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The English Health Care System

by Ruth Thorlby and Sandeepa Arora, Nuffield Trust

What is the role of government?

Responsibility for health legislation and general policy in England rests with Parliament, the Secretary of State for Health, and the Department of Health. (In cases where data for England are unavailable — e.g., financial or funding data — U.K. data are used instead.) Under the Health Act (2006), the Secretary of State has a legal duty to promote a comprehensive health service, providing services free of charge, except for those with charges already in place. Rights for those eligible for National Health Service (NHS) care are summarized in the NHS Constitution; they include access to care without discrimination and within certain timeframes for some categories, such as emergency and planned hospital care (Department of Health, 2013b). The Department of Health provides stewardship for the overall health system, but day-to-day responsibility for running the NHS belongs to a separate public body, NHS England.

NHS England manages the NHS budget, oversees 209 local Clinical Commissioning Groups (CCGs), and ensures that the objectives set out in an annual mandate by the Secretary of State for Health are met, including both efficiency and health goals. Budgets for public health are held by local government authorities, which are required to establish “health and well-being boards” to improve coordination of local services and reduce health disparities.

Who is covered and how is insurance financed?

Publicly financed health care: In 2013, the U.K. spent 8.8 percent of GDP on health care, of which public expenditure, mainly on the NHS, accounted for 83.3 percent (Office of National Statistics, 2015). The majority of funding for the NHS comes from general taxation, and a smaller proportion from national insurance (a payroll tax). The NHS also receives income from copayments, people using NHS services as private patients, and some other minor sources.

Coverage is universal. All those “ordinarily resident” in England are automatically entitled to NHS care, largely free at the point of use, as are nonresidents with a European Health Insurance Card. For other people, such as non-European visitors or illegal immigrants, only treatment in an emergency department and for certain infectious diseases is free (Department of Health, 2013a).

Private health insurance: In 2012, 10.9 percent of the UK population had private voluntary health insurance (Nuffield Trust, 2013). The bulk of it was provided through employers (3.97 million policies) versus individual policies (0.97 million). Private insurance offers more rapid and convenient access to care, especially for elective hospital procedures, but most policies exclude mental health, maternity services, emergency care, and general practice (King’s Fund, 2014). Data on private insurers are not freely available, but according to the Competition and Markets Authority (2014), four insurers account for 87.5 percent of the market, with small providers making up the rest.

What is covered?

Services: The precise scope of the NHS is not defined in statute or by legislation, and there is no absolute right for patients to receive a particular treatment. However, the statutory duty of the Secretary for Health is to ensure comprehensive coverage. In practice, the NHS provides or pays for preventive services, including screening, immunization, and vaccination programs; inpatient and outpatient hospital care; physician services; inpatient and outpatient drugs; clinically necessary dental care; some eye care; mental health care, including some care for those with learning disabilities; palliative care; some long-term care; rehabilitation, including physiotherapy (e.g., after-stroke care); and home visits by community-based nurses.

The volume and scope of these services are generally a matter for local decision-making, but the NHS Constitution also states that patients have a right to drugs or treatment approved in technology appraisals carried out by the National Institute of Health and Clinical Excellence (NICE), if recommended by their clinician (Department of Health, 2013b). For drugs or treatments that have not been appraised by NICE, the NHS Constitution states that CCGs shall make rational, evidence-based decisions (Department of Health, 2013b; a total of 533 appraisals were carried out between March 2000 and August 2014). There is no routine reporting of how individual clinical commissioning groups make decisions, but a study of predecessor organizations found considerable variation (Nuffield Trust, 2011). There is also evidence of wide variations in access to some treatments, such as hip replacements (Royal College of Surgeons in England, 2014).

Cost-sharing and out-of-pocket spending: There are limited cost-sharing arrangements for publicly covered services. Out-of-pocket payments for general practice are limited to services that fall outside the purview of the NHS, including examinations for employment or insurance purposes and the provision of certificates for travel or insurance.

Outpatient prescription drugs are subject to a copayment (currently GBP8.20, or USD11.60, per prescription item in England); drugs prescribed in NHS hospitals are free. NHS dentistry services are subject to copayments of up to GBP222.50 (USD314.00) per course of treatment. (Throughout this profile, all figures in USD were converted from GBP at a rate of GBP0.71 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD, 2015).These charges are set nationally by the Department of Health. Out-of-pocket expenditure on health by households accounted for 11.9 percent of total expenditures in the U.K. in 2013 (Office for National Statistics, 2015). In 2013, the largest portion of out-of- pocket spending (34%) was for pharmaceuticals, followed by about 20 percent on medical appliances and equipment (Office for National Statistics, 2015; including consumer spending on drugs and medical products not covered by the NHS, such as glasses, dental treatment, and spending on hospital and outpatient care).

Safety net: People who are exempt from prescription drug copayments include children under age 16 and those 16 to 18 in school full time; people age 60 or older; people with low income; pregnant women and those who have had a baby in the past 12 months; and people with cancer, certain other long-term conditions, or certain disabilities. Patients who need large amounts of prescription drugs can buy prepayment certificates costing GBP29.10 (USD41.10) for a period of three months and GBP104 (USD147) for 12 months. Users incur no further charges for the duration of the certificate, regardless of how many prescriptions they need. In 2013, 90 percent of prescriptions in England were dispensed free of charge (Health and Social Care Information Centre, 2014a). Young people, students, pregnant and recently pregnant women, prisoners, and those with low incomes are not liable for dental copayments. Vision tests are free for young people, those over 60, and people with low incomes, and financial support to meet the cost of corrective lenses is available to young people and those with low incomes. Transportation costs to and from provider sites also are covered for people who qualify for the NHS Low Income Scheme.

How is the delivery system organized and financed?

Primary care: Primary care is delivered mainly through general practitioners (GPs), who act as gatekeepers for secondary care. In 2014, there were 36,920 general practitioners (full-time equivalents) in 7,875 practices, with an average of 7,171 patients per practice and 1,530 patients per GP. There were 40,443 hospital specialists and a further 53,786 hospital doctors in training (Health and Social Care Information Service, 2015a, 2015b). The number of solo practices is currently 843, while there are 3,589 practices with five or more GPs (Health and Social Care Information Service, 2015a). General practices are normally patients’ first point of contact, and people are required to register with a local practice of their choice; however, choice is effectively limited because many practices are full and do not accept new patients. In some areas, walk-in centers offer primary care services, for which registration is not required.

Most GPs (66%) are private contractors, and approximately 56 percent of practices operate under the national General Medical Services contracts, negotiated between the British Medical Association (representing doctors) and government. These provide payment using a mixture of capitation to cover essential services (representing about 60% of income), optional fee-for-service payments for additional services (e.g., vaccines for at-risk populations, about 15%), and an optional performance-related scheme (about 10%) (Health and Social Care Information Centre, 2015d). Capitation is adjusted for age and gender, local levels of morbidity and mortality, the number of patients in nursing and residential homes, patient list turnover, and a market-forces factor for staff costs as compared with those of other practices. Performance bonuses mainly relate to evidence-based clinical interventions and care coordination for chronic illnesses. The proportion of income from these bonuses will fall when the new 2014–15 contract is implemented, as the number of bonus-related services is reduced and funding rerouted into capitation.

The proportion of GPs employed in practices or on a salaried basis as locums (e.g., standing in when other GPs are unavailable) is increasing (currently around 20%). Most general practices employ other professionals such as nurses, who monitor patients for such things as blood pressure and provide minor treatments such as dressing wounds. The structure of general practice is changing, away from the single-handed “corner shops” and toward networked practices, including larger multipractice organizations using multidisciplinary teams of specialists, pharmacists, and social workers (King’s Fund and Nuffield Trust, 2013). The average income for combined GPs (contracted and salaried) was GBP92,200 (USD130,200) before tax in 2013–2014 (Health and Social Care Information Service, 2015c).

Outpatient specialist care: Nearly all specialists are salaried employees of NHS hospitals, and CCGs pay hospitals for outpatient consultations at nationally determined rates. Specialists are free to engage in private practice within specially designated wards in NHS or in private hospitals; the most recent estimates (2006) were that 55 percent of doctors performed private work, a proportion that is declining as the earnings gap between public and private practice narrows (GHK Consulting and Office of Fair Trading, 2011). Patients are able to choose which hospital to visit, and the government has introduced the right to choose a particular specialist within a hospital (not yet fully implemented). Most outpatient specialist consultations are carried out in hospitals, although consultation may take place in general practices. Some GPs “with specialist interests” also offer specialist consultations, paid on a per-session or fee-for-service basis.

Administrative mechanisms for paying primary care doctors and specialists: The bulk of general practices are reimbursed monthly for the services they deliver on the basis of data extracted automatically from practices’ electronic records. Some payments may require practices to enter data manually on the number of patients screened or treated for “enhanced services,” which qualify for additional payments, such as diagnosis and support for patients with dementia. These data are collated and validated by NHS England.

After-hours care: GPs are no longer required personally to provide after-hours care to their patients (a small minority still do), but must ensure that adequate arrangements for its provision are in place. In practice, this means that CCGs contract mainly with GP cooperatives and private companies, both of which usually pay GPs on a per-session basis.

Serious emergencies are handled by hospital emergency departments. In some areas, less serious cases are seen in urgent care centers or minor-injury units, which are staffed in a variety of ways, and include nurse-led and GP-led centers. Telephone advice is available on a 24-hour basis through NHS 111 for those with an urgent but not life-threatening condition.

Hospitals: Publicly owned hospitals are organized either as NHS trusts (currently 98) directly accountable to the Department of Health or as foundation trusts (currently 147) regulated by Monitor, an economic regulator of public and private providers. Foundation trusts enjoy greater freedom from central control, have easier access to capital funding, and are able to accumulate surpluses or run (temporary) deficits. Government wants all hospitals (including those providing mental health and ambulance services) to become foundation trusts in the near future.

Both trusts and foundation trust hospitals contract with local CCGs to provide services. They are reimbursed mainly at nationally determined diagnosis-related group (DRG) rates, which include medical staff costs and account for about 60 percent of income, with the remainder coming from activities not covered by DRGs, such as mental health, education, and research and training funds (Department of Health, 2013c). Responsibility for setting those rates is shared between NHS England and Monitor. In some areas, rates are not applied and payments are made for an overall service, such as emergency care. Also at the local level, fees for “years of care”—for example, for the total cost of the care a diabetic patient receives over 12 months—are being developed but as yet are not in widespread use. There is no cap on hospital incomes.

An estimated 548 private hospitals and between 500 and 600 private clinics in the U.K. offer a range of services, including treatments either unavailable in the NHS or subject to long waiting times, such as bariatric surgery and fertility treatment, but generally do not have emergency, trauma, or intensive-care facilities (Competition and Markets Authority, 2014). Private providers must be registered with the Care Quality Commission and with Monitor, but their charges to private patients are not regulated and there are no public subsidies. Although the volume of care purchased from private providers by the NHS has increased recently in areas outside of mental health, NHS use of private hospitals remains low—3.6 percent of overall spending by commissioners on hospital services in 2012–2013 (Nuffield Trust, 2014a).

Mental health care: Mental health care is an integral part of the NHS, which covers a full range of services. Less serious illnesses—mild depressive and anxiety disorders, for example—are usually treated by GPs. Those requiring more advanced treatment, including inpatient care, are treated by mental health or hospital trusts. Some of these services are provided by community-based staff. About a quarter of NHS-funded, hospital-based mental health services are provided by the private sector.

Over the past decade, policy has focused on increasing access to psychological therapies for mild to moderate mental health problems, though there can still be long waiting times. Policies to improve care of more severe conditions in the community have focused on outreach and early intervention, and there is an overarching aim to ensure “parity of esteem” between mental health and other kinds of health services. A review conducted in 2012 suggested that mental health services have been underfunded compared with treatment of physical illnesses (Centre for Economic Performance, 2012).

Long-term care and social supports: The NHS pays for some long-term care, such as for people with continuing medical or skilled-nursing needs, but payments in recent years have been substantially reduced. Most long-term care is provided by local authorities and the private sector. Local authorities are legally obliged to assess the needs of all people who request it, but, unlike NHS services, state-funded social care is not universal. With the exception of time-limited “reablement” services, some equipment and home modifications (in some areas), and information services, residential and home care are needs- and means-tested. Full state support for residential care, for example, is available only to those with less than GBP14,250 (USD20,123) in assets who also have high levels of need, with a sliding scale applied up to GBP23,250 (USD32,832). There is a national framework for assessing need, but local authorities are free to set eligibility thresholds for access to funds, which has become progressively more restricted (Nuffield Trust, 2014b).

Those eligible are liable for some copayments, with some people contributing almost all of their “assessed income,” including pensions. Beneficiaries can receive personal budgets to purchase their own care but can also opt to have the local authority arrange it. Some additional allowances paid to users and carers are exempt from means testing, such as “attendance allowance,” worth a maximum of GBP81.30 (USD115) a week.

The 2014 Care Act aims to limit individuals’ risk of catastrophic long-term care costs by imposing a cap on total out-of-pocket expenditure; however, this provision has been postponed until 2020 over cost concerns.

In 2009, the private sector provided 78 percent of residential care places for older people and the physically disabled in the U.K. (Laing and Buisson, 2013). The NHS provides end-of-life palliative care at patients’ homes, in hospices (usually run by charitable organizations), in care homes, or in hospitals. Separate government funding is available for working-age people with disabilities.

What are the key entities for health system governance?

The Department of Health and the Secretary of State for Health are ultimately responsible for the health system as a whole. The Health and Social Care Act 2012 transferred important functions to NHS England, including overall budgetary control, supervision of CCGs, and, along with Monitor (described below), responsibility for setting DRG rates for provision of NHS services. NHS England also commissions some specialized low-volume services, national immunization and screening programs, and primary care. It is also responsible for setting the strategic direction of health information technology, including the development of online services to book appointments, the setting of quality standards for electronic medical record-keeping and prescribing, and the IT infrastructure of the NHS.

The National Institute for Health and Clinical Excellence (NICE) sets guidelines for clinically effective treatments and appraises new health technologies for their efficacy and cost-effectiveness. The CQC ensures basic standards of safety and quality through provider registration and monitors care standards achieved (described further below). It can require closure of services if serious quality concerns are identified.

The 2012 Act extended Monitor’s role to being the economic regulator of public and private providers, with powers to intervene if performance deteriorates significantly. Monitor licenses all providers of NHS-funded care and may investigate potential breaches of NHS cooperation and competition rules and mergers involving NHS foundation trusts. Where such mergers are found to be prima facie undesirable, they are referred to the Office of Fair Trading and the Competition Commission.

Healthwatch England promotes patient interests nationally. In each community, local Healthwatches support people who make complaints about services; quality concerns may be reported to Healthwatch England, which can then recommend that the Care Quality Commission (CQC) take action. In addition, local NHS bodies, including general practices, hospital trusts, and CCGs, are expected to support their own patient engagement groups and initiatives. The Department of Health owns NHS Choices, the primary website for public information about health conditions, the location and quality of health services, and other information. The website, which also offers a platform for user feedback, received 27 million visits a month in 2012–13 (NHS Choices, 2013).

What are the major strategies to ensure quality of care?

The CQC has responsibility for the regulation of all health and adult social care in England. All providers, including institutions, individual partnerships, and sole practitioners, must be registered with the CQC, which monitors performance using nationally set quality standards and investigates individual providers when concerns have been raised (e.g., by patients). It rates hospitals’ inspection results and can close down poorly performing services. New “fundamental standards” for all health and social care came into force in 2015 (Department of Health, 2014a). The monitoring process includes results of national patient experience surveys.

NICE develops quality standards covering the most common conditions occurring in primary, secondary, and social care. National strategies have been published for a range of conditions, from cancer to trauma. There are national registries for key disease groups and procedures. Maximum waiting times have been set for cancer treatment, elective treatments, and emergency treatment. A website, NHS Evidence, provides professionals and patients with up-to-date clinical guidelines. Support is also provided by NHS Quality Improvement, part of NHS England.

Information on the quality of services at the organization, department, and (for some procedures) physician levels is published on NHS Choices. Results of inspections by the CQC are also publicly accessible. The Quality and Outcomes Framework provides general practices with financial incentives to improve quality. General practices are awarded points (determining part of their remuneration) for keeping a disease registry of patients with certain diseases or conditions and their management and treatment. For hospitals, 2.5 percent of contract value is linked to the achievement of a limited number of quality goals through the Commissioning for Quality and Innovation initiative. In addition, DRG rates for some procedures are linked to best practice.

All doctors are required by law to have a license to practice from the General Medical Council. Similar requirements apply to all professions working in the health sector. A process of revalidation every five years is being introduced for doctors. Providers of hospital services must also be registered with the CQC.

What is being done to reduce disparities?

The Secretary of State, NHS England, and CCGs have a legal duty to “have regard” for the need to reduce health disparities, although the applicable legislation does not specify what action needs to be taken. NHS England publishes an annual report on the actions and progress being made in reducing disparities in access and outcomes, by gender, disability, age, socioeconomic status, and ethnicity (NHS England, 2015b). Strategies include ensuring that local areas receive adequate resources to tackle inequalities and that the outcomes for at-risk groups are routinely monitored.

What is being done to promote delivery system integration and care coordination?

GPs increasingly work in multipartner practices that employ nurses and other clinical staff, who carry out much of the routine monitoring of patients with long-term conditions. These practices also have some of the features of a medical home—that is, they direct patients to specialists in hospitals or to community-based professionals, like dieticians and community nurses, and hold treatment records of their patients. GPs are responsible for care coordination as part of their overall contract; to improve coordination for older patients, the latest version of the contract (2014–15) requires practices to have a “named accountable GP” for all patients over age 75. GPs also have financial incentives to provide continuous monitoring of patients with the most common chronic conditions, such as diabetes and heart disease.

The 2012 Act charged NHS England, Monitor, and CCGs with promoting integrated care—closer links between hospital- and community-based health services, including primary and social care. The health and well-being boards within local authorities are intended to promote integration between NHS and local authority services, particularly at the intersection of hospital and social care.

The government announced in 2013 the selection of 14 “Pioneer” integration pilot programs, aimed at improving coordination of health and care services for patients most at risk of having to undergo unplanned or emergency treatment. The Better Care Fund provides GBP3.8 billion (USD5.4 billion), pooled from existing health and social care budgets, for integration projects by local health and social care commissioners starting in 2015–16. Health and well-being boards have submitted plans for these funds with a range of objectives, including a reduction in emergency hospital admissions by 3.5 percent (Local Government Association, 2013).

What is the status of electronic health records?

The NHS number assigned to every registered patient serves as a unique identifier. Most general practice patient records are computerized. Some practices use electronic systems to allow patients to make appointments or e-mail their GP, but there is no requirement for practices to have that capability. Records are not routinely linked between providers.

A move to make primary, urgent, and emergency care services paperless by 2018, and all other parts of the NHS by 2020, is being enforced by requirements that NHS organizations show progress toward that end in the intervening years; they risk having funding removed if universal digital care records are not implemented by 2020.

NHS Choices will serve as a single point of access for patients to register with a GP, book appointments and order prescriptions, access apps and digital tools, speak to their doctor online or via video link, and view their full health record (Department of Health 2014c). All NHS patients have the right of access to their own health records (in some cases it is possible electronically) and can apply in writing to have a copy of their records held by their general practice, hospital, or dentist. By 2016, all patients will be able to have access to their GP electronic record in full, and by 2018 it is hoped that access will extend to data from all health and health care interactions.

Electronic transfers are widely used by GPs to send prescriptions to pharmacies, and for the storage and distribution of digital scans, X-rays, and other images.

NHS England has been developing a program for collecting data and for linking electronic records from general practice with those from hospitals and other care settings, for purposes of research and planning in health and social care services (NHS England, 2014b). Full implementation has been delayed because of concerns about confidentiality, but piloting in 265 general practices started in 2014.

How are costs contained?

Rather than using patient cost-sharing or imposing direct constraints on supply, costs in the NHS are constrained by a global budget that cannot be exceeded. NHS budgets are set at the national level, usually on a three-year cycle. CCGs are allocated funds by NHS England, which closely monitors their financial performance to prevent overspending. They are expected to achieve a balanced budget each year.

The current economic situation has resulted in a largely flat NHS budget against a backdrop of rising demand. Between March 2010 and March 2015, the NHS budget rose by between 0.6 percent and 0.9 percent (in real terms), versus the 5.6 percent growth between 1996–97 and 2009–10 (King’s Fund, 2015b). NHS England (2014a) estimated that the gap between rising demand and a continuation of this minimal increase in funding would be equivalent to GBP30 billion (USD42.4 billion) per year by 2020–21, assuming no additional efficiencies, but also that efficiencies equivalent to 2–3 percent of the annual budget are possible, versus a historic rate of 0.8 percent.

Although some of the savings targets have been met in the past five years, the financial pressure on the NHS is being associated with some deterioration in quality of care—notably waiting time targets (Nuffield Trust and Health Foundation, 2015).

Cost-containment strategies to date include freezing staff pay increases, supporting increased use of generic drugs, reducing DRG payments for hospital activity, managing demand, and reducing administration costs (King’s Fund, 2015a). There are a number of tools for local purchasers to maximize value by addressing unwarranted variations in utilization and clinical practice, provided by the government-funded “Rightcare” program. Local purchasers can also run competitive tenders for certain services.

What major innovations and reforms have been introduced?

In October 2014, NHS bodies, led by NHS England, published the Five Year Forward View, which sets out the challenges facing the NHS and a series of strategies to address them (NHS England, 2014a). These included setting up a number of pilot programs across England to test new models of care known as “vanguards.” To date there are 37 vanguard sites, which focus on scaled-up primary care, enhanced health care in long-term care homes, vertically integrated hospital and community care, and networks to improve emergency care. NHS England hopes that, among other benefits, evaluations of the program will lead to better tools for identifying those at risk of becoming high-cost, high-need patients, and to the development of capitated contracts to incentivize providers to collaborate in the care of complex patients. The Five Year Forward View also sets out strategies to improve health and well-being, including a diabetes prevention initiative (NHS England, 2015a).

The primary challenge facing the NHS is finding a way to redesign services and invest in prevention while at the same time generating efficiencies without compromising service quality or access. In November 2014, the National Audit Office reviewed the financial health of hospital providers in the NHS and warned that the trend of increasing financial distress was unsustainable (National Audit Office, 2014). The new Conservative government elected in May 2015 endorsed the Five Year Forward View and committed an additional GBP8 billion (USD11 billion) per year. But measured against the GBP30 billion (USD42 billion) gap identified by NHS England, this additional funding equates to an annual savings target of GBP22 billion (USD31 billion). Moreover, this funding will need to cover the implementation of new pledges, made in the election manifesto, to implement full seven-day working weeks in hospitals and general practice by 2020.

Acknowledgements

The authors would like to acknowledge Anthony Harrison, the author of earlier versions of this profile.

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