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Question: Assess the economic arguments in favor of opening the NHS to a less centralized and more free market form of funding (12 marks)

At this very moment the NHS is using a centralized system. A centralized system is an economic system in which decisions about the production, allocation and consumption of goods and services are planned ahead of time. They rely on control and regulation by a government in accordance with a plan of economic development. The government have set up the NHS that runs throughout England. This system has allowed free health care occur. This is because the government funds the NHS. The money that has been given has come from the tax money we all pay. However there have been issues regarding this form of system as there have been many issues regarding waiting lists and the diagnosis of problems and illnesses. “The NHS is less equitable in its operation than the government suggests, particularly in its regular denial of treatment to the elderly and in a system of patient referral and priority that is often arbitrary and subject to regional and local variation”.
These problems have made many parties such as the Conservatives to opt using a more open or free market. A free market is an economic system in which the production and distribution of goods and services takes place through the mechanism of free markets guided by a free price system rather than by the state in a planned economy. An example given of this free market is the passport idea that was given in the source. “Instead, under their ‘Right to Choose’ policy, patients would be provided with a ‘health passport’, and would have the option of treatment at any hospital, be it NHS or private, and at a time of their choice.” This will mean that the health care is split even more so that the health care is distributed and the work load on the NHS is less. It will also mean that less funding will be needed to cover the costs as part of the operation bills will be paid for by the patient if done privately. This will mean patients both on and off the NHS will receive improved treatment, as well as greater choice for customers. Paid healthcare also increases the patients’ perception of value for the service, which will now be quicker. However the free market system does not work perfectly. Corruption may occur, for example - health insurance companies do not like to insure patients with chronic illnesses such as arthritis due to the long-term expenses, whereas the NHS is obliged to treat such patients. Also doctors are more likely to be attracted to private health care because of the higher salary they will get, and therefore there will be fewer doctors on the NHS than in Private practices.
Overall I think that a free market would be better of, as it would improve the healthcare overall. The whole passport idea will encourage patients to move away from the NHS, and patients who remain with the National Health Service will experience improved care because of this. However we should not go straight into a free market as the sudden change may be very costly and very ineffective. We need to have a transition period over a few years to make the system work otherwise it may turn out like it did in the Soviet Union.

1.“Spending on education is to rise by £19bn over the next three years as part of the government's review of public spending.” I believe that this is a positive statement. It is a statement that can be measured however it does not have to be a correct statement it may also turn out to not be true in the future. In this statement there is no indication of approval or disproval. Positive statements can also be measured in this case we look at how much the spending on education is going to rise by.
Labour's General Election manifesto had promised to “raise the proportion of national income spent on education". This is a normative statement as looking at the facts the education bill for 1998-99 was £37bn and therefore the spending would have had to rise by £1.8bn a year. This is an opinion and therefore a normative statement.

2.A PPF [production possibility frontier] curve shows the different arrangement of economic goods which an economy can produce if all the inputting factors and resources are used. Economists do this by drawing the graph with two different goods on the two axis. Then the curve is drawn, and as it is a curve as one increases the other decreases. If we are near the line then it means that we are using up our resources efficiently and we are gaining the most we can. If we are underneath the line it means that we are producing the goods however we are producing them inefficiently and we are not using the resources to our best ability. It is not possible for us to be above the line as we do not have enough resources to be above the line otherwise the graph would have looked different. Therefore economists must try to find the point on the curve at which production of both types of goods is maximized.

3.“Real terms” is a measure of value of money without the effect of inflation. The chancellor means that when he stated on government spending on education that it would rise and therefore boost the value of money without taking inflation into account. Nominal value is the measure of value of money with the effect of inflation. And therefore the Chancellor uses Real terms to that he can state that they are gaining money and not just having money but that money is not worth anything.

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6.If the new funding were to make the education system better, it would move the PPF graph into a more favorable position for our country. This is because our country would have better educated and skilled workforce and therefore we should be more efficient at making these goods. This should therefore make our economy a lot stronger as we are capable to produce more goods for greater demands. This will mean that our economy would be better and we will have even more money to spend on the likes of further education or transport systems.

7.Opportunity Cost is the principle stating the cost of one economic good in terms of the next best alternative forgone. In the economic world we know that we have unlimited wants and needs and also that everything available to us is only finite. As we spend money on education we spend less money elsewhere. In this case the benefits of increased spending on education against the opportunity cost from other options have both been weighed up. Other opportunity costs such as the Transport of London or the NHS have also been thought about. Gordan Brown thinks that the money is better of being spent on education than the other opportunities as he is looking into the future and he thinks that this money will suit or future better as it will make us a well educated country.
There have recently been concerns over the time patients spend waiting for treatment on the NHS. We could have spent money on the NHS so we could change it to either the same as the American health system in which health care is private. Here people can either choose to take health insurance to cover incidents or to take a risk and not have any insurance due to the high prices. We could also have a Social Insurance Fund which would require workers to part with a section of their salary. We could have also spent money on refurnishing the hospitals or making new hospitals so there are more bed spaces.
Another opportunity cost is the transport system. We need to look at how we can improve the system as in more buses without further delays and by not increasing the bus fares further as they have more than doubled in the last few years. A lot of the old buses have been stopped from running and new buses that are a lot more comfortable and passenger friendly have been introduced however there are still some lines that still use these old buses. This will make the country a lot more tourist friendly and therefore our countries economy may also increase.

How does the text relate to the three key questions that are at the heart of the 'economic problem'?

What goods and services to provide?
How best to produce the goods/services the best way?
Who is to receive these services?
The NHS provides these services in the United Kingdom. The NHS receives money from the government through taxes, and they decide what they are going to use that money on such as doctors, medical research or even equipment. The money at this very moment has not been utilised in the best way possible yet, therefore the government are trying to solve this situation and come up with some solutions to overcome the problems that were stated in the extract. The NHS is free to the public and so everyone is entitled to these services.

What are the opportunity costs involved in deciding on appropriate levels of health care?

The Opportunity cost of helping improve the NHS has been made from raising the taxes and through National insurance. However this means that as we spend more time improving the NHS we spend less time on improving education about common diseases that many people get as they are uneducated. The money could also be used to research into ways of treating diseases. This will also mean that more people would not be happy as if they are a healthy human being they may think that they are wasting their money on something that they do not need they would however find building a sports facility to stay fit more useful. A lot of the money has also been used up on increasing the wages of doctors and nurses, however it is also very beneficial as it could land more educated people jobs.

How does the text suggest that there may be alternative answers to the issue of the provision of health in the UK?

There are three main points that the text raises to solve the issue of the provision of health in the UK. It suggests the government the raise taxes through national insurance and so, so that the money collected from it can be used to improve the health services. Another way is to use the same health system as the Americans. This is where the person can choose to cover him self with health insurance so if he does have an unexpected he will automatically be covered. However there is also a downside to this system as not everyone takes this insurance policy and faces a huge debt if they do have an . The government could also use a Social Insurance fund which would make the workers split some of the money from their salary.