Pricing, insurance and the National Health Service

Since the birth of the National Health Service in 1948 there have been periodic discussions of the potential role of pricing and insurance in the United Kingdom health care system. This article is concerned with discussing the problems inherent in these mechanisms and it advocates more careful articulation of the cost and benefits of such policies. The first section gives a description of some quite recent proposals to extend the role of the pricing and insurance mechanisms which have been made by the British Medical Association and the McKinsey consultancy company. The second section uses economic analysis to show that both the pricing and the insurance mechanisms have inherent problems which may vitiate their efficiency in many western health care markets. The third section is concerned with the mechanisms by which the efficiency of the health care system can be improved, and radical experimentation is advocated. Without radical experimentation and the implementation of suitable incentive systems, inefficiency and inequality will continue in the National Health Service.