Press Story

Analysis of 22 countries reveals tax-funded healthcare systems are cheaper and have lower admin costs
The best way to fix the NHS is change the way money is spent, not the funding model, says IPPR
Health secretary Wes Streeting to discuss findings in major speech at Institute for Public Policy Research report launch (Monday).

A major new IPPR report finds that there is no evidence that insurance-based healthcare systems out-perform tax-funded systems.

The analysis – spanning 22 high-income countries – concludes that switching the NHS to a European-style insurance system would not improve performance across measures of capacity, access, quality, efficiency and equity.

The report says that health system outcomes vary far more within funding models than between them. However, new research finds that tax-funded systems have some key advantages, including:

They are cheaper for patients: people in the UK spend 2.6 per cent of household income on out-of-pocket health costs, compared to 3.5 per cent for those in insurance systems

They have lower admin costs: administrative costs consume 2.2 per cent of health spending in tax-funded systems compared to 3.5 per cent in insurance systems

The authors of the report also point out the high risks of transitioning from one system to another, saying any such move could cost billions and potentially take decades.

The findings undermine claims that social health insurance systems such as those in France or Germany are inherently superior. The think tank warns that politicians risk pursuing costly distractions instead of addressing the real causes of the health service’s decline.

Instead, the report says the real reason for the NHS’s poor performance against comparator countries is partly driven by chronic underinvestment.

While the NHS has received record funding, its increase in spending in recent years has predominantly been focused on staff, salaries, and other costs that have risen due to inflation.

Spending on capital investment – including beds, diagnostic equipment, and infrastructure like buildings – remains lower than it was in 2010. Spend on capital was 0.358 per cent of GDP in 2023, down from 0.395 per cent in 2010. This is roughly half the average of our comparators.

The think tank says that the government can turn the NHS around, but only if they:

Prioritise capital investment, such as spending on the crumbling NHS estate and diagnostic equipment
Move care out of hospitals and into the community, to focus on prevention and public health
Tackle the social care crisis, to reduce preventable admissions and poor post-discharge outcomes

Wes Streeting, secretary of state for health, will address questions raised by the report in a keynote speech at IPPR's launch event today (Monday).

Sebastian Rees, head of health at IPPR, said:

“There is no structural silver bullet for the NHS. The idea that simply switching to a European-style insurance model would fix its problems is a pointless distraction and not supported by the evidence.

“The NHS’s challenges are real – but they are the result of a decade of chronic underinvestment and choices on how money is spent, not the funding model itself.

“Policymakers should focus on what actually works: investing in infrastructure, strengthening primary care, and tackling the drivers of poor health.”

Lord Ara Darzi, former health minister, said:

“The social insurance systems of France, Germany, and the Netherlands are regularly invoked as superior alternatives, with little scrutiny on what those systems actually deliver or what it would take to replicate them here. There is no systematic evidence that social health insurance models outperform tax-funded systems.”

ENDS

Sebastian Rees, Avnee Morjaria and Harry Quilter-Pinner, co-authors of the report, are available for interview

CONTACT

Rosie Okumbe, digital and media officer: 07825 185421 r.okumbe@ippr.org

David Wastell, director of news and communications: 07921 403651 d.wastell@ippr.org

NOTES TO EDITORS

The IPPR paper, Bismarck versus Beveridge revisited: does the model shape the outcome? by Sebastian Rees, Avnee Morjaria, Harry Quilter-Pinner and Emma Norris, will be published at 0001 on Monday April 13. It will be available for download at: https://www.ippr.org/articles/bismarck-versus-beveridge-revisited
IPPR (the Institute for Public Policy Research) is the UK’s most influential think tank, with alumni in Downing Street, the cabinet and parliament. We are the practical ideas factory behind many of the current government’s flagship policies, including changes to fiscal rules, the creation of a National Wealth Fund, GB Energy, devolution, and reforms to the NHS. As an independent charity working towards a fairer, greener, and more prosperous society, we have spent almost 40 years creating tangible progressive change - turning bold ideas into common sense realities. www.ippr.org