What impact does the state of the National Health Service (NHS) have on the demand for private
medical insurance by individuals and families? Professor Carol Propper, Dr Hedley Rees and
Katherine Green explore this important question in new research published in the latest issue of
the Economic Journal. Examining data for the period from 1979-96, they find that:
l The growth in family purchases of medical insurance is linked to the growing number of
NHS consultants who are available to do private work and to the amount of facilities in the
private sector. This implies that any policy change that alters the pay and conditions of
NHS consultants will affect both the demand for NHS care and the demand for services
taken in the private sector.
l In contrast, a change in the total amount of public spending on the NHS or in the length of
the waiting lists does not appear to lead to a change in the number of people buying private
health insurance.
l There has also been a generational change in purchasing behaviour. 'Thatcher's children' -
people currently in their twenties and thirties - are more likely to buy private medical
insurance at this age than were members of their parents' generation at the same age.
The private health care sector has always existed alongside the NHS. Senior NHS doctors can
work in both sectors. And even those opting to work full-time for the NHS are allowed to do some
private work: those on part-time contracts are essentially allowed to do unlimited private work.
The numbers opting for part-time contracts has steadily grown. The obvious question is then how
this and the more general state of the NHS influence the demand for the private alternative?
The study is the first to cover this long a period and to look at the impact of the availability of
private sector manpower and facilities on the growth of the public sector. In so doing, it shows
that the availability of private facilities is important to the consumer. Specifically, these findings
suggest that changes in the terms and conditions offered to consultants working in the NHS will
have knock-on effects on the rest of the health care system. The increase in the number of
consultants working part time for the NHS has lead to an increase in private insurance purchase.
The evidence of generational change also suggests that attitudes to private welfare may be
changing in the UK. As the boundaries of the welfare state have been moved, individuals may feel
more comfortable with 'going private'. Again, this could have important policy implications: the
idea that individuals pay directly for some of their health care may be more acceptable to younger
people than those who are older.
The study uses data from the Family Expenditure Survey, which is linked so that individuals can
be followed over time. These data are matched to regional indicators of the availability of both
NHS and private sector facilities. The statistical analysis is able to distinguish between cases
where an increase in demand led to an increase in private sector availability and cases where an
increase in availability led to an increase in private insurance purchase.
Note for Editors: 'The Demand for Private Medical Insurance in the UK: A Cohort Analysis' by
Carol Propper, Hedley Rees and Katherine Green is published in the May 2001 issue of the
Economic Journal. The authors are at the University of Bristol.
For Further Information: contact Carol Propper on 0117-928-8427 (email:
carol.propper@bristol.ac.uk); Hedley Rees on 0117-928-8434 (email: h.j.b.rees@bristol.ac.uk);
RES Media Consultant Romesh Vaitilingam on 0117-983-9770 or 07768-661095 (email:
romesh@compuserve.com); or RES Media Assistant Niall Flynn on 020-7878-2919 (email:
nflynn@cepr.org).