ABSTRACT
This chapter examines the choice of private insurance in Britain. It considers the impact of the growth of private insurance on the National Health Service (NHS). Private health insurance schemes grew appreciably in the 1970s. This growth in sales, as with any product, could be attributed to changes in taste, changes in income, or changes in price. Rising incomes could influence the decision to purchase health care and insurance against its costs. Aside from the straightforward income effect, the rise in income could lead consumers to purchase different characteristics of care, or insurance to pay for them. Since private and public systems are not complete substitutes, the key to the long-run effect of private sector growth on the public sector is the extent to which the differences between the two are perceived. One possibility is that private insurance will be seen as a complete substitute for the NHS by the affluent employees it covers.
