHS as calls for ‘privatisation’ or the introduction of US-style private healthcare, there is scant indication that anyone supports this. Indeed, the one thing that the NHS has in common with US healthcare is no that other country wants to emulate either of them.

Some point approvingly to features of the French or German approaches, or to how healthcare is managed in the Netherlands and in Scandinavian countries. Yet there is a system that manages to combine the best features of the NHS with a customer responsiveness that is lacking in the NHS itself – Australia.

When they introduced universal healthcare, the Australians did not make the mistake that the UK did, by assuming that this meant that the state had to take over the production and delivery of it. They went instead for a state insurance system called Medicare, which covers most of the costs, but with the delivery of the healthcare itself handled by a mixture of private and public providers. About one third of hospital places are provided privately and, unlike in the UK, Medicare doesn’t run any itself.

Under the Australian system, the patient chooses where to receive healthcare, and the state’s money follows the patient to cover the costs of it. Australians are encouraged through tax rebates to take out additional private health insurance (PHI), and most do so. This often provides faster and more comfortable treatment, with the tax rebate reducing the premiums by about 25%. The private insurers are obliged to pool risks by charging people the same premiums without taking into account any existing or previous conditions. The tax rebate is justified by the lower costs to the public system when people go private.

The UK used a similar principle briefly when private insurance was made tax-free in 1990 for those aged over 60, but this was abolished as soon as Labour took office in 1997.

The Australian healthcare system is rated as ‘good’ or ‘very good’ by 81% of Australians, which is a higher figure than the NHS currently scores in the UK. The key facet that makes it consumer-orientated is the fact that medical personnel are paid according to the procedures they deliver, not for simply having patients on their books. Australians report that if for some reason their GP cannot see them in good time, you can find an alternative almost instantly. Again, that’s because the doctors are paid for seeing and treating patients.

The Australian system is less costly than the UK’s, but delivers significantly better outcomes on many measures, including cancer, heart disease and strokes, and in most cases has shorter waiting times. Yet it manages to achieve the vital NHS principle that patients shall be treated at no cost to themselves in most cases, no matter how poor or how sick they are.

The UK could learn much from the success in practice that the Australian system has achieved, and could incorporate some of its features into the NHS. It could give hospitals, consultants and GPs their freedom from state controls and bureaucracy, and contract with them to pay for the services and treatments they provide. It could offer tax rebates to those taking out private health cover either individually or through their employers. It could, through such obvious improvements, turn the NHS into what it was originally supposed to be, and what the Australian healthcare system already is.

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Madsen Pirie is President and co-founder of the Adam Smith Institute.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.