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NHS reform impact on PMI

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Government changes to NHS reform will still result in an increase in usage of private medical schemes, putting an upward pressure on company premiums.

The Health and Social Care Bill announced by the coalition government on 19 January 2011 has received wide spread opposition from GPs, hospitals, consultants and other interested parties. The Government has subsequently announced that it will be changing many of the initiatives that were to be implemented following recommendations from the NHS Future Forum. Overall there have been sixteen proposed changes. According to Mercer, despite the changes, companies should continue to prepare for further increases in corporate healthcare costs. GP Consortia will work with healthcare professionals to ensure the most effective multi-professional involvement in the design and commissioning of services. Consortia will also not take on the full range of responsibilities by April 2013 but when they have the right skills, capacity and capability to do so. Despite these changes, Mercer believes that giving these consortia control over budgets may still affect the quality of care and the length of waiting lists.

According to Naomi Saragoussi, Principal in Mercer’s Health and Benefits business, “The devil is in the detail. While the Government has accepted the criticism of its policies and the plans to make the NHS more competitive appear to have been watered down, some areas lack clarity. It may be difficult for the consortia not to take a more commercial approach, and prioritise more cost effective treatments, despite their good intentions. We will have to wait and see.” According to Mercer, companies are already experiencing rocketing medical costs. The company’s recent European Health and Benefits Report showed that UK medical inflation – the cost of providing healthcare and health-related benefits to employees – increased by 4.9 percent in 2010. This follows increases in 2009 and 2008 of six percent and ten percent respectively. While these rises are partly due to the impact of increased longevity and the growing costs of cancer care, the current programme of NHS reform will add to these inflationary pressures as the changes come into force.

Mercer has previously expressed concern that the reform would encourage some private providers to deliver less risky, high-volume elective surgery rather than more complex, costly surgery for urgent and potentially life-threatening illnesses. The company is pleased to see that the government is addressing this by promising “new safeguards against price competition, cherry-picking and privatisation.” However, according to Ms Saragoussi; “We are still concerned that the expanded GP consortia will not necessarily have the financial experience and skills to manage these large budgets. Clinicians will instead need to employ qualified staff or buy in support from external organisations, including private and voluntary sector bodies. Given that many of these will be experts from the PCTs, one wonders if the cost savings and reduction in bureaucracy will be as great as is anticipated.” The company has also noted that the new reforms will allow employers to work with their local Health and Wellbeing Boards to help shape the future health and wellbeing strategies in their local area.

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