Mutuals care about people


Sept 2001

Mutual care for the elderly
Many people think that before the coming of the Welfare State in 1948, there were no health or welfare services available to ordinary people.  In fact, there was widespread provision funded partly by the state and partly by insurance schemes. The National Insurance Act 1911 also introduced the idea of approved welfare providers.  Instead of the state paying benefits directly, these funds were paid via Friendly Societies. Friendly Societies were also allowed to operate “good fellowship” schemes.  This meant that they could pay members more than they had contributed when they fell on hard times.  Mutual societies often owned their own nursing homes.  Trade Unions had health insurances schemes and care homes particularly in the smoke-stack industries like steel  and coalmining.  Miners Rest Homes were often at the seaside because it was thought that the fresh air would help with chest diseases. Most people belonged to a doctors’ panel.  For the payment of a regular small fee you could see a doctor for free when you needed one.
West Midlands Co-op Residents
Millions of people also belonged to Friendly Societies. The insurance payments were often combined with a small savings scheme.  This was to encourage thrift and discourage unnecessary claims.  The  system worked well within its limitations but there were several serious shortcomings.  Firstly, it was neither universal or compre hensive.  What you got depended on where you lived and the size of your wallet.  It wasn’t much good if you were long term unemployed or disabled.  The Depression of the 1930s exposed the fragility and instability of a system based on voluntary insurance.  Mass unemployment increased the demands on the health services at the same time as removing its economic base. The unemployed couldn’t keep up the payments.  Extra contractual payments (good fellowship)  were impossible to sustain.  By the outbreak of the Second World War, the whole health and welfare system was on the .point of collapse.
The Beveridge Report in 1942 introduced the principles of compulsory insurance and comprehensive cover.  Beveridge wished to continue to channel the new services via the mutual sector.  But Bevan wisely decided to nationalise the entire welfare system.  The insurance-based principle was retained but mutuals were excluded. Many Labour MPs representing industrial areas opposed this. The new Welfare State brought ‘cradle to grave’ security.  One unforeseen consequence of this was the rise of the dependency culture in the late 1950s.  The feeling was that if something was worth doing then the government ought to pay for it. Voluntary work was frowned upon
Bevan believed that while the initial cost of setting up the NHS would be high, it would fall over time.  Costs would taper as better health provision cleared up historic neglect.  This did not happen. They have continued to soar year on year.  By the 1980s, it was becoming clear that there was a limit on what income taxpayers were prepared to pay.  They demanded better services but weren’t prepared to pay for them.  So people began to cast around for alternative sources of funds or provision.
One potential source is private medical insurance. Advocates of private healthcare say that it takes the pressure off the NHS.  That’s true.  So why not encourage more people to opt out by giving them tax relief on medical insurance.  Opposing this, Mr Alan Milburne the Health Secretary has pointed out that the £400 million that the relief would cost is better spent directly on the NHS.  Besides there is no guarantee that the money would go into providing more beds..  It is more likely that the medical insurance companies would raise their premiums or that the consultants would put up their fees.
Without the NHS, the private sector would be in difficulties.  People often think that if something is private it must be better.  Few private hospitals treat chronic conditions, cancer or cardiac complaints because most medical insurers exclude them from their policies.  Private hospitals are often small with inadequate facilities and ill-trained staff.  Frequently they don’t have intensive care units and have to rush desperately ill patients in ambulances to the nearest NHS hospital.  Whilst there are only a few hundred private hospitals in the UK, there are tens of thousands of private care homes.  These can vary from sheltered housing with a warden to those which provide full nursing care.  The quality of care varies enormously.  Public concern about the quality of care in both private hospitals and care homes has lead the Labour Government to introduce the new Care Standards Bill.  From 2002, the new National Care Standards Commission will have wide powers of inspection and enforcement.  Standards will rise.  In the meantime, if private hospitals are going to be used to help cut the NHS waiting lists then proper checks will need to be made to make sure that they meet NHS standards.  The same must apply where local authorities contract out services to private care homes.
However good they are, private hospitals and homes are there to make a profit.  So is the only choice between an over-extended public sector and a profit motivated private sector?  Can the third mutual sector help?  At the moment, it provides two types of products; health insurance and direct health care.  BUPA, Standard Life Healthcare and HSA are the biggest providers of medical insurance.  Many Friendly Societies offer similar policies.  The insurance policies are used to pay hospital bills.  So in this respect, they are no different from private sector insurers.  One area where Friendly Societies do score is in optical and dental insurance.  In many places, NHS dental services are virtually unobtainable and, even where they can be obtained, the costs can soon mount.  Some Societies offer low cost optical and dental policies and can be less rigorous about pre-existing conditions than private insurers are.  Most policyholders are on low incomes: often elderly.  
Turning to direct health care, BUPA and Nuffield Hospitals are the biggest provider of hospitals.  These represent about a third of the private sector.  Though these hospitals charge for admission, they don’t make a profit themselves. However the consultants who use them certainly do. But patients are limited in their choice of hospitals..  Under the Tories, local authorities were forced to transfer most of their care homes to the independent sector. Council provision was limited to 15%.  Those that were not sold to private firms went to housing associations or other not-for profit organisations.  
On a much smaller scale, a few Friendly Societies still have free seaside care homes for their members.  But some are also considering building care homes as an investment.  The Association of Friendly Societies is pressing to have the law changed so that more of these ventures can be undertaken.  Most Trade Unions have closed their care homes because of falling membership and rising costs.  Their emphasis has switched to medical insurance. The last member-controlled mutual hospital, the Manor House Hospital closed last spring.  Owned by the Manor House Friendly Society, it had very long standing links with the Labour Movement.  Now it only provides medical insurance.  Is it possible to reverse this trend and for the government to encourage the Unions to provide care homes for their members either by grants or tax-breaks?
The Co-operative Movement is also looking at care homes and sheltered housing.  Last year, the West Midlands Co-op bought its first retirement home.  Other Societies may soon follow.  These will be investment-led initiatives.  There is an opportunity for Worker Co-ops to flourish too. Some big Care Co-ops are starting to provide residential care. Already they provide domiciliary care to many council social services departments.  Local government externalisations also present opportunities for mutuality. This was done successfully on Humberside The council’s care homes were re-packaged as a not-for profit organisation.  The council retained nomination rights and guaranteed the rents.  These acted as security to finance further expansion. 
It is likely that the government will withdraw further from direct welfare provision in the future.  It should encourage mutuals to fill the gap. By providing care homes they could help to reduce ‘bed blocking’ in NHS hospitals.  But these could be homes rather than hospitals.  Some could provide 24 hr nursing care; for example for people with Senile Dementia or Alzheimer’s Disease.  Others would be would be for people who are not sick enough to be in hospital but not well enough to be at home.  To do this, the legal framework needs to be modernised.  Much of it dates back to Victorian times.  This is in stark contrast to company law which seems to have almost annual up-dating.  The law on Mutuals should give them greater commercial flexibility to provide new services at the same time as keeping the ‘carpetbaggers’ at bay.  Start up funds and training in small business techniques should be provided.  However, once they are up and running, Mutuals should remain completely independent.  Reforming the Mutual sector should become a major plank in Labour’s programme for its Second Term.

This Article was published in the CHARTIST Sept/Oct 2000

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Photo; Co-op Commission