Why I’m not impressed with Daniel Hannan’s plan

By Amanjit Jhund

There has been a lot of Daniel Hannan bashing going on recently but most of the posts on LabourList on both sides seem to have been based on conjecture and no real analysis of Mr Hannan’s plan for the NHS.

I support expanding top up fees and increasing patient choice and as such I chose to reserve judgement on Mr Hannan’s proposals. I went out today and bought a copy of The Plan to read it for myself.

I’m afraid to say that I was not impressed, it seemed poorly researched, and ill informed.

Before anyone starts to accuse me of more “Tories are Evil” rhetoric please let me explain why I felt this.

First of all, Mr Hannan bases his proposals on the Singapore health care system. He does this citing one piece of evidence, that Singapore spends only 3.5% of its GDP compared with Britain’s 8.4% on healthcare. He claims that this provides “health outcomes that surpass those of many European nations” but fails to provide any parameters of comparison.

He argues that we should use a voluntary opt-in system of individual health insurance accounts paid for by National Insurance contributions with “additional contributions to be paid into such accounts” accompanied by “a compensating tax cut”. He believes that these accounts would provide individuals with the funds to choose their treatment provider for individual illnesses and that a “small amount” would be set aside each year for “catastrophic medical insurance”. He believes that this would work as “a sad reality of life is that most of us will get old, be very ill for a few years and die”.

Mr Hannan is, however, mistaken.

With increasing life expectancy we are not seeing a uniform increase in quality of life in later years. Instead we have have a situation where morbidity increases in line with this increase so that Mr Hannan’s statement should read:

“A sad reality of life is that most of us will get old, our health will deteriorate gradually over a number of years requiring expensive long term care and then we will die.”

This is important as the provisions in Mr Hannan’s healthcare insurance model only cover “catastrophic” medical events not long term care. This model works in Singapore because whilst they do have an ageing population they also have a cultural infrastructure where the elderly are cared for in the family structure and this is backed up by the statistics, as only 21% of Singapore nursing home residents are actually born in Singapore and 70% of residents do not have children or grandchildren. This is vitally important as in Singapore the often debilitating long term care is absorbed by the family structure rather than the state or “individual health accounts”.

In fact, in a far superior book than Mr Hannan’s (Ageing and long-term care: national policies in the Asia-Pacific By David R. Phillips and Alfred C. M. Chan) it is suggested that:

“It has been an unspoken policy in Singapore that nursing homes should be controlled in order not to encourage family members to turn to them as a first resort. The rationale has been that family care would be affected negatively if there was easy availability of institutional nursing home care”.

This has left Singapore with an increasing funding gap in the provision of care for the elderly, with services for the elderly having to be trebled by 2030 to keep pace with demand. In order to make Mr Hannan’s “Plan” work in this country for the provision of long term care it would have to be accompanied by a cultural revolution where vast swathes of the elderly and their care would be reabsorbed into family structures and coffers. Otherwise we would see many individuals emptying their “health accounts” to pay for the required long term care and treatments leaving them with little or no cover in the extreme end of their old age.

The other patient group that would be particularly overlooked by Mr Hannan’s Plan are the chronically ill. This patient group again would be forced into paying for their care out of the “health accounts” potentially emptying them quickly and with the greater likelihood of “catastrophic” events during their lifespan they would no doubt garner greater premiums in their insurance rates leading to an even worse situation.

To be fair, Mr Hannan does suggest that we should retain the funding of “healthcare through the welfare system” for those not able to save enough for their accounts. He also believes that we should make “health accounts bequeathable; and within certain limits, making them transferable to family members”.

This strikes me as being ridiculous on several levels.

1) The remnants of the NHS would be likely to become 2nd class hospitals and care units unable to compete on free market terms, funded through an ever decreasing welfare system and forced to take on the complex needs of the chronically ill patients, the elderly and the associated costs (this would not be any sort of free market system that I have ever heard of).

2) Given that he suggests “a compensating tax cut” in additional contributions to accounts I am suspicious that this is a way of raising the inheritance tax threshold for the rich.

3) It would also lead to the establishment of a genetic underclass as individuals unlucky enough to have genetic disorders such as a BRACA1 or 2 gene mutation (leading to increased cancer rates) would not only be unlikely to inherit any money in their accounts but they may also be required to mortgage their accounts to pay for a family members treatment. This would have a cumulative effect on subsequent generations even more pronounced in diseases such as Huntington’s disease where the genetic mutation gets worse in subsequent generations with earlier onset, condemning them to perpetual 2nd class care.

As a proponent of free market reforms and patient choice in the NHS I am left disapproving of Mr Hannan’s Plan but I do look forward to a lively debate on this below.