The Beveridge Model as a Tool to Improve Healthcare System

Healthcare, in many countries, was an essential component of industrialisation and economic development. Governments intervene in the healthcare market as there is a view that private markets cannot be trusted in determining healthcare outcomes as it is a unique service that is crucial for survival (Rosen & Gayer, 2010). In order to achieve universal coverage of healthcare, the provision of healthcare in a country can be delivered through different models. Two common models are the Beveridge model and the Bismarck model. The Irish healthcare system can be categorised as a variation of the Beveridge model and many countries with a British influence historically also tend to use this model. In the Beveridge model, healthcare is provided by the government and the costs incurred are financed through general taxation whereas the Bismarck model involves healthcare costs being incurred by an individual and their employer through payroll deductions (Kraft, 2014). According to Nuti & Seghieri (2014), the Beveridge model aims to provide coverage universally regardless of one’s ability to pay whereas the Bismarck model allows for choice when availing of health services by utilising insurance. Countries such as Germany and France employ the Bismarck model. This essay will explore the key features and issues associated with each model in order to assess their sustainability in the provision of healthcare.

In the Beveridge model, a key feature is the role of the state in funding and providing health services. Many hospitals are owned and run by the government and staff employed are employees of that government (PNHP, n.d.). This gives greater control to a government in controlling costs and has been effective in this respect for countries such as the United Kingdom (Or, et al., 2010). These cost savings can be achieved through economies of scale on the administration side and through improved purchasing power of resources (Savedoff, 2004). However, a weakness of this feature is that funding towards health services must compete with other government priorities and the level of funding can be affected due to the economic cycle. Historically, Ireland experienced a relatively low level of expenditure in health as a percentage of GDP in comparison to the OECD average (Burns, 2018). During the financial crisis of 2007/8, the Irish government made a series of financial commitments thereby further reducing the amount of available funds for investments in many areas including healthcare. As a result, the Irish healthcare system is generally associated with “poor quality and overstretched hospital infrastructure and staffing constraints” (Nolan, et al., 2014, pg. 8) due to underinvestment in the sector. While the Beveridge model provides control over the cost of providing healthcare, Forte (2010) argues that cost minimisation tends to lead to quality issues and dissatisfaction among those availing of the services. Also, having greater control over cost does not necessarily equate to the sector being efficiently run as Forte (2010) also argues that there is no incentive for healthcare providers to reduce operational costs and could lead to Hendriks & Myles’ (2013) idea that bureaucracies have tendencies to exhaust their allocated budgets in search of greater budget allocations. Therefore if aiming to achieve universal coverage in healthcare, the sustainability of this model would be limited due to these weaknesses.

Additionally, a fundamental idea behind the Beveridge model is the view that healthcare is a human right and it should be available to all who require it, regardless of their income, occupation and/or social status (Nuti & Seghieri, 2014). While this may achieve equality, it can also lead to various issues arising. Hong Kong, as a former British colony, has a healthcare system that is also based on the Beveridge model and highlights many of these issues. Through a series of public consultations, reoccuring problems in the health sector highlighted include increased demand due to an aging population and the public having increasing expectations in healthcare leading to the current healthcare system to be overutilised while under financial pressure (Lieu, 2016). The government has a role healthcare in Hong Kong which is consistent with the Beveridge model however it is limited to funding healthcare providers and has no managerial control over the providers. Low expenditure in healthcare is attributed to be a cause of the system being under pressure as in 2013, health expenditure as a percentage of GDP was 5.4% in comparison to OECD average of 8.9% (Lai, 2018). This suggests that cost minimisation should not be the primary target in the provision of healthcare as Chung (2017) implies that guarenteeing open access to health services leads to increased cost and there is therefore a conflict between guaranteeing access and reducing cost and striking a balance between the two would be difficult without compromising on some of the public’s expectations. Solutions to these problems suggested include a introducing a Bismarck model of healthcare to the territory.

In the Bismarck model, there is also an element of government involvement in the provision of healthcare services. In this model, laws place an obligation on employers and employees to make contributions into health insurance to fund health services in the form of payroll deductions to private insurance companies. An essential requirement for these insurance companies are to be non-profit organisations and must include coverage for all citizens. The deductions are commonly known as ‘sickness funds’ and must be available to anybody in employment notwithstanding any pre-existing conditions (Chung, 2017). When seeking treatment, the patient can use any public or private hospitals of their choice. Upon the completion of a treatment, the patient is billed for the full cost incurred. In the French system, up to 70% of the cost is refunded for hospital visits and the full amount is not reimbursed in order to promote consumer responsibility (Nasef & Taguri, 2008). According to Sawicki & Bastian (2008), the application of this model in France and Germany has achieved satisfaction by the public and an emphasis on consumer responsibility would be a key advantage of this model in discouraging abuse of healthcare services. There is also flexibility in this model when selecting a hospital or doctor to visit which alleviates the overutilization problems experienced in the United Kingdom and Hong Kong in Beveridge model. However, ‘sickness funds’ are predominantly raised by and used by citizens in employment, and extended family members in some countries, which leads to inequality for certain groups in society. In order to address the inequality, the German government covers healthcare expenses for the unemployed and children however the self-employed are still required to make the full contribution towards their insurance (Khazan, 2014).