Can user charges make health care more efficient?

User charges and efficiency

Two arguments for expanding the role of user charges in the NHS might be made, both relating to the potential to get better value from the resources available. The first argument is that user charges can help make up for shortfalls in public funding. This is an efficiency argument because the implicit claim is that in the current economic climate, social welfare will be enhanced by substituting patient payments for tax financing. There is no theory of fairness in tax policy that permits targeting the ill in this way, and we will not consider this argument further.

The second argument is that user charges make people more discerning in their healthcare choices.7 When health care is free at the point of use, patients seek care for as long as there is some benefit to be had—however small, and irrespective of its cost. Imposing a charge will encourage people to avoid care that is low value or not cost effective (costs more to provide than the benefit produced is worth), freeing up resources to provide more high value care. As a result, the amount of health the healthcare system produces will grow relative to the resources available.

For this to be the case, however, several assumptions must hold. People must possess the information needed to make the right choices; they must be able to understand the information they have; and they must be able to make rational choices based on that information. These assumptions do not hold in health care.8

Research shows that although people do reduce their use of health care when faced with a charge, they are unable to distinguish low value from high value care. The strongest evidence for this comes from the respected RAND Health Insurance Experiment, a large randomised controlled trial carried out in the United States in the 1970s and early 1980s.9 The RAND study found that people across income groups who faced a user charge reduced the use of effective care almost to the same degree as they reduced the use of ineffective care.10 This important finding has been reinforced by subsequent studies based on natural experiments.3

Advocates of user charges point out that in spite of reduced use of effective care, the RAND study showed no adverse health effects for people who are not poor.2 This is hardly surprising, given the study’s design and timing. The trial was not long enough to capture the longer term effects of user charges. It also excluded people older than 62 and those too disabled to work. In addition, as the architects of the RAND study and other researchers have noted, many conditions that were untreatable or acute in the 1970s are now considered manageable, so the range of treatment potentially subject to charges is far greater today than at the time of the study.11 Their message is that the low level of adverse health effects found in the RAND study should not be used to justify user charges.

Other research shows how user charges can contribute to avoidable increases in

healthcare costs over time. Introducing user charges in one area of care—for example, outpatient prescription drugs—can have a squeezed balloon effect, initially lowering expenditure on drugs but increasing the use of other services such as half day or full day admissions to community mental health centres,12 nursing home admissions,13 and emergency care.12 14 This is because people may forgo necessary treatment, fail to adhere to treatment, or opt for free (but expensive to provide) care to avoid paying user charges. Total spending can increase if patients present in high cost settings with conditions that could and should have been treated (more cheaply) much earlier on.

International experience

The research evidence shows that the efficiency case for user charges outlined above does not hold. But it might still be possible to design a user charges policy that enhances efficiency. This could be done by building on the primary incentive effect of user charges—to forgo care—in such a way that patients only forgo low value care. The obvious course of action is to remove responsibility for decisions about value from users of health care and apply charges to low value care alone. A few countries, including the United States, France, and Germany, are developing such a value based approach (box 2). A review of their experience shows the rationale for and effects of value based user charges.

User charges and the NHS

The three countries discussed above are trying to implement a user charges policy that steers patients away from low value care and towards high value care, rather than putting patients in a position where they must gamble on their own health. Should the NHS follow suit and adjust its user charges policy accordingly? There are two factors to consider: problems with the value based approach and the presence of alternatives.

A value based system of user charges can be expensive to design and administer. It can also be risky because of uncertainty about the clinical effectiveness—let alone the cost effectiveness—of many healthcare interventions. Given that individual patient characteristics can affect the clinical or cost effectiveness of an intervention, to get things entirely right may be impossible. So although a value based policy is a clear improvement on traditional user charges, it can only ever be partial in scope if major cost and serious risk are to be avoided.

In the US, France, and Germany, the ultimate aim of adapting policy on user charges has been to achieve outcomes the NHS already achieves not through user charges but through supply side controls. The use of financial incentives (free care) to register with a regular doctor, enrol in disease management programmes, encourage adherence to medication, and obtain referral to specialist care is intended to tackle the problems associated with highly fragmented delivery systems and fee for service provider payment—for example, lack of continuity, poor coordination, duplication, and inappropriate prescribing and use of specialists. These are problems the NHS has largely managed to avoid or redress through its strong primary care focus, general practitioner gatekeeping, policy on generic prescribing and, more recently, through the Quality and Outcomes Framework, which includes incentives for disease management.27 28 Thus value based cost sharing operates in contexts where alternative ways of achieving particular ends are absent—perhaps because they are less feasible.

Because there are costs and risks associated with value based user charges, and because the NHS has other tools for achieving the same ends, it is hard to see how expanding the role of user charges would enhance efficiency. A step in the value based direction would be positive —for example, it does not make sense to spend a great deal on financial incentives for general practitioners to improve outcomes for people with asthma, heart disease, and mental illness (through the Quality and Outcomes Framework), yet erect barriers to treatment by making these patients pay for prescription drugs. A charge could remain for low value care, but if care is indisputably of low value, why provide it at all?

The current economic climate requires tough decisions about NHS funding and provision. Because we value fairness alongside health gain, revenue for health care should be raised equitably. And because we want to get the best possible return on the money we put into health care, user charges should not be allowed to undermine efficiency by impeding access to high value care. The NHS is fortunate in having recourse to a larger set of policy instruments than many other countries, which makes user charges hard to justify. If the UK government’s concern is to enhance efficiency in health care, the best starting point would be to dispense with user charges altogether.