Question

Describe the various payment systems for healthcare services since Post World War II. Identify each one, briefly describe the system, then compare each payment protocol. Finally, identify the system of payment you believe would work the best in our current healthcare environment. Provide rationale citing references to justify your selection.

Answer 1

The voluntary hospital system is not dead’, declared one delegate at the 1938 annual conference of the Incorporated Association of Hospital Officers; ‘It may be changing, it may eventually become something other than a voluntary hospital system, but it is not dead.’1 Ten years later it would be brought to an abrupt end, nationalised and integrated almost wholesale into the new health service. While this was undoubtedly a significant change in the organisation of healthcare in modern Britain, how to understand that change is open to debate. Historians and social scientists have variously understood the NHS as both a rejection and a culmination of what came before. These different narratives cast patient payment in contrasting roles. It was either an important indicator that the voluntary hospitals had effectively become private hospitals ahead of their nationalisation, or it was a major plank in the establishment of a more democratic form of health provision that pre-figured a socialised health service. Thus, to appreciate the place of payment within the pre-NHS hospital system, it is important to understand the wider picture within which it emerged.

Payment becoming a standard feature of the hospital experience was not, however, an exclusively British phenomenon. After surveying some key themes in the historiography of healthcare in early twentieth-century Britain, this chapter will turn to a few enlightening international comparisons. Previous international perspectives on hospital funding have tended to focus on health insurance, which allows for some revealing comparisons. For example, under the National Health Insurance scheme British doctors were paid according to a rather ungenerous capitation fee, while the German system it was based upon had allowed the doctors to set their own fee for their service.2 Equally, the French insurance system allowed patients the right to choose their doctor, whereas previously ‘the so-called non-paying sick had had no such right because free medicine had been a charitable exchange’.3 Neither British doctors nor patients were similarly empowered by state insurance and this comparison provides useful context for the patient payment schemes in Britain that likewise did little to empower either. In contextualising the British payment schemes we will focus on comparisons with the United States, France and Ireland. Each had a different experience of introducing patient payments. The American ‘private patient revolution’, the adoption of social insurance programmes in France and the distorting influence of the Irish Hospitals Sweepstake all contrasted sharply with the British experience.4 At the same time, however, they each show the same fundamental changes to the technological capacities, social function and patient base of the hospital in the early twentieth century. Internationally and domestically, it is within this broader context, as one change at a time of many, that we can best understand the arrival of patient payments as normal practice within the British hospital in the decades preceding the inception of the NHS.

The road to 1948?

The establishment of a national health service was a key plank of Labour’s postwar social reforms. At the end of the Second World War, business as usual was restored to British politics in a startlingly prompt manner. Only two weeks after the Allied victory in Europe, Churchill’s national coalition partners withdrew their support and forced the first general election for a decade, and the first on traditional party lines since before the Wall Street Crash.5 When Labour won a shock landslide victory, and the modest Clement Attlee took Churchill’s place as Prime Minister even as fighting continued in the Pacific, some aspects of the new government’s policy were characterised by continuity. The primacy of the Anglo-American alliance is the most obvious, but the wartime coalition had also been keen to follow the 1942 Beveridge Report in exploring the options for postwar social reconstruction. Beyond this, however, Labour’s first majority government took Britain in a radical new direction.6 Much of the empire was dismantled at an alarming pace while key industries including coal, steel, electricity and the railways were brought under state control.7 Almost as an extension of this programme, Britain’s entire hospital sector was nationalised. However, the creation of the NHS is usually seen as totemic not of Labour’s nationalisation policies, but of its wider establishment of the welfare state.8 While reforms to social security and pensions have little place in the popular memory of the 1945 Labour government, the NHS is often referred to interchangeably with the welfare state itself.

The hallmarks of this new health service were that it should be universal, comprehensive and free at the point of use. The funding for this came almost entirely from general taxation, breaking what link there was between paying for and receiving care in times of sickness. This was delivered by a tripartite system: regional boards for the newly nationalised hospitals, primary care services provided by self-employed professionals contracted to treat NHS patients (including dentists, opticians, pharmacists and general practitioners serving as gatekeepers to many other services), and local authority Medical Officers of Health overseeing the remaining public health and social care services (such as community clinics, health visitors for expectant and new mothers, school medical services and immunisation programmes).9 Despite almost continual reform, this fundamental structure of the NHS has so far survived for many decades. There is, therefore, no escaping the significance of the ‘appointed day’, 5 July 1948, when this new health service came into being, three years to the day from Labour’s surprise election victory.

For our purposes, we might see 1948 as the abolition of payment. Yet this clear-cut account needs nuancing for both before and after the introduction of the NHS. While questions of payment were removed from the doctor–patient relationship, it was only a few years before the very occasional payments for additional items were joined by standard charges for the services of opticians and dentists and then for all prescriptions. Meanwhile, the separation of private beds continued. Where before private beds had been the sole provision made for the middle classes, they were now able to enter the free public wards and amenity and pay beds became options for purchasing a greater degree of privacy or the services of a private doctor or surgeon. Indeed, the choice between free or fee-paying services meant the middle-class patient had more choice under the NHS than before

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