Question Anton Finance & Economics

Is there an economic case for the privatisation of the NHS?

Is there an economic case for the privatisation of the National Health Service?

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Answer Expert #23686

Privatisation would turn the UK National Health Service into an American system with public reliance on private insurance. An economic case can be made for such a transformation as free public services encourage over-use (Morris et. al. 2005). Privatisation will also mean better patient choice. However, reasons can be given for why health care should not be privatised.

Equality

A privatised system would exclude many people from treatment given the expense of the insurance. To achieve equality, healthcare should be offered for free. Treatment should be provided according to medical need rather than the ability to pay (Sloman 2007).

Budgeting

The public can find it difficult to forecast their future health needs. It would be complicated for individuals to budget for future private medical expenses. A universal public system removes the financial complexity from individual planning.

Positive Externalities

The drawback of the American system is that those on low incomes often cannot afford treatment. If treatment is not provided, then sick patients could infect other people. The private health care system does not fully consider the effect that illness has on other people (Sloman 2007). In contrast, the NHS provides external protection to the wider community.

Patient Knowledge

Consumers have knowledge of common private markets such as the clothing trade. However, patients tend to have poorer knowledge of the health system. The danger with a private approach is that immoral doctors could promote more expensive treatment than is necessary (Sloman 2007). In contrast, the NHS does not give doctors fees for treatment, so there is less incentive for them to provide unnecessary services (Emmerson et. al. 2000).

Conclusion

The economic case for privatisation is outweighed by the benefits of the publically managed NHS.

References

Emmerson, C. , Frayne C. and Goodman A. (2000), Pressures in UK Healthcare: Challenges for the NHS, The Institute for Fiscal Studies. Available online at http://www.ifs.org.uk/comms/nhsspending.pdf. Accessed at 25/10/16

Morris, Z., Chang, L., Dawson, S. and Garside, P. editors (2005), Policy Futures for UK Health, United Kingdom, Radcliffe Publishing Ltd

Sloman, J., (2007), Essentials of Economics (4th ed.), Harlow: Prentice Hall