CHAPTER THREE

UNITED KINGDOM

A 1948 leaflet entitled “Your New National Health Service” informed the British public that on July 5, the National Health Service (NHS) “will provide you with all medical, dental, and nursing care. Everyone—rich or poor, man, woman or child—can use it or any part of it. There are no charges, except for a few special items. There are no insurance qualifications. But it is not a ‘charity.’ You are all paying for it, mainly as taxpayers, and it will relieve your money worries in times of illness.”

Over the last 70 years, this pledge has largely been honored. The NHS has certainly faced its fair share of challenges: most recently, growing shortages of physicians, nurses, and other health care personnel; the deteriorating condition of its hospitals and other facilities; the failure of a seamless system-wide introduction of electronic records in hospitals; disagreements about how much to pay for drugs and other new technologies; and a lack of funding for long-term care.

Despite these and other controversies, the NHS retains widespread public support and pride. Indeed, NHS doctors and nurses dancing in hospital beds were featured in the celebrations of the 2012 London Olympics. The British public wants to improve the system by investing more funds rather than scrapping the government system altogether and expanding the private sector.

Reviled as the epitome of inefficient “big government” health care by some and praised as a model of egalitarian care delivery by others—perhaps no other health care system in the world has been as exhaustively studied and debated as that of the United Kingdom. Much of the discussion about the NHS today rehashes old arguments. However, as more and more countries consider shifting toward universal coverage, the NHS remains relevant as a prime example of the progress—and pitfalls—afforded by the largest single-payer and socialized health care system in the world.

HISTORY

In 1911, nearly a century after the creation of the United Kingdom of Great Britain and Ireland, Chancellor David Lloyd George introduced the first national insurance scheme with health benefits as part of a campaign for wider social reforms. Prior to this legislation health care was considered a luxury, available only to the wealthy unless one was able to access free care through charity, a teaching hospital, or the socially stigmatized Poor Law, which provided local welfare services to the impoverished and almshouses to care for the sick. Lloyd George’s legislation deducted a small amount of an employee’s wage, combining it with contributions from employers and the state, in order to provide health insurance to wage-earning male workers. These workers could then choose a primary care physician from a select panel of local providers. As in Germany, this system did not initially cover workers’ families or other non-workers.

Because only the employed were entitled to health care under the National Insurance Act, the system remained a hodgepodge of private, federal, and charity insurance plans until World War II. In 1939, UK hospitals banded together in expectation of a flood of civilian casualties from World War II. An Emergency Hospital Service was introduced in order to provide free treatment to any victims, including war evacuees. Additionally, the government expanded its infant, child, and maternity services during the war. A political consensus emerged that, in order to coordinate the hospitals and this increasing volume of health services, a kind of national health service was needed.

By 1940, the Labour and Conservative Parties had entered into a coalition and, in 1941, announced a new committee that would survey the UK’s social insurance and health care services. In 1942, the results of this survey along with subsequent recommendations were published in the Beveridge Report. The report addressed the “five giants on the road of reconstruction… Want, Disease, Ignorance, Squalor, and Idleness.” Among other recommendations, the Report proposed a flat-rate universal contribution in exchange for a standardized set of universal health benefits and social services. Upon its publication, the British Institute of Public Opinion found that 95% of the public had heard of the Report and that “there was overwhelming agreement that the plan should be put into effect.”

In the postwar 1945 election, Labour won a landslide victory by running on a platform that included promises to enact Beveridge’s 5 “giants.” The Labour Party’s newly appointed minister of health, Aneurin Bevan, proposed creating a nationalized health care system. At the time Bevan’s proposal faced immense criticism. He was opposed by the Conservative Party, the British Medical Association (BMA), and even Labour members of Parliament. Nevertheless, Bevan did have the support of the Royal Colleges and ultimately won over the support of BMA physicians by cutting several deals with the association, which he described as “stuffing their mouths with gold.” Two elements from Bevan’s deal survive to this day: hospital-based doctors continue to do private work on top of their salaried employment, and general practitioners (GPs) are independent contractors rather than salaried providers.

Through Bevan’s tenacity, the National Health Services Act was granted royal assent in November 1946 and came into effect on July 5, 1948. The Act established the National Health Service (NHS) as a national system in England and Wales, accountable to the minister of health. A separate NHS was created for Scotland, accountable to the secretary of state for Scotland, under the National Health Service (Scotland) Act of 1947. A similar service was established in Northern Ireland in 1948.

The NHS aimed to offer comprehensive health services that are free at the point of care and provided by public hospitals and primary care physicians (general practitioners, or GPs). However, the Act did retain power to charge for expensive medical appliances, home-based care, dental care, eye care, and services to privately paying patients. A representative Central Health Services Council advised the minister of health on any health-related matters. County councils and boroughs were designated as local health authorities, responsible for ambulance services, local health centers, and public health functions. Most hospital services were coordinated locally by hospital management committees, though overall hospital services were under the control of the minister of health. Responsibility for mental health care, previously under the supervision of the Board of Control for Lunacy and Mental Deficiency, was also transferred to the minister of health.

The 1950s and 1960s were focused primarily on the modernization of facilities and realignment of care to fit the NHS model. In 1952, small patient co-pays were introduced for prescriptions and dental care, a decision Bevan so opposed that he quit the cabinet in protest. In 1954, a Royal Commission was tasked with investigating the state of care for people with mental health conditions. It called for the integration of mental health more fully into the NHS and the expansion of local authorities’ responsibilities to offer mental health services. In 1962, then minister for health Enoch Powell launched The Hospital Plan for England and Wales, which pledged £500 million over 10 years to develop a program of hospital building and improvements. In 1968, the Ministry of Health merged with the Ministry of Social Security to form the Department of Health and Social Security.

In 1973, the National Health Services Reorganization Act was passed. The Act sought to unify health and local authority services and resulted in the reorganization of the NHS into 14 regional health authorities and 90 area health authorities. The Act required area health authorities to set up family practitioner committees to provide general medical services and community health councils to act on behalf of the public and patients. In 1982, the NHS was again restructured. The area level health authorities were abolished, leaving 192 district health authorities that reported to regional health authorities.

In 1990, the Conservative government passed the National Health Service and Community Care Act, which introduced an internal market for the supply of health care, separating the public-payer functions from care provision. The idea was for the government to become a payer for health care, thereby encouraging public hospitals and community health care organizations to compete. The Act also created GP fundholding, which essentially offered the option for GP practices with at least 11,000 patients to become capitated payers themselves. These practices could then apply for an NHS budget to cover their staff and outpatient and inpatient services costs.

In 1997, Tony Blair and the Labour Party regained power partially on a pledge to reform the NHS. The Labour Party subsequently passed the Health Act of 1999, which established the Commission for Healthcare Improvement, an independent inspection body for the NHS, responsible for monitoring and reviewing the quality of health care services. That same year the National Institute for Care Excellence (NICE)—later renamed the National Institute for Health and Care Excellence—was established and entrusted with reducing the variation in the quality of NHS services through evidence-based guidelines and quality standards for health treatments and services as well as with ensuring that the most clinically and cost-effective treatments and drugs were made readily available. In 2000, the NHS Plan aimed to improve access to care, decrease wait times, recruit more physicians and nurses, and build more hospitals. In 2002, a white paper entitled “Shifting the Balance of Power” set out the devolution of responsibilities to the front line. The government abolished both regional and district health authorities, replacing them with strategic health authorities (SHAs) and 303 primary care trusts (PCTs) that assume responsibility for 80% of the NHS budget.

In 2003, the NHS was once again reorganized, with the establishment of NHS foundation trusts and 2 new bodies to regulate health care—the Commission for Healthcare Audit and Inspection (CHAI), replacing the Commission for Healthcare Improvement, and the Commission for Social Care Inspection. The CHAI was responsible for monitoring and inspecting all NHS health care providers as well as measuring and publishing NHS performance data. The Commission for Social Care Inspection assumed responsibility for the review of social care organizations.

In late 2008, during the global financial crisis, the first austerity measures were introduced to address the budget deficit and to lower the national debt. Although the NHS was largely protected, spending on mental health was curtailed. In 2009, the NHS Constitution was published, outlining the rights and responsibilities of patients and providers and enshrining the right of patient choice. Also in 2009, the Care Quality Commission (CQC) was established as an independent regulator of all health and social services in England, assuming the functions of CHAI, the Commission for Social Care Inspection, and the Mental Health Act Commission.

In 2011, a bill was introduced proposing to abolish SHAs and PCTs, create a new national NHS Commissioning Board and local clinical commissioning groups (CCGs), and establish a new patient-rights group, Healthwatch England. Despite fierce Labour Party opposition, it was ultimately passed.

The Health and Social Care Act of 2012 defines the current structure of the NHS. The NHS Commissioning Board—now referred to as NHS England—was responsible for authorizing 211 clinical commissioning groups (CCGs) across England and allocating funds to them. These CCGs are composed of local primary care practices and are led by an elected governing body made up of primary care physicians; other clinical providers, including a nurse and a specialist consultant; and members of the public. They “commission,” or pay for, health care services for their local populations. NHS England oversees CCGs and is responsible for commissioning primary care and specialized services for patients across England.

In 2014, NHS England published the “Five Year Forward View,” setting out a direction for the NHS to improve health, care, quality, and efficiency. NHS Chief Executive Simon Stevens described this as a road map for “triple integration of primary and specialist care, of health and social care, and of physical and mental health care.”

In October 2016, local councils and NHS organizations set out to meet the long-term health and social needs of the population. They created Sustainability and Transformation Partnerships (STPs) in 44 local areas covering all of England. Partially informed by the 2014 new models of care program, the STPs represent what Sir Malcom Grant, former chairman of NHS England, called “the biggest shift toward integration of care of any health economy in the world, breaking down the division between physical and mental health provision.”

In 2018, 70 years after the NHS was founded, UK Prime Minister Theresa May announced that NHS England’s revenue funding would grow by an average of 3.4% in real terms over the following 5 years, constituting a $26.6 billion USD (£20.5 billion) increase over inflation by 2023–2024. This represented a departure from recent years of funding increases, which averaged 2.2%, against the long-term average of 3.7% per year since 1948. In response, in January 2019 NHS England published the “NHS Long Term Plan,” which delineated service improvements over the next decade. The Plan had 3 aims: to create a new service model for patients, focusing on increasing investments in primary, community, and mental health services; to establish integrated care systems that would bring together local health and social care organizations; and to encourage a shift toward digital care. Each integrated care system operates similarly to an HMO in the United States and must decide how to plan and deliver care for their local populations. Simultaneously, a new contract was agreed upon between the BMA and NHS England regarding how GPs deliver care.

Ultimately the NHS has endured because it is immensely popular because, as one provider we interviewed explained, “Health is too important an issue to pass reform on without public support. In England this has meant enormous protection for the NHS.”

The NHS is made up of 4 devolved health systems: England, Scotland, Wales, and Northern Ireland. The NHS model still broadly applies to all 4 countries. Given that the UK is a country of 66 million people, nearly 56 million (85%) of whom reside in England, England’s health care system is the primary focus of this chapter.

COVERAGE

Mandatory Insurance

The NHS covers all citizens and residents of the United Kingdom; it is a single-payer socialized system. Patients can choose their primary care physician or GP, who acts as a gatekeeper and first point of contact. A patient may then be referred to specialists and hospital care if needed. A UK resident can receive health care anywhere in the UK, not just within their county or country of residence.

The NHS legislation ensures the delivery of necessary health services, though no explicit, positive list of covered services exists except for the drugs and new technologies appraised and ultimately approved by the NICE. The ministers of health in each country along with their respective health boards decide what services will be funded. As of 2019, each of the 191 English CCGs decide the actual services delivered in England. In general, the covered services are relatively comprehensive, including inpatient and outpatient hospital care, care in physician offices, prescription drugs, mental health care, palliative care, some long-term care, rehabilitation care, and dental and vision care. However, because CCGs must make coverage decisions based on local budgetary needs, some areas end up covering services that others do not. Some patients have complained of such “postcode lotteries.” NHS England oversees CCGs and remains responsible for commissioning—that is, paying for—primary care and highly specialized services, but CCGs have either joint or full responsibility for these. NHS England is also responsible for commissioning a range of public health services, such as immunizations and screenings, in conjunction with the Department of Health and Social Care (DHSC) as well as Public Health England.

Figure 1. Health Care Coverage (United Kingdom)

Because the purpose of the NHS is to provide health care free at the point of care, any resident can use NHS services without having to pay. Nonresidents can receive emergency care and primary care for free, but they must pay for any subsequent care.

GPs provide a variety of primary care services under the NHS, including routine diagnostic tests, chronic care management, minor surgeries, referrals to specialists, outpatient prescription drugs, preventive and public health services, and family planning. In order for a patient to receive specialty care, they must first either be referred by their GP or admitted to a hospital due to an emergency. Emergency care services, whether provided in urgent care centers, hospital ERs, or emergency visits to GPs, are also provided free of charge.

Voluntary Private Insurance

Just under 11% of the UK population, about 7 million people, has some form of voluntary, private health care insurance; over 50% of privately insured beneficiaries reside in England. These plans can cover condition-specific care, such as chemotherapy for cancer, or elective therapies and diagnostic tests. About 82% receive their voluntary, private insurance from their employer, while 18% purchase their plans individually. Unlike other countries, the UK has seen a plateau in the percentage of people choosing private insurance, largely because of a boost in NHS funding. There are currently 9 main private health care insurers—BUPA, AXA PPP Healthcare, Aviva, Simply Health, Benenden, Allianz, PruHealth, Saga, and CS Healthcare. BUPA has the largest share of the market, covering just over 1 million people.

In these private plans the insurers charge premiums based on what services are covered, the risk of the patient, and the desired profit margins. The Prudential Regulation Authority regulates private insurers, and the Financial Conduct Authority acts as a consumer protector, making sure consumers in the private market are treated fairly.

FINANCING

In 2017, the UK spent about $260 billion USD (£197.4 billion), or 9.6% of the GDP, on health care. This translates to just under $4,000 USD (£2,989) per capita. Of the G7 countries, the UK has the 2nd-lowest percentage of GDP spent on health care, significantly less than the nearly 18% spent by the United States and the 12.2% spent by Switzerland. Only Italy spends a smaller percent of GDP on health care.

The whole NHS had a budget of $160 billion USD (£121 billion), or 61% of total spending, while NHS England had a budget of $140 billion USD (£107 billion), which accounted for 54% of total national spending ($148 billion USD, £114 billion) in 2018–2019. The largest nongovernmental expense in 2017 was out-of-pocket costs, including household spending on health care goods and services, such as residential and home-based long-term care provided by the private sector, totaling 16% of total spending, or $40 billion USD (£31 billion). The next-largest contributor was private health insurance, at 3% of health care spending, or $7.8 billion USD (£6.0 billion).

Figure 2. Financing Health Care (United Kingdom)

Mandatory Health Insurance

The UK Treasury sets the total budget for the DHSC in England, subject to parliamentary ratification. The NHS England budget exists within the total DHSC budget, and the NHS chief executive is then responsible for executing the budget of NHS England. The NHS allocates funds to the 191 CCGs in England based on population and health needs. In their respective geographic areas, the CCGs plan and pay for elective hospital care, primary care, community care, emergency care, and mental health care. In 2019, CCGs in England managed $104 billion USD (£80 billion). Separate allocations purchase specialized health care services, primary health care, and military health care services.

Almost 99% of NHS funding comes from general taxation and National Insurance (NI) contributions, with the remaining covered by co-payments on specific services such as dental care. NI contributions are income-linked payroll deductions. Those making less than a certain amount—$666 USD (£512) per month in 2019–2020—do not have to pay for NI but still receive the benefits. In 2019–2020, persons making between $930 and $5,400 USD (between £719 and £4,167) per month had 12% of their earnings deducted, and those who earned above $5,400 USD (£4,167) a month had a lower contribution rate, with just 2% of their earnings deducted. The remainder of funding comes from patient co-pays; charging overseas visitors for the cost of NHS care; and providing care to privately insured patients.

Voluntary, Private Supplemental Insurance

Most private health care insurance plans are offered by employers as part of employees’ overall benefits packages. The contributions may be based on individual risk, community risk, or group risk, depending on the insurer. The average annual premium for a private health insurance plan is $1,865 USD (£1,435). Little public data exists on the variances in contributions by employers or employees for private plans.

Cost Sharing

Under the NHS there are no health care premiums, and almost all medical care is free at the point of service. However, there are small co-pays for certain services. In England, dental care incurs a co-pay ranging from $27 to $317 USD (£20.60 to £244.30), depending on the complexity of the service. Patients may also pay for private dental care through voluntary, private health insurance plans. In addition, approximately 10% of prescription drugs in England have a flat charge of $11.55 USD (£9). Children under the age of 16, adults over the age of 60, and those who have a specified medical condition, are pregnant, or recently had a baby are exempt from paying the charge for prescriptions. Overall, nearly 90% of prescription drugs distributed in 2012 were free for patients. There are no prescription drug co-pays in Scotland, Wales, or Northern Ireland.

In 2016, out-of-pocket spending totaled $40 billion USD (£31.0 billion). It represented the largest area of spending outside of government-financed insurance. However, less than 1.5% of households have faced a threat of impoverishment due to out-of-pocket health care costs.

Long-Term Care

In 2017, the UK spent $63 billion USD (£48.2 billion) on long-term care. In the UK, the financing of long-term care is divided into 2 categories—financing for health care services, including assistance with activities of daily living such as eating and walking, and financing for social services, such as managing finances. For health care services 66% of total spending on long-term care was financed by the government, with another 31% financed by out-of-pocket payments, and the remaining 4% financed by nonprofit institutions. For social services 48% was financed by the government, 40% by nonprofit institutions, and 12% by out-of-pocket expenditures.

Long-term care spending is jointly financed by the NHS and the private sector. Local governments’ funding of the majority of long-term care has dropped significantly. If a patient requires long-term medical care, the NHS provides that care for free. However, local governments fund personal assistance or custodial care. In England, a patient is not eligible for financial assistance for personal assistance or custodial care unless they have $30,000 USD (£23,250) or less in savings. For care in a nursing home, the value of the patient’s home is counted toward the $30,000 USD (£23,250) threshold. Even then, the patient may still need to pay a share of the costs, depending on the area of England in which they reside. A patient has the option to delay paying their share of costs until after their death, at which time the government collects the payment from either the patient’s estate or the sale of their home. For patients making above the threshold, the charge may range up to the full cost of care. Plans to cap out-of-pocket spending on long-term care at $94,000 USD (£72,000) were delayed until 2020, as the government could not decide how to fund the cap.

In 2017, long-term care was a major campaign issue. Prior to the election, Theresa May proposed changing the income cutoff from $30,000 to $100,000 USD (£23,250 to £130,000), including the value of patients’ homes regardless of area of residence. Her proposal was expected to reduce out-of-pocket costs for most patients but would increase costs for homeowners. Dubbed the “dementia tax,” the proposal was very unpopular. Taking note of May’s disastrous proposal, Boris Johnson pledged to “protect you or your grandparents from the fear of having to sell your house to pay for the costs of care.” For now the financing and affordability of long-term care remains highly controversial, with no clear solution in sight.

Public Health

In 2016–2017, the UK spent $13 billion USD (£10.3 billion) on preventive and public health care. Government expenditures accounted for 76% of total spending ($10.1 billion USD, or £7.8 billion), and out-of-pocket expenditures totaled 13% of spending ($1.7 billion USD, or £1.3 billion), with other sources, including private insurance, making up the rest.

Mental Health

In 2018–2019, NHS England spent $16 billion USD (£12.5 billion) on mental health care in England. The recipient of the largest portion of mental health funding was CCGs, with the remainder going toward more specialized mental health services. In 2015, the Mental Health Investment Standard (MHIS) was introduced to require CCGs to increase their investment in local mental health services to a level at least in line with the overall increase in money available to them. By 2018, all CCGs in England had met the MHIS, such that 13.9% of local health care spending went toward mental health care services. According to the NHS Long Term Plan, mental health investment will be at least $2.95 billion USD (£2.3 billion) higher per year by 2023–2024.

PAYMENT

In 2017, the UK spent $260 billion USD (£197.4 billion) on health care. The largest spending category was for curative and rehabilitative care (65% of total expenditures), followed by long-term care (16%); medical goods, such as drugs, glasses, and wheelchairs (10%); and preventive care (5%).

Hospitals

In 2017, 49% of all government spending on health care was for care in hospitals, including care provided by hospital-based specialists. Beginning in 2003 hospitals in England began to be paid using a model similar to the US DRG system. Known as Payment by Results (PBR), the system links individual case groups, called Healthcare Resource Groups (HRGs), to specific reimbursement rates set by NHS England and NHS Improvement. If there are various episodes of care within one stay, the dominant episode is coded for. National average episode costs (self-reported by physicians) are adjusted for any technological innovations and for the market forces factor (MFF), which considers variations in cost by location in order to determine payments.

CCGs purchase care from trusts, reimbursing them for the care based on the PBR rates. The PBR system began by paying for elective inpatient procedures and now has expanded to cover 60% of all hospital activities. The remainder of hospital income comes from other activities, such as mental health services, health education, and research and training funds.

PBR has increasingly been criticized for its fee-for-service model, which incentivizes volume over quality and value. In response, commissioning of health care services in the UK is moving toward greater use of capitation and other alternative payment arrangements.

Payment for public hospital capital costs, such as buildings, equipment, and technology, is covered under the DHSC’s capital budget and by providers’ depreciation reserves.

In addition to public hospitals, there are also approximately 550 private hospitals and nearly 600 private clinics in the UK. Private institutions offer services either unavailable in the NHS or NHS services, such as bariatric or hip replacement surgeries, in which demand outstrips the public service’s ability to provide and, consequently, have long waiting times. In England a patient may choose to receive an NHS-covered service at a private hospital so long as the private hospital can perform the procedure at NHS prices. Private institutions must register with both the CQC and NHS Improvement, but their charges to private patients are not regulated. A quarter of private hospitals’ revenues come from NHS referrals; the remainder of care they provide is paid for either by private health insurance or by patients out of pocket.

Figure 3. Payment to Public Hospitals (United Kingdom)

Physician Payment

In 2017, 25% of all government spending on health care was for care delivered in ambulatory settings. Of this, $17.5 billion USD (£13.5 billion) was spent on services provided by GPs in their offices—or surgeries, as they are known in the UK. In addition, $3.8 billion USD (£2.9 billion) of government spending went to dental care, and $29 billion USD (£22.3 billion) was spent on care provided by other ambulatory providers. Under the NHS, specialists and hospital-based physicians are employees of the NHS, while GPs remain private practitioners who are paid by the NHS for their services.

GPs can be paid one of 3 ways. The predominant mechanism is through the General Medical Services (GMS) contract, under which GP practices are paid a national weighted capitation for essential services, adjusted for a practice’s patient characteristics, number of new patients, morbidity of the local population, and local market forces. The GMS is negotiated between the NHS and the British Medical Association. Practices can also agree to provide “enhanced services” in order to receive supplementary payments. To be paid extra for these “enhanced services,” practices may need to enter and report data manually. In 2015, 62.5% of primary care practices operated under GMS contracts.

Figure 4. Payment to Ambulatory Physicians (United Kingdom)

One alternative to being paid through GMS contracts is Personal Medical Services (PMS) contracts. PMS contracts are negotiated locally between NHS England and a practice. They offer more flexibility than national GMS contracts, as a practice can negotiate what services they will offer and the financial reimbursement for those services. Under a PMS contract a practice is paid a baseline sum for essential services, which is adjusted based on local population risk, and this may be supplemented with payments for enhanced services. In 2019, 26.3% of GP practices operated under PMS contracts.

There also exists a 3rd payment mechanism, Alternative Provider Medical Services (APMS) contracts, which are for primary care services provided by outside contractors, like international health companies. In 2018–2019, 2.3% of GP practices operated under APMS contracts.

GPs may choose to be salaried. These GPs are either employees of independent contractor practices or are directly employed by primary care organizations.

The NHS operates several different payment programs to incentivize quality improvement. Primary care physician practices may choose to participate in the Quality and Outcomes Framework (QOF), a voluntary payment structure that modifies GMS payments based on quality of care, primarily for chronic conditions. Practices are scored using a “quality scorecard,” which can award a maximum of 1,000 points for performance on indicators such as patient education, medication management, and appropriate screenings. Data on quality is automatically extracted from a practice’s electronic records. In its first year, the program was approximately $200 million USD (£155 million) more expensive than anticipated, as many practices achieved maximum performance that year. As such, the maximum percentage of practice income tied to QOF was subsequently decreased from 25% to 15%. Critics of the QOF suggest that it has eroded the relationship between physicians and the government. Dr. Donald Berwick reflected that “it was a dreadful period; doctors became convinced that they should do whatever the QOF says to be paid.”

The standard contract the NHS uses for the majority of its commissioned services includes another pay-for-performance scheme, the Commissioning for Quality and Innovation (CQUIN). The CQUIN ties a certain percentage of provider income to quality improvement performance. The CQUIN pays 2.5% of a provider’s income; at least 0.5% of this is tied to the provider accomplishing national quality improvement goals, with the remainder dependent on the provider accomplishing locally determined goals. Yet another pay-for-performance scheme is Best Practice Tariffs (BPTs), which were introduced in 2010 to incentivize optimal care according to guidelines. BPTs now cover over 20 areas of health care, ranging from managing acute stroke to diabetic ketoacidosis. This model includes a base payment for hospital admissions, plus additional payments for executing the best practices. For example, providers treating a hip fracture are paid a base rate of $5,620 USD (£4,326), with a potential total payment of $7,360 USD (£5,662) if the providers achieved all best-practice goals.

Most recently the NHS established Primary Care Networks (PCNs), which are organized around GPs that serve “natural communities of around 30,000 to 50,000” patients. In addition to GPs, PCNs will have funds to hire physician assistants, pharmacists, physical therapists and other health providers who can offer integrated, pro-active care to avoid exacerbations and other medical problems, not just respond to patients’ illnesses. Payment to PCNs will be based on contract as well as shared savings if they reduce emergency room use, hospitalizations, and unnecessary office visits.

Mental Health

The NHS, local authorities, and private organizations all provide mental health services. Under the NHS mental health services are primarily purchased by CCGs. The NHS accounts for more than 80% of secondary mental health care, most provided by mental health trusts. These trusts provide health and social services to persons with mental health conditions. A patient may access a mental health trust through a GP referral or an admission to a hospital. There are currently 60 mental health trusts in the UK. Local authorities primarily fund housing and social services for people with mental health conditions.

In November 2016 the NHS published new guidelines for paying for mental care. Providers and commissioners can now choose between a capitated payment or an episodic payment.

Long-Term Care

In the UK, services are split depending on whether they cover long-term health needs, like support with activities of daily living (ADLs), which include bathing or eating, or social services, such as shopping or managing finances. NHS covers health needs, while local authorities generally cover social service needs. For patients qualifying for nursing care, their local CCG pays a direct contribution to the institution to reimburse them for the services provided. In England the standard reimbursement rate was $205 USD (£158.16) per week in 2019.

Local authorities are required to assess patients’ needs for long-term care according to a national framework. With the exception of some home care and short-term rehabilitation services, long-term care is both needs and means tested. Full state support for home care is only available to patients with less than $18,500 USD (£14,250) in assets who also have high levels of need, with a sliding scale of support provided up to $30,000 USD (£23,250) in assets.

Government payments for institutional care have decreased in recent years, leaving much of the burden of long-term care to the private sector and even to patients themselves. Today some 95,000 people in residential and nursing homes must pay for their own care. Local government funding for long-term care continues to drop, even as the UK’s population ages. Government projections estimate that within the next 50 years there will be an additional 8.6 million people ages 65 years and above, a population roughly the size of London.

Public Health

In England the DHSC, NHS England, and Public Health England coordinate public health services. The DHSC develops overall government policies on public health. NHS England is responsible for immunization programs and national screening programs. Public Health England is an agency within the DHSC that runs the national health protection service and advises local authorities on how to improve their local public health.

In 2012, the Health and Social Care Act established Health and Wellbeing Boards to determine how to best meet the public health needs of their communities.

DELIVERY OF HEALTH CARE SERVICES

Hospital Care

As of 2017 there were 1,920 hospitals in the UK, of which 1,370 were public and about 550 were private. The NHS has a relatively low number of hospital beds and high occupancy rates. In 2015, there were only 2.6 beds per 1,000 persons, well below the EU average of 5.1 beds per 1,000 persons. While the average length of stay has been decreasing, reaching a low of 7 days in 2015, occupancy rates remain at nearly 85%, the 2nd highest in the EU. High occupancy rates suggest that the NHS has little flexibility in dealing with increases in demands from, for example, a bad influenza season.

Publicly owned hospitals are organized within either an NHS trust or a foundation trust. There are currently 72 NHS trusts and 150 foundation trusts, many of which encompass multiple hospitals. NHS Improvement—made up of Monitor and the NHS Trust Development Authority and now combined with NHS England—regulates and oversees trusts and foundation trusts.

Patients in the UK have the right to choose both their hospital and their specialist so long as they obtain a referral from their GP.

Ambulatory Care

In the UK, primary care physicians—GPs—dentists, and pharmacists provide ambulatory care. Patients have free choice of the GP they must register with. Primary care visits serve both as the first point of contact and as gatekeeping for specialist care. Treatment for most common conditions and injuries can be obtained via primary care. GPs provide diagnostic tests, physical examinations, management of chronic conditions, vaccinations, drug prescriptions, basic life support when necessary, and referrals for urgent, specialist, and mental health services.

There are over 300 million GP practice appointments each year in England. A GP office will generally be run by a multidisciplinary team, which can include nurses, midwives, and pharmacists.

Hospital emergency departments provide emergency care. In some areas, urgent care centers or minor-injury units, which can be led by either nurses or GPs, handle less serious cases. Telephone advice for patients with urgent but not life-threatening conditions is available 24 hours a day through the hotline NHS 111.

Electronic Health Records

NHS England has been promoting the digitalization of health care, though the results are inconsistent. Innovations in the primary care sector are generally viewed as a success story. In the 1990s, practices began digitalizing, using software written specifically for them. Today 100% of GP practices are computerized. Since 2015, all GP practices are required to offer patients the option to schedule appointments and order prescriptions online. As of 2016 patients have a right to access their detailed electronic health record, which includes diagnoses, treatments, test results, medications, and immunizations, but not clinician notes.

Transitioning the hospital sector to electronic health records has been more challenging. In 2003, the government launched a massive program designed to computerize all NHS trusts (the National Programme for IT, NPfIT). A decade later, the program was disbanded, viewed as an example of the flaws of an overly centralized approach to a massively complex IT implementation. In recent years, the NHS has enacted several programs designed to achieve full computerization of the system, investing in training digitally facile clinicians and promoting digital interoperability across the hospital and primary care sectors. The complete digitalization of the NHS will not be possible until at least 2023. According to Richard Murray, chief executive of the English health charity The King’s Fund, the resistance to transitioning to EHRs “is more of a cultural issue—there’s a lot of concerns about data security. We’re making progress locally, but not nationally.”

Mental Health

GPs provide the first line of contact for mental health care, as they are expected to assess a patient’s mental health status. When services exceed the clinical abilities of the GP, the patient can be referred for counseling for psychological therapy and/or drug and alcohol abuse to a local health center or a mental health specialist. Community mental health is often provided in teams, with GPs and community staff working together to provide services. With a primary care referral, a patient may access NHS mental health services for free. Community-based organizations may also provide mental health services, while mental health hospitals provide inpatient mental health services. The private sector provides about a quarter of NHS-funded inpatient mental health care.

A patient who needs mental health services has the legal right to choose any provider or care team able to offer such care. In England the CQC, an independent regulator of health providers, also has a specific responsibility to protect patients’ basic human rights while they are being treated under the Mental Health Act.

While mental health remains a priority for the NHS, there are provider shortages that seem to be getting worse. In 2018, 2,000 mental health staff left their positions each month. Consequently, one in 10 mental health posts are unfilled. “It’s fantastic what we’ve done in mental health,” Mr. Murray explained, “but now we need to make good on our promise. We need to get more mental health providers.”

Long-Term Care

In 2016, the Sustainability and Transformation Partnerships (STPs) were created to promote coordination between NHS and local authorities in order to improve health and care for patients. In 2018, 14 STPs evolved into integrated care systems (ICS), where NHS and local authorities are jointly responsible for budgeting and delivering health care and social services. The goal is to have ICSs covering all of England by April 2021 in the hopes of stronger care coordination.

Local authorities are required to assess the needs of patients who may need social services and provide such services if the patient is deemed eligible. However, there are no national standards for eligibility; it is up to the discretion of local authorities and often depends on year-to-year budget demands. Unsurprisingly, there exists wide variation in availability and quality of long-term care. Once a patient is eligible for long-term care, a social worker makes the necessary in-home or facility-based care arrangements. In England all long-term care providers are regulated by the CQC based on DHSC standards.

Preventive Care

The NHS covers, free of charge, a wide range of preventive screening and immunization services, including screenings during pregnancy and for newborn babies, cancer screenings, and diabetic eye screenings. Primary care physicians cover most of these NHS authorized preventive services. The majority of the decisions regarding what preventive services are covered are made at the local level by CCGs or Health and Wellbeing Boards.

Quality Controls

The quality of care provided in NHS England is measured primarily by 3 bodies. First, the CQC regulates all health and adult social services in England, undertaking regular inspections. All providers must register with the CQC, which sets national quality standards and may investigate any providers who do not adhere to these guidelines. The CQC also rates hospital inspection results and has the power to close down poorly performing hospitals.

Second, NICE provides quality and effectiveness guidelines for the most common conditions in primary, secondary, and social services. NICE has also established standardized recommendations regarding wait times for cancer, elective, and emergency treatment. Finally, NICE is responsible for analyzing the clinical and cost effectiveness of pharmaceuticals and other health technologies.

Third, information regarding the quality, location, and organization of services is published on www.nhs.uk, a website run by NHS Digital.

The proportions of NHS hospitals independently rated as “good” or “outstanding” doubled in the 5 years prior to 2019.

Patient Satisfaction

In 2018, The King’s Fund asked NHS patients: “How satisfied are you with the way the NHS runs nowadays?” Of the sample surveyed, 53% were “very” or “quite” satisfied. This represents a 3% satisfaction drop from the previous year and the lowest satisfaction level since 2007, though this rate is still almost double that of 15 years before. Those over 65 years of age were happier with the NHS (61% satisfied) than younger persons (51% satisfied for ages 18 to 64). Patients were overall satisfied with their quality of care, the fact that care is free at the point of service, the variety of services available, and the behavior of NHS staff. Patients were overall dissatisfied because of long wait times, staff shortages, a lack of funding, and a perception that NHS funding is being wasted. Recent austerity budgeting under the Conservatives may be to blame for the lackluster support. “When you ask people what they think about the NHS,” Mr. Murray explains, “they like the system but blame the government.”

With respect to wait times, a recent NHS England survey found that 20% of patients seeking a primary care appointment must wait at least one week, a significant increase over the past 5 years. Additionally, 11% of patients are unable to secure an appointment when they first try.

In June 2019, the Public Accounts Committee published a report stating that 50% of NHS and foundation trusts did not meet the NHS maximum wait times of 18 weeks for elective treatment, and under 40% met the 62-day standard wait time for cancer treatment. However, the median wait for planned surgery is under 10 weeks and has fallen dramatically since 2000. Wait times at emergency departments are also lagging; 84.4% of patients are seen, admitted, and treated or sent home within 4 hours of arrival, significantly below the NHS target of 95%.

PHARMACEUTICAL COVERAGE AND PRICE CONTROLS

The NHS currently spends around $24 billion USD (£18 billion) on drugs annually. This amounts to about $360 USD (£275) per capita—one of the lowest levels among all developed countries.

Market Access, Coverage Determination, and Price Setting

In the UK, the regulation of manufacturing, marketing, and pricing of pharmaceuticals is all decided at the national level. All drugs are licensed for marketing by the Medicines and Healthcare products Regulatory Agency (MHRA), an agency within the Department of Health, like the US Food and Drug Administration. In determining whether to permit the marketing of a drug, the MHRA authorizes clinical trials of drugs, assesses the results of those trials, and monitors the safety and quality of available drugs. It can also remove drugs from circulation if it deems them unsafe or ineffective.

There are 3 types of pharmaceuticals available in the UK, as delineated by the Medicines Act of 1968: (1) drugs sold on the General Sale List, which can be sold over the counter; (2) drugs dispensed only by pharmacists; and (3) drugs available only with a prescription.

The first step in establishing a price in the UK is approval by the National Institute for Health and Care Excellence (NICE). NICE is an official body that is operationally independent from but accountable to the Department of Health and Social Care. Using available research from pharmaceutical companies, peer-reviewed publications, professional organizations, patient advocacy groups, and others, NICE assesses the clinical benefits and cost effectiveness of the drug for a specific indication. It determines the incremental cost effectiveness ratio for a drug expressed as dollars per quality-adjusted life year (QALY). After this assessment, the Technology Appraisal Committee (TAC) evaluates the evidence. The TAC is composed of NHS employees, academic researchers, pharmaceutical industry representatives, and members of the public. While there is no firm QALY threshold, the TAC approves drugs that tend to fall at or below $26,000 to $39,000 (£20,000 to £30,000 per QALY). However, there are higher thresholds for drugs treating rare and life-threatening diseases, up to $390,000 (£300,000) per QALY.

Figure 5. Regulation of Pharmaceutical Prices (United Kingdom)

To hold down total drug spending, the Association of the British Pharmaceutical Industry (ABPI) and the UK government announced in 2018 that they had reached a deal to update the voluntary scheme, which has existed for 50 years, with a new scheme for pricing branded drugs: the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS). Begun in 2019, VPAS imposes a 2% cap on growth in the total NHS annual budget for brand-name drugs in exchange for a promise of faster drug approval. Companies who chose not to be in the VPAS fall under a statutory pricing scheme that limits annual sales growth for drugs at 1.1%.

Generic drugs prices are set via the NHS Drug Tariff, which dictates the amount that NHS repays pharmacies for generic drugs. The Drug Tariff usually uses market prices as its main reference. The pricing for over-the-counter drugs is not regulated.

Prices Paid by Patients

Drugs prescribed in NHS hospitals are free to patients. In England, prescription drugs used in outpatient settings are subject to a patient co-payment of $11.55 USD (£9.00) per prescription. However, many groups are exempt from drug co-pays, including children 16 years and under, children ages 16 to 18 who are in school full time, adults ages 60 and older, low-income individuals, pregnant women or those who have given birth within the last year, and patients with cancer or certain other long-term conditions or disabilities. Therefore, patients for whom the price of prescription drugs could be a financial burden are insulated from even small co-pays. Consequently, in 2015, 90% of all drugs prescribed in England were dispensed for free.

Patients who are not exempt from co-pays but who are expecting a high utilization of prescription drugs may buy prepayment certificates. A 3-month certificate costs $38 USD (£29.10), and a 12-month certificate costs $135 USD (£104.00). After purchasing a certificate, the beneficiary can incur no further charges during the 3- or 12-month period, regardless of how many prescriptions they need.

HUMAN RESOURCES

With approximately 1.5 million employees, the NHS is the largest employer in the United Kingdom and in Europe and is one of the world’s largest employers, just behind Walmart and McDonald’s.

Physicians

As of 2016, there were just under 9,000 GP practices in the UK, approximately 7,000 of whom were in England. There are a total of about 150,000 employed physicians in the UK, constituting about 2.9 physicians per 1,000 population, which is slightly higher than the United States but significantly lower than the average in the European Union of 3.6 per 1,000 population. But there are only about 35,000 GPs. There are also 35,000 dental practitioners and 66,000 pharmacists.

Until the last few years, the number of physicians in the UK has increased. This increase has not kept up with population growth. Even worse, over recent years the actual number of GPs has actually been declining, and the NHS in England currently does not have enough staff to meet demand. Between July and September 2018 alone, there were nearly 94,000 vacancies for full-time hospital and community service positions. Most of these vacancies are not of medical staff. Indeed, nearly half are of nurses and midwives. The precise shortfall of physicians is not quantified, although it is felt to be compromising access to care. These shortages are unequally distributed, with the largest vacancies in the southeast portion of the country: the Thames Valley and Kent, Surrey, and Sussex.

In 2016, the total average annual income of a full-time UK physician was $149,000 USD (£114,600). The average annual income for a full-time GP was $135,000 USD (£104,300), while the average annual income of a full-time specialist or consultant was $151,000 USD (£116,100). This is comparable to physician salaries in France and the Netherlands; higher than those in Norway, Taiwan, and China; and lower than those in the United States, Canada, Germany, and Switzerland. Consultants may also work in private practices to supplement their income or apply for Clinical Excellence Awards, which range in value from about $4,000 to about $100,000 USD (£3,016 to £77,320).

To become a physician, students after high school (completing British A level examinations) must complete a 5-year undergraduate degree at one of 34 UK medical schools. The 5 years are generally divided into 2 years of preclinical coursework, followed by 3 years of clinical experience. The educational programs are under the supervision of the United Kingdom General Medical Council (GMC), which approves the curriculum and assessments of each school. After graduation, students must then enter a 2-year foundation program analogous to internship and residency in the United States. Following this, graduates must decide to train as either primary care or specialist physicians. GPs train for at least 3 additional years, the first 2 years in a hospital and the last year in a GP practice. Specialists train in hospitals for 5 to 8 years. During these training years, they are referred to as junior doctors. After completing training, GPs can work as fully licensed physicians.

Junior doctors generally earn a base salary of about $35,500 USD (£27,689) in year one, which can increase to about $41,000 USD (£32,050) in the 2nd year of training. A junior doctor is expected to work no more than 48 hours per week. A physician beginning specialty training earns a base salary of $48,600 USD (£37,935), which can increase with training to $61,700 USD (£48,075). About 17% of physicians employed by the NHS are junior doctors.

The NHS and BMA negotiate the contract for all junior doctors. The negotiation of this contract, which began in 2012, was hotly contested. After several attempts, the negotiations failed, and junior doctors in England began a general strike across the NHS. Eventually a new contract with protected overtime rates was signed in October 2016.

Nurses

In 2018, there were about 307,000 nurses and midwives and an additional 16,000 practice nurses working in GP offices. There are 7.9 nurses per 1,000 persons in the UK, significantly lower than in the United States (11.6) and Norway (17.7).

As with other countries, there is also a nursing shortage in the UK. After the 2008 financial crisis, the number of nurses fell, and this was compounded by the introduction of English-language testing to qualify for nursing registration. In addition, about 33,000 nurses leave the NHS each year. In 2018 alone there were nearly 40,000 vacancies for nursing and midwifery positions in the UK.

To become a nurse, students must complete a 3- or 4-year degree. Generally, the first year teaches a common curriculum; students can specialize in subsequent years. After completing the degree, nurses register with the United Kingdom Nursing and Midwifery Council (NMC) and can begin to practice. Nurses must renew their registration annually and are evaluated by the NMC every 3 years to ensure they have met local standards for safe practice.

Annual salaries for a nurse in the UK range from $31,500 to $94,000 USD (£24,214 to £72,597), depending on the level of experience. By comparison, the average annual salary of nurses in Norway is $52,000 USD and in Switzerland is $57,234 USD.

CHALLENGES

The UK system is well known for its universality, both in coverage and access to care. All residents in the UK have reliable access to primary care services and free choice of provider. Primary and hospital services are free at the point of care. The strength of local authorities in determining how care is delivered is a major advantage of the UK system, as it gives authorities the flexibility to test new payment and performance pilot projects. When it comes to drug prices, the UK has what many people consider to be a model system, as it melds rigorous and objective cost-effectiveness analysis with public input. This has kept prices low and closely linked with drugs’ purported health benefits. While this process has not been without controversy, especially with respect to cancer drugs, the system has remained in place to this day and has garnered significant respect.

Perhaps the biggest strength of the NHS is the public’s trust and devotion to it. The public does not want to replace the system with an alternative. All the public wants is a fully operational NHS. To ensure the continued success of the NHS, there are at least 6 major challenges facing the system going forward.

Probably the biggest challenge facing the NHS is staffing shortages. While the number of physicians has increased over time, it has not increased in proportion to the population. Additionally, about 33,000 nurses leave the NHS each year, exacerbating this problem. Today there are nearly 100,000 job vacancies in the NHS; this is expected to increase to over 250,000 vacancies within the next decade if no efforts are made to combat the workforce shortage. The general perception is that these staffing shortages are compromising access and quality of care. Indeed, the 2019 NHS Long Term Plan identifies the workforce shortage as one of its most pressing problems. Though there are many causes of this problem, a central one is that while salaries for physicians, especially GPs, are competitive with those in many European countries, nurses’ salaries are significantly lower than those in most other countries.

The NHS’s staffing shortage relates to a 2nd major challenge: hospitals. Compared to the United States, the UK has fewer hospital beds and much longer lengths of stay. This has led to a high bed occupancy rate, about 85% across the system, leaving little room for any shocks to the system, such as those that arise from a bad flu season or other increases in utilization. Obviously, as hospitalization rates are decreasing over time across all countries, building new hospitals is not the answer. However, the system should shift the care of many patients with chronic conditions or those with simple operative needs, such as hip and knee replacements, out of the hospital. In addition, there needs to be an effort to reduce the length of stay for many admissions. These changes will require investing in new infrastructure, such as increasing home care services, thereby enabling the system to deliver more care at home, or increasing the number of beds in skilled nursing facilities and nursing homes in order to more smoothly discharge elderly patients.

The 3rd challenge facing the NHS is wait times. While wait times fell dramatically in the 2000s, the post-recession 2010 austerity measures have since increased them again. Attempts to address this issue have had minimal success. In 2013, NHS England rolled out legislation to standardize wait times for elective procedures. The guidelines called for most patients to receive elective surgery within 18 weeks of their primary care referral. Although performance initially improved, overall wait times have actually increased since the legislation’s implementation. Similarly, wait times for GP appointments have increased, and wait times for cancer care are a persistent problem. Indeed, long wait times are an often-cited stereotype of the NHS and one of the problems that most drives the public’s dissatisfaction with the system. To this day, wait times remain an ongoing sore point for physicians and the public alike.

These challenges—staffing, hospital occupancy, and wait times—can be at least in part traced to the overall funding of the NHS. While there is a governmental commitment to invest more in the NHS, only about 9.6% of the UK GDP is devoted to health care. This places the UK near the bottom of the rankings of health care spending by advanced OECD countries such as Canada, France, Germany, Netherlands, Norway, Switzerland, and the like, which all spend above 10% of GDP on health care. Undoubtedly, spending more money on health care, even if 0.5 to 1.0% of GDP more, would put the UK in league with peer nations. If spent prudently, this spending increase would make a significant dent in addressing the staffing and wait time problems currently troubling the NHS.

A 5th challenge is improving quality of care. In 2004, the NHS introduced the Quality and Outcomes Framework (QOF), the largest primary care pay-for-performance health scheme of its time. QOF was expected to provide quality targets and financially reward primary care physicians for proper management of patients with chronic conditions. Although QOF did modestly improve care for patients with diabetes and asthma and also helped low-socioeconomic areas catch up to national standards of care, several issues have jeopardized its future. A technical problem in the original payment formula unintentionally led to higher payments for larger practices than for smaller ones with equivalent levels of quality. Certain QOF indicators, such as those for diabetes, were poorly defined, leading to patients with less specific codes essentially vanishing from QOF registers. Finally, many providers felt that QOF targets, although evidence-based, achieved only marginal gains despite much higher workloads.

A 6th challenge is the deployment of electronic health records in hospitals across the UK. While the EHRs for GPs seem to work well, the roll-out in hospitals has not gone smoothly. Part of this is cultural, as many doctors and institutions still share suspicions regarding privacy. Part of this may be related to the general challenges of any large-scale deployment of a technology in a complex organization. However, going forward, having EHRs throughout the NHS is necessary and must be achieved to ensure the system’s future.

Finally, long-term care has been a flash point in the UK system, especially in the 2017 election. As in most countries, there is no dedicated long-term care financing mechanism in the UK. Instead, funding comes from a hodgepodge of sources. Further stressing the system is the fact that funding from local governments has declined in recent years. Efforts attempting to change the funding formula to increase funding responsibilities for patients and their families have been highly unpopular. There remains no clear solution, yet the UK population continues to age. This issue will need to be addressed, especially as the number of elderly in the UK will increase substantially in the coming years.

Despite many criticisms, the NHS works relatively well. Medical care is of comparable quality to many peer countries, with no cost sharing at the point of care. Most of the problems and sources of dissatisfaction are not structural but rather can be traced back to persistent underfunding of the system. While this is an issue that will have to be addressed, it is very politically charged, as proven by the recent controversy over long-term care funding. Nevertheless, because of the British public’s deep commitment to and trust in the NHS, there exists strong public support for change and perhaps even for change as sweeping as new funding legislation.