The cost incidence of the U.K.'s NHS system

Abstract

We examine the cost incidence of the United Kingdom's National Health Service (NHS) through application of the concepts of fiscal imbalance (FI) and generational imbalance (GI). We find significant disparities of costs by gender, region and type of NHS expenditure. The financial sustainability of publicly funded health care systems is sensitive to the demographics of ageing population. Historical and current trends in the demographic structure of U.K.'s population also impact these structural imbalances underlying the system. The pay-as-you-go (PAYG) financed funding status of NHS based on both currently required cash-based accounting principles and proposed accrual-based accounting principles is criticised for not recognising the continuing service obligations of the U.K. Government under the NHS. A combination of FI and GI largely explains the under-funding of the NHS. Data are taken from both historical trends in expenditure and ageing as well as projected demographics. The analysis implies that there is a significant inter-generational inequity in the funding of the NHS. © 2008 The International Association for the Study of Insurance Economics.