Prescription Charges
Purpose of Report
To consider proposals to reduce the prescription charge to nil
Background
The Health Insurance (Jersey) Law 1967 collects contributions (2% in total) from employers, employees and the self-employed and uses this money to pay for medical and pharmaceutical benefits and the administration of the Law. The money collected cannot be used for any other purpose.
Medical benefit is the payment made to patients visiting a general practitioner which “offsets” the charge made by the general practitioner for the services provided. Pharmaceutical benefit is the cost of the medicines prescribed by a general practitioner and their supply through pharmacies. Under the Law a charge can be levied on the patient for each prescription, which is the prescription charge. Whilst the amount of medical benefit to a patient is obvious, the amount of pharmaceutical benefit is hidden behind the actual cost of the medicine supplied.
Increasing the rate of medical benefit takes money directly from the system. Increasing the prescription charge reduces the rate of pharmaceutical benefit and adds more of a financial burden on those who genuinely need prescription medicines (sometimes referred to “taxing the sick” in other jurisdictions). Since 1967, previous Social Security Committees and now the Minister have recognised that the only mechanism guaranteed to provide more benefit to individuals is to keep the prescription charge low as drug inflation increases. Experience suggests that increasing medical benefit rates lead to increases in general practitioner charges and therefore the benefit to the patient of the increase in rates can be lost or reduced.
Comparison with other jurisdictions
The current NHS prescription charge in Jersey is £2.10, in the NHS it is £6.85 an item, whilst in Guernsey it is £2.60 (£2.70 from 1 January 2008). At first glance this already appears to be a good deal for Jersey patients but the vast majority (about 85%) of all UK prescriptions are exempt from a charge. In Jersey, exempt prescriptions are only available through the soon to be replaced HIE system and only account for about 13% of prescriptions. In addition, access to the GP is free in the UK.
Furthermore, with devolution in the UK, the setting of prescription charges has become the responsibility of the national assemblies. The Welsh Assembly has already abolished prescription charges (2007) and reports no adverse effects with prescribing patterns not being influenced. The Scottish National Party has re-affirmed its commitment to remove prescription charges in Scotland and is likely to move forward on this in 2008. There are also reports that the Department of Health in the UK is reviewing the whole nature of prescription charges (not just the level) and will report back in 2008. It should be remembered that the UK does not have a health insurance scheme, and funding for prescription medicines is through general revenues.
Purpose of Charges
The Health Insurance Scheme was introduced in 1967 at the time that the UK had a period where prescriptions were free of charges. There is no definitive explanation of the purpose of prescription charges in Jersey but the policy has always been to keep them as low as possible to ensure more benefit reaches claimants. International and UK studies have highlighted several reasons for prescription charges;
- Raising revenue
- Influencing patient behaviour to avoid inappropriate use of medicines
- Increasing the public perception of a valued service as payment has to be made
- Influencing doctors’ prescribing habits to provide more efficient medicine usage
Current reviews of prescription charges in the UK have pointed to the change in primary care medicine and the shift from treating disease to the management of chronic illness through pharmaceutical products. The negative effects of charges as a barrier to efficient medication have been raised by the professions.
The medical profession has always expressed concerns for those people with chronic conditions with large numbers of prescriptions who sometimes have trouble meeting the cost of prescription charges. This can also occur when families experience episodes of illness, perhaps not prolonged, which require prescription medicines for family members. In some instances, patients are making a choice not to have particular medicines dispensed by the pharmacist. This can occur in the UK, particularly with prescription charges of £6.85 an item but as the exemptions include people over 60, children under 16, or people with a listed medical condition and those receiving UK Income Support or Pension Credit, the issue is not as great.
Reports from the Pharmaceutical Society suggest that “prescription charges can pose a barrier to access for some people”, and “charges should not act as a barrier to patients accessing essential medication”. Presentations on patient’s views of charges showed that charges were considered to be unfair and confusing and not necessarily related to clinical need.
Income Support in Jersey
Jersey’s Income Support system effectively provides households with payments in advance to meet the day to day costs of living in Jersey. This includes visiting the general practitioner and receiving dispensed medicines. Discussions with general practitioners on the mechanics of Income Support have highlighted that meeting the cost of prescription charges could still be an issue for some former HIE patients with many prescription items. This vulnerability extends to similar patients who may not be Income Support claimants and whilst special payments might be considered as mechanisms to help such patients, it would be better if further support could be given through the Health Insurance system. If this were possible then a wider range of people might be able to benefit through a system of contributions rather than general revenues.
It has been suggested both here and in the UK, that reducing prescription charges or indeed abolishing them may lead to inappropriate prescribing where general practitioners replenish the bathroom cabinets of patients with over the counter medicines such as paracetamol, aspirin etc. As mentioned above, this has not been the case in Wales and Jersey has an additional protection from this tendency in that patients still have to pay to visit a general practitioner to obtain prescriptions in the first place. Access to a general practitioner is not free as it is in the UK.
Setting Prescription Charges in Jersey
Prescription Charges are set under the Law by Order. Different charges can be set against different descriptions of pharmaceutical benefit (different medicines) or can be set against different classes of insured person. As with existing HIE households the charge can be set at zero. Previous Committees and now the Minister consider rates of medical benefit and prescription charges annually and in setting the rates have regard to the status of the Health Scheme as well as the changes in the cost of living in Jersey.
Status of the Health Insurance Fund
The performance of the Health Scheme over the past 5 years is summarised below;
2002 2003 2004 2005 2006
£000 £000 £000 £000 £000
Financial
Income 21,769 22,698 23,712 25,293 26,926
Expenditure 16,969 17,795 18,569 18,402 18,463
Surplus 4,800 4,903 5,143 6,891 8,483
Assets 27,358 32,261 37,404 44,295 52,778
(The predicted figures for 2007 are income £27.8 million, expenditure £17 million and a surplus of £10.8 million.)
Statistics
GP visits 367,329 359,477 349,479 338,556 354,395
Prescriptions 928,715 958,231 993,307 1,044,211 1,235,670
HIE visits 43,939 44,006 45,078 46,542 47,125
HIE Prescriptions 148,774 153,031 170,730 175,152 184,120
It is clear that over that 5 year period income has grown much faster than expenditure (23.7% compared to 8.8%). The growth in income is largely attributable to the growth in contribution income (a 19% increase) and an increase in bank interest received (£2 million in 2006 compared to £873,000 in 2002). Growth in expenditure can be analysed by the growth in benefits and shows that medical benefit (visits to general practitioners) has grown in value by 16% between 2002 and 2006 yet visits have actually decreased by 2.4%.
In very simplistic unit cost terms, there has been a 19% increase in the cost to the Health Fund between 2002 and 2006 for each visit to a general practitioner, which is largely explained by the increase in the medical benefit rate from £13 to £15 a visit. Pharmaceutical Benefit on the other hand shows a growth in value of 4.4% but a growth in volume (prescription numbers) of 31%. The cost to the Health Fund of each prescription between 2002 and 2006 has reduced by 21%. The prescription charge has been increased from £1.95 to £2.10 during that period.
The actual cost of medicines has not fallen. Drug inflation in the UK has been slightly higher than the published inflation figures and as Jersey’s prescriptions are priced using UK Drug Tariff prices the reduction in cost seems difficult to explain. The reason for the reduction of costs relates to price changes for commonly available unbranded drugs where the price is calculated from information from manufacturers after discount. This reflects changes in the pharmaceutical manufacturer/wholesaler arrangements which the Department of Health in the UK believe better reflects the actual cost of certain unbranded drugs.
The Minister has also approved around 450 additional drug items, formerly only available in hospital, be added to the list of items available to general practitioners. It is estimated that this will add over £1 million to the cost of pharmaceutical benefit each year. It is also true to say that as New Directions is developed and primary health care takes more of a centre stage, more costs will be met from the Health Insurance scheme.
An actuarial review is undertaken on the Health Insurance Fund every 5 years. The last review was for the 5 year period ending 31 December 2002. The Government Actuary had suggested in the past that the Fund should hold at least one year’s expenditure to allow time for contribution increases in response to any deterioration in the Fund finances. At the end of 2006 the Fund stood at approximately 2.85 years of expenditure. However the actuary did note that with an ageing population, with a falling contribution base a degree of pre-funding would mitigate any strain on the fund.
In summary, the Health system is currently in a very robust and buoyant state due to economic growth and changes in prescription costs. There is an opportunity to provide more financial assistance to those who use and contribute to the Health Scheme.
Summary and Conclusions
At this stage of the development and introduction of Income Support and the consequential removal of HIE, it is not recommended that drastic changes in the rate of medical benefit are made. Income Support will remove the hidden subsidy that general practitioners have given through low consultation costs for those on HIE and other low income groups. It may also change the behaviour of some patients and doctors and therefore it will be difficult to determine the overall effect within the primary care system. Representatives of general practitioners have been informed that medical benefit rates will be reviewed after Income Support has been introduced successfully.
The rise in prescription numbers suggests that many would benefit from a reduction in prescription charge. In the past it had been suggested that the prescription charge should be linked to drug inflation but recent changes in pricing policy in the UK have blown a hole in that policy as the average rate of pharmaceutical benefit per prescription has reduced. It is also true that with the advent of Income Support, all individuals will have to pay a “user charge” to see the doctor so even with no prescription charge, or a low prescription charge, obtaining a prescription will not be free, removing any need for prescription charges as a deterrent against abuse.
In considering changes to pharmaceutical benefit, there are two variables;
- What should be the level of prescription charge
- Should there be different charges for different groups of insured person.
Practically, the decisions are limited by the administration and pricing of prescriptions. Variable prescription charges for different categories of people would be impossible because the UK Prescription Pricing Authorities would not be able to price the prescriptions. In essence, the decision is to have one charge or at the most two charges with the lowest being equivalent to zero.
Those most vulnerable from the financial barrier which the prescription charge presents are, in particular, those with chronic conditions, but also those suffering acute conditions requiring multiple prescriptions and would not necessarily be restricted to those on the lowest incomes, but also those just outside income support, particularly pensioners and those with young children.
If these groups were exempted it is unlikely that the number of exempt prescriptions being less than currently being experienced in the UK (around 85%).
It must also be remembered that the Health Insurance Fund is a contributory scheme from which all contributors expect to benefit, rather than a scheme established on a non-contributory means-tested basis and that therefore there is a strong argument that all should benefit equally from the scheme’s benefits proportionate to their clinical need as opposed to their incomes.
The Health Insurance Fund is in a very healthy financial position and it is estimated that the abolition of prescription charges in 2006 would have cost approximately £2.5 million. Bank interest on the year amounted to just under £2 million. There would still have been a surplus of approximately £6 million (£8.48 million actual) on the year, and a fund equivalent to 2.72 (2.85 actual) years’ expenditure. Costs will be greater than this in future years in light of the increased numbers of pharmaceutical products recently added to the formulary and given that the prescription charge will no longer act as a barrier to medication. Even after allowing for any such increases, the fund will remain in a very robust position.
Recommendation
So as to enable the contributors to the Health Insurance Fund to benefit from its robust financial position, and at the same time ensuring those in greatest medical need and on lower incomes are able to access the medicines they need it is recommended that the Minister reduce the prescription charges within the Health Insurance Fund to £nil with effect from 1 February 2008 or as soon thereafter as proves operationally achievable.
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