Is the grass really greener? Comparing how social insurance and tax-funded systems raise revenue: an explainer
January 2024
Key points
- How do other European countries raise revenue for publicly funded health care services? This report compares the social health insurance (SHI) systems of France, Germany and the Netherlands with the tax-based systems of Italy, Spain, Sweden and the UK.
- Different funding models each have their merits, but ultimately there is no perfect system, and no strong evidence that any country’s funding system is superior to others.
- Overall levels of health care funding are the product of political choices, with no simple relationship between the model used and the overall amounts raised.
- All seven countries covered in this report will have to grapple with the common challenge of ageing populations, needing more health care as they grow older.
- UK policymakers should recognise the strengths of our current model, and focus on improving the current funding system for the NHS, rather than embarking on a wholesale switch to another funding model.
How we pay for health care is a highly topical and emotive issue. The NHS is founded on the principles of being universal, equitable, free at the point of delivery and tax funded. But taxation is not the only way to generate revenue for universal health care services.
This report describes how revenue is raised for publicly funded health care services in seven European countries (France, Germany, the Netherlands, Italy, Spain, Sweden and the UK). It sets out the main features of social health insurance (SHI) systems and tax-funded health systems (like the NHS).
The grass may appear greener on the other side. Some suggest the UK should switch to a SHI model, to increase overall funding, give citizens more choice and reduce central government’s role in local health funding decisions.
The report concludes that switching to an SHI system would be costly and disruptive, with no evidence it would deliver benefits. Instead, UK policymakers should recognise the strengths of the UK’s existing model – low administrative costs and low financial barriers to care compared with other countries – and focus on how to secure long-term sustainable funding in the face of growing demand.
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