Policy paper

Impact assessment for the reciprocal healthcare arrangements between the UK and the Isle of Man

Published 10 October 2023

This was published under the 2022 to 2024 Sunak Conservative government

Headline summary

1. This assessment assesses the effects of different options for the new reciprocal healthcare arrangements between the UK and the Isle of Man. The policy objectives include demonstrating UK support to the Isle of Man as part of the wider UK family (in other words, the United Kingdom and its Crown Dependencies and Overseas Territories) by ensuring better health outcomes for Isle of Man residents through the new pre-arranged treatment provisions for procedures which may not be readily available on-island.

2. Three options are considered in this assessment:

• Option 0: do nothing, and the baseline against which the alternatives are assessed
• Option 1: waiver for medically necessary treatment costs, charge for pre-authorised treatment at 100% of the NHS tariff
• Option 2: reimbursement arrangements for medically necessary healthcare and charge for pre-authorised treatment at 100% of the NHS tariff

Options 1 and 2 both create net costs for the UK relative to the current arrangements, but option 1 is the preferred option to meet the policy objectives at least cost. Similar arrangements with the other Crown Dependencies – the Bailiwick of Guernsey and the Bailiwick of Jersey - were also considered in parallel.

3. The arrangement does not meet the criteria for a full impact assessment but we have undertaken and are publishing our assessment of the arrangement to support transparency of decision-making as agreed in the House of Lords in 2022 during the passage of the Health and Care Act 2022.

Explanation of the current situation and the rationale for intervention

4. Intervention would be validated by the strong diplomatic reasons of demonstrating UK support to the Isle of Man as part of the wider UK family by providing healthcare and ensuring that arrangements between the UK and all 3 Crown Dependencies are regularised and even. Due to the comparatively smaller population and more limited healthcare capacities, the Isle of Man often cannot provide specialist treatment on-island, so arranging for pre-authorised treatment referral places will provide the Isle of Man residents with better and more secure healthcare outcomes.

5. The Department of Health and Social Care (DHSC) is aiming for healthcare arrangements that are consistent across all Crown Dependencies. Arrangements should be in line with each other as well as the UK Overseas Territories where possible, to ensure that the UK’s policy towards all members of the UK family remains as consistent and fair as possible.

6. The Isle of Man has an existing reciprocal healthcare arrangement with the UK that allows for a waiver on necessary healthcare. The Isle of Man Government must pay for pre-authorised referrals to the UK which are subject to the standard NHS ‘overseas visitor’ tariff of 150% of the cost. The UK has the same arrangement with Jersey.

7. To ensure reciprocal healthcare arrangements government intervention is needed.

Policy options

Option 0: do nothing

Necessary treatment: continue to waive costs (reciprocal arrangement)

Pre-authorised treatment: charge the standard NHS ‘overseas visitor’ 150% tariff

Option 1: waiver for medically necessary treatment costs, reduced charge for pre-authorised treatment (preferred option)

Necessary treatment: continue to waive costs (reciprocal arrangement)

Pre-authorised treatment: charge at cost (100% tariff), seeking reimbursement for each treatment

Option 2: reimbursement arrangements for medically necessary healthcare and charge for pre-authorised treatment at 100%

Necessary treatment: new reciprocal arrangement with cost reimbursement

Pre-authorised treatment: charge at cost (100% tariff), seeking reimbursement for each treatment

Analysis of options

8. The analysis compares the value for money of alternative reciprocal healthcare arrangements. Costs and benefits are analysed over 5 years with a base year of 2023 to 2024^{[footnote 1]}, reflecting the clause in the memorandum of understanding (MoU) for the arrangement to be reviewed at a minimum every 5 years.

9. In line with the Green Book, only effects on UK society are captured here. This includes UK-insured people that are resident in the UK and receive treatment in the Isle of Man. Effects on the Isle of Man and their population are not included in the assessment, though it should be noted that this policy is highly beneficial to the Isle of Man – in terms of reduced costs for pre-authorised treatment.

Option 0 (current baseline)

10. Option 0 – ‘do nothing’. This option does not meet the policy objectives and so is included for the purposes of comparison only. Costs and benefits for this option are all set to £0, and all options below are compared to this baseline.

Option 1

11. The UK would continue to waive costs for medically necessary treatment for Isle of Man visitors, meaning Isle of Man visitors to the UK would access this kind of healthcare free of charge, and vice versa for UK residents visiting the Isle of Man. Neither government would seek to recover costs as long as the patient did not travel for the purpose of receiving treatment. Proof of residency in each jurisdiction will be accepted as proof of eligibility for treatment in the other.

These new reciprocal healthcare arrangements will also present an opportunity to expand the territorial scope of the Global Health Insurance Card (GHIC), as it will also be accepted as proof of eligibility in the Crown Dependencies. Guidance will be published which will give information about how this policy will be operationalised. As this option does not change the arrangements for medically necessary treatment, there are no associated impacts for analysis.

12. For pre-authorised treatment, the Isle of Man will be able to refer patients to the UK under circumstances where they cannot or may not be appropriate to provide the treatment in their own jurisdiction. The Isle of Man would be charged at-cost (100% tariff) rather than at the standard 150% NHS ‘overseas visitor’ tariff. This aspect of the arrangement is not reciprocal because the UK does not require access to pre-authorised treatment for UK residents the Isle of Man. The purpose is to make services available to Isle of Man residents that they cannot access on island and build on the departmental goal of fostering increased healthcare co-operation within the wider UK family.

Impacts

13. The only impacts of this arrangement on the UK are for the NHS and the government as set out below. There are no costs or benefits to UK individuals travelling to the Isle of Man under this option as there are already reciprocal healthcare arrangements (cost waiver) in place for medically necessary treatment and no requirement for pre-authorised treatment in the Isle of Man. Businesses are not affected by these arrangements.

14. The NHS will incur the costs of providing treatment to Isle of Man patients for services received while in the UK. An assessment of these costs has not been made as they occur under all options.

15. Pre-authorised treatment for Isle of Man patients in the NHS will be charged at 100%. This is an opportunity cost for the NHS from not applying the 150% ‘overseas visitor’ charge (and a saving for the Isle of Man Government). The impact on the NHS is estimated as £6.3 million per year and £31.5 million over 5 years. These figures are based on historic expenditure for pre-authorised treatment using data provided by the Isle of Man (unpublished). The calculation adjusts for the reduction in charging rate and the assumption that expenditure will increase over the 5 year appraisal period in line with healthcare inflation.

16. When evaluating NHS impacts, it is typical to consider them in terms of health outcomes that could have been generated for the UK population. This option has low value cost impacts on the NHS that translate into a potential reduction in the amount of health outcomes that the NHS can generate. We do not quantify these health impacts for reciprocal healthcare arrangements because they also generate health benefits for the population in the partner country. Under this option, estimating the health impacts for the UK but not the corresponding health impacts for the Isle of Man risks overstating the scale of these costs.

17. This change will benefit the NHS as it will create consistency with the Overseas Territories arrangements for pre-authorised treatment which are also at 100% NHS tariff. This consistency will be simpler for the NHS and NHS Business Services Authority (BSA) to administer, creating a benefit that cannot be monetised but is expected to create efficiency savings.

18. There are no costs to the government under this option beyond those faced by the NHS. There is a key unmonetised benefit to the UK government from strengthening healthcare co-operation with the Isle of Man as part of the wider UK family.

Overview of benefits and costs of Option 1, monetised and unmonetised

Group affected - NHS:

• costs: opportunity cost from reduced charging rate: £6.3 million per year (£31.5 million over 5 years)
• benefits: administrative efficiency from aligning arrangements across Crown Dependencies and Overseas Territories

Group affected - government:

• costs: not applicable
• benefits: strengthened healthcare co-operation across the wider UK family

Option 2

19. Option 2 has the same arrangements for pre-authorised treatment as option 1 but is different for medically necessary healthcare where, instead of a waiver, both governments will seek to recover costs from each other. Treatment would remain free at the point of access for UK visitors to the Isle of Man and Isle of Man visitors to the UK. The GHIC will be accepted as proof of eligibility in the Isle of Man.

20. Costs and benefits relating to pre-authorised treatment are the same as under option 1 (see overview above). For medically necessary treatment, the only impacts are on DHSC and the NHS. Individuals are not affected as they are expected to receive the same treatment as under the baseline and are not directly impacted by the change in who pays for treatment.

21. The impact on the NHS is a non-monetised cost of the operational burden from the introduction of reimbursement arrangements.

22. Under option 2, medically necessary treatment would be free for UK residents at point of access in the Isle of Man, but treatment costs would be recouped from the UK government. These costs would be offset by income from state-to-state reimbursement for medically necessary treatment received by visitors from the Isle of Man to the UK as summarised in the overview below.

• in the absence of data specific to the Isle of Man, the cost to the UK government (in other words, income for the Isle of Man) is estimated based on claims received by the UK for reimbursement of treatment received in European countries under the European Health Insurance Card (EHIC) scheme. The annual number of claims is estimated by multiplying the number of UK resident visits to the Isle of Man by the average number of claims per trip from EHIC charging. This volume is multiplied by the average cost of an EHIC claim for treatment in the EEA or Switzerland - approximately £500 (2019 costs). The number of claims can alternatively be estimated based on the number of nights spent in the Isle of Man and the claim rate per night. This is the reason for the range of figures in the estimated cost (nights used for the low or best estimate and visits used for the high estimate).
• in the absence of data specific to the Isle of Man, the benefit to the UK government (in other words, income from the Isle of Man) is estimated based on claims made by the UK for reimbursement of treatment provided by the NHS under the EHIC scheme with European countries. The annual number of claims is estimated by multiplying the number of their citizens’ visits to the UK by the average number of claims per trip from EHIC charging. This volume is multiplied by the average cost of an EHIC claim for treatment in the UK (approximately £1,000 - 2019 costs).

Summary of average annual costs and benefits to the UK government under reimbursement arrangements for medically necessary treatment

Estimated cost to the government (in other words, Isle of Man income): £0.5 to £0.7 million

Estimated income (in other words, Isle of Man expenditure): £0.4 million

Overall net cost to UK: £0.1 to £0.3 million

Overview of benefits and costs of option 2, monetised and unmonetised

Group affected - NHS:

Costs:

• opportunity cost from reduced charging rate: £6.3 million per annum (£31.5 million over 5 years)
• operational burden of introduction of reimbursement arrangements

Benefits:

• administrative efficiency from aligning arrangements across Crown Dependencies and Overseas Territories

Group affected - government:

Costs:

• reimbursement to the Isle of Man (best estimate): £0.5 million per annum (£2.3 million over 5 years)

Benefits:

• strengthened healthcare co-operation across the wider UK family
• reimbursement from the Isle of Man: £0.4 million per annum (£2.1 million over 5 years)

Outcome and summary

23. While both alternative options create additional costs relative to option 0, the ‘do nothing’ option does not include any new reciprocal healthcare provisions therefore it does not meet the policy objectives of this intervention and was not recommended.

24. Option 1 is the lowest cost option considered that meets the policy objectives. Option 1 serves to strengthen healthcare co-operation between the UK and the Isle of Man as part of the UK family and extends the use of the GHIC to another territory.

25. Option 2 achieves the same policy objectives as option 1, however at a higher cost so is not recommended.

26. Although it will not be possible to monitor medically necessary treatment of Isle of Man residents in the NHS (or vice versa), due to there being a waiver in place rather than a reimbursement arrangement, financial impacts of providing NHS pre-authorised treatment to Isle of Man residents will continue to be monitored by the relevant NHS trusts. These arrangements, including the operations under it, will be reviewed by each participant at a minimum of every 5 years to ensure the best value for money is being achieved. There is less evidence to map to outcomes (for example, cost savings to individuals and health impacts) but there are logical arguments for positive outcomes impacts.

---

1. Meaning that all monetary values are discounted to 2023 to 2024 using the standard discount rate of 3.5% per year. ↩