A major new report from the Institute for Public Policy Research has found no evidence that insurance‑based healthcare systems outperform tax‑funded systems such as the NHS.
The analysis, which examined health systems across 22 high‑income countries, concludes that moving the NHS to a European‑style social health insurance model would not improve performance across key measures, including capacity, access, quality, efficiency and equity.
The report finds that differences in outcomes vary far more within funding models than between them, challenging claims that insurance‑based systems in countries such as France or Germany are inherently superior.
IPPR warns that debates over funding models risk distracting policymakers from addressing the real causes of pressure on the NHS, while potentially pursuing reforms that would be costly and disruptive.
While no funding model is shown to consistently outperform others, the analysis highlights several advantages associated with tax‑funded healthcare systems:
- Lower costs for patients:
In the UK, people spend 2.6% of household income on out‑of‑pocket healthcare expenses, compared with 3.5% in insurance‑based systems. - Lower administrative costs:
Administrative spending accounts for 2.2% of total health expenditure in tax‑funded systems, compared with 3.5% in insurance models.
IPPR says these differences matter for both affordability and fairness, particularly for households on lower incomes.
The report’s authors also warn of the significant risks involved in transitioning from a tax‑funded system to an insurance‑based model.
Such a move, they say, could cost billions of pounds, take decades to fully implement, and introduce complexity and instability during the transition.
IPPR cautions that major structural reform could strain the health system further, rather than solving existing performance problems.
Instead of its funding model, the report argues that the NHS’s weaker performance compared with some international peers is partly driven by chronic underinvestment.
While NHS funding has reached record levels, much of the growth in recent years has been absorbed by:
- Rising staff numbers
- Wage increases
- Other inflation‑driven cost pressures
This has limited investment in the physical and technological capacity of the health service.
The report highlights a significant shortfall in capital investment, including spending on:
- Hospital buildings and estates
- Beds and wards
- Diagnostic equipment
Capital spending in the UK stood at 0.358% of GDP in 2023, down from 0.395% in 2010. This level is around half the average seen in comparable high‑income countries.
IPPR says this sustained underinvestment has constrained the NHS’s ability to increase capacity, modernise infrastructure and improve productivity.
Sebastian Rees, Head of Health at IPPR, said:
“There is no structural silver bullet for the NHS. The idea that simply switching to a European-style insurance model would fix its problems is a pointless distraction and not supported by the evidence.
“The NHS’s challenges are real – but they are the result of a decade of chronic underinvestment and choices on how money is spent, not the funding model itself.
“Policymakers should focus on what actually works: investing in infrastructure, strengthening primary care, and tackling the drivers of poor health.”
The report argues that the NHS can be turned around – but only if policy focuses on the right priorities.
IPPR says the government should:
- Prioritise capital investment, including tackling the crumbling NHS estate and expanding diagnostic capacity
- Move care out of hospitals and into the community, with a stronger focus on prevention and public health
- Address the social care crisis, reducing avoidable hospital admissions and improving outcomes after discharge
These reforms, the think tank argues, would deliver greater benefits than a wholesale change to how the NHS is funded.
IPPR concludes that claims promoting insurance‑based systems as a solution to NHS challenges are not supported by the evidence.
Instead, it warns that pursuing funding‑model reform could delay action on the practical investment and service changes needed to restore performance and improve patient care.
The NHS Alliance has responded to the report, with Director of Policy, Improvement and Leadership Dr Layla McCay commenting:
Recent findings in the British Social Attitudes Survey showed continuing strong public support for the NHS to be primarily funded through taxes.
“We agree.
“The NHS is already undergoing far-reaching reforms addressing where, when and how care is delivered and its role in keeping people well.
“It is also in the midst of big changes in the way services are led, organised and held accountable.
“At the same time, it is striving to meet tough performance challenges in the face of a relentless rise in demand and huge financial pressures.
“The last thing it needs on top of all that is a change in the funding model, which – as the IPPR shows – could come at significant financial cost alongside further upheaval and disruption.”
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