The demand for private health insurance: do waiting lists matter?

A key dimension of differentiation between health care systems concerns the relative role of the public and private sectors in delivering care. Even in countries, such as Britain, that have relied on a national health care system for 50 years, there has always been an active private sector, catering to those who do not wish to use the National Health Service (NHS). For the most part, these are individuals who also smooth their medical payments by purchasing private insurance. If they become sick, then they consume treatment in the private rather than the public sector.

This report studies the demand for private health insurance in the UK using data from the British Social Attitudes (BSA) survey. According to this, around 14% of British households have private health insurance, with a roughly equal split between individual and employer provision. Here, we are mainly concerned with determinants of demand for individual purchases. Our specific focus is on how this demand is related to aspects of NHS performance such as waiting-lists and measures of satisfaction with the NHS in the BSA data.

While measures such as waiting-lists are frequently discussed as barometers of NHS performance, little evidence exists of their actual role in insurance demand. There are good reasons why we would expect that private insurance demand would respond to the state of the NHS. Private insurance provides a means by which individuals can reduce their reliance on the NHS as a source of health care. It is natural for them to take such a course if they are unhappy with aspects of the NHS. If the perceived or real quality of NHS provision declines, then individuals may choose to go private in greater numbers. We look for evidence that private insurance is fulfilling this function.

Our main finding is that there is a positive association between the purchase of private health insurance and length of local NHS waiting-lists.