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How did health insurance start

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Many people come to this site for a short account of the health service

The history of the NHS is that of an organisation established after a century's discussion on the provision of health services to meet a long recognised need. It appeared at a time when Britain saw health care as crucial to one of the "five giants" that Beveridge declared should be slain during post-war reconstruction. (want, disease, squalor, ignorance, idleness) The cataclysm of war provided an opportunity that might not have been taken in quieter times. The NHS was noble in conception and has been faced on the one side with ever increasing costs as a result of advances in medical knowledge, medicines and technology, and on the other with the financial restrictions inevitable in a centrally funded service with changing management dogmas and political beliefs. Whether knowing what we know now Britain would follow the same pathway towards a universal health care system is anyone's guess.

Below you will find a quick and simplified over-view. You may find the link to the inheritance of the NHS is useful for this provides the text of the book's introductory chapter. The links to 1948-1957. 1958-1967. 1968-1977. 1978-1987. 1988-1997. 1998-2007. 2008-2117 provide the text of the book and more recent decades. Two links give financial information over the years, earlier and later periods .

More information on the factors that led to the creation of the NHS is to be found in Geoffrey Rivett's earlier book on the Development of the London Hospital System,

This short account of the chronological time line, for simplicity’s sake, is mainly about England. though more detailed texts are available on this site and in hard copy [1]

The Nuffield Trust has produced a historical timeline (to which I contributed).

How we came to have a health service.

Others have written extensively on the reasons for a health service. These included

  • The emergence of a view that health care was a right, not something bestowed erratically by charity
  • Bipartisan agreement that the existing services were in a mess and had to be sorted out
  • Financial difficulties for the voluntary hospitals
  • The second world war that ensured the creation of an emergency medical service as part of the war effort
  • The cataclysmic effects of the war that made it possible to have a massive change of system, rather than incremental modification
  • An increasing view among the younger members of the medical profession that there was a better way of doing things

The genesis of the NHS stretched back into the 19th Century. Even then some believed that access to health care was part of the structure of a civilized society. Some municipalities, such as the London County Council, had the ambition to run hospitals as well as utilities. Hospital charities had been supported by the benevolent while socialists such as the Webbs argued for a state system or the insurance principle - pay in advance when well to provide for the care needed when sick.

In the First World War the army medical services had shown the benefits of organisation and transport. At the government's request in 1920 Lord Dawson produced a forward thinking report on how a health service might be organised.[2] Under the Local Government Act (1929) local authorities had taken over poor law hospitals that now became municipal hospitals serving ratepayers, not paupers. They needed much upgrading. In general the services that existed were in a mess. The quality varied widely from town to town, and country areas were in general poorly served. The London County Council and Middlesex were doing an excellent job - but many councils did not. There might be duplication or an almost total absence of specialist services. During the 1930s a series of reports were produced by the BMA[3] (1930), think tanks such as Political and Economic Planning (1937)[4] and the Hospitals Association. The King's Fund and the Nuffield Provincial Hospitals Trust as protectors of hospitals were also deeply involved for they appreciated that the future of the voluntary movement depended upon its efficiency. Working together and regionalisation were they key to this.

The experience of the Second World War, when in 1939 an emergency medical service was instantly created as the country came under command and control, provided an example of what could be done. In his report on social welfare systems Beveridge had little to say about the precise nature or funding of a health service, though seeing one as essential to a satisfactory system of social security (1942).[5] A major issue that later split the Labour Party was whether a future NHS should be run by local authorities, or quite separately on a regional basis. During the war the Conservatives produced the first White Paper on a future service in which local authorities would lead. (1944)[6]. But after Labour's election victory in 1945 Bevan presented to the Cabinet a radically different plan favouring nationalisation of all hospitals, voluntary or council, and a regional framework. After much tough negotiation this plan went through, with modest concessions.

The National Health Service started in 1948 in a society weary but disciplined by war, and accustomed to austerity. There remained resilience, humour and a sense of fun. People who had become accustomed to little were content with simple things. Cinema, sport and radio, combined with “holidays

at home” or the British seaside and Butlin’s camps, were the entertainment, there being little travel abroad.

We take the National Health Service for granted now, but it is only 60 years ago that health care was a luxury not everyone could afford. It is difficult for us to imagine what life was like without ‘free’ health care and the difference that the NHS made to people's lives. The same services were available the day after the creation of the NHS as the day before, no new hospitals were built nor hundreds of new doctors employed. But poor people who often previously went without medical treatment now had access to services, instead of relying instead on dubious and sometimes dangerous home remedies or the charity of doctors who gave their services free to their poorest patients.

The services on which the NHS was based were

General practitioners

Access to a GP had been free to workers who were on low pay, but this didn't cover their wives or children, workers with a better standard of living or the retired. It worked through a "panel" often operated by Friendly Societies that paid GPs as little as possible. GPs in affluent areas could rely on income from their patients. Poorer people, if they could not pay the small fee, had little right to care but sometimes obtained it through the GP's charity.

Hospital care

The tempo was slow by today’s standards, lengths of stay being numbered in weeks. Bed rest was a major form of treatment for heart attacks, ulcers, tuberculosis and childbirth. Something like a quarter of hospital beds were provided in voluntary hospitals. These varied from small hospitals in lesser towns supported by public subscription, to internationally famous teaching hospitals such as St Bartholomew's, Guy's and St Thomas ' with substantial investment income. A handful went back to a mediaeval origin and others were the result of the charity of the wealthy such as Thomas Guy in the 18th Century. Later some hospitals were developed in conjunction with universities, University College Hospital. King's College Hospital and the provincial teaching hospitals. Special hospitals concentrated on particular diseases or types of patients, children or women. But each voluntary hospital was a law unto itself, raising funds and deciding its admission policies. In London. the King's Fund had, since 1897, attempted to bring some order to the financial accounts, management, the location of voluntary hospitals, and to help with their costs. Patients were often charged and many hospitals were near bankrupt.

Local authority services

Most beds were provided in municipal hospitals by the local authorities of counties and large towns out of the rates. They were a service to their ratepayers. Local authorities also provided maternity hospitals, hospitals for infectious diseases like scarlet fever, smallpox and tuberculosis, as well as those for the elderly, mentally ill and mentally handicapped and a variety of community services. The standard varied widely, depending upon the attitude of the Council

Mentally ill people

Mentally ill and mentally handicapped people were generally sent away to large forbidding institutions, not always for their own benefit, but because that was how the system worked. Admission was often for life. Under the poor conditions prevailing, many patients became worse rather than better and "institutionalised". However there was, in a true sense, asylum for people who could be 'strange' in private, and a basic standard of food and accommodation.

Older people

Older people who were no longer able to look after themselves fared particularly badly. Many ended their lives in the Public Assistance Institutions, the old workhouses feared by everyone. Workhouses changed their names in 1929, but their character and the stigma attached to them remained. One of the early achievements in the NHS was the development of active geriatrics, when a start was made on dealing with the problem of the “back wards”, seldom visited by doctors, where people ended their days.


The National Health Service started on 5 July 1948. It was a momentous achievement and, in spite of earlier professional opposition to some of the details, everybody wanted the new service to work. However, the weather was frightful, food was still rationed, there was a dollar economic crisis and a shortage of fuel. Yet the 1951 Festival of Britain, on the South Bank, provided a glimpse of a better future.

The war had created a housing crisis - alongside post-war re-building of cities, the New Towns Act (1946) created major new centres of population which needed health services. Hospitals had little claim on the few building materials available - housing and schools came first. The distribution of consultant services was poor, for specialists were centred in the major hospitals in large cities where private practice was possible, not rural areas. In some large counties there were few consultants. The NHS was founded at the time when massive innovation was occurring, some stimulated by war. The pharmaceutical industry was creating a flood of new drugs. Antibiotics, better anaesthetic agents, cortisone, drugs for the treatment of mental illness such as schizophrenia and depression, good diuretics for heart failure and the antihistamines all became available.

Ultrasound was built upon wartime electronics expertise. These developments, while improving the lot of the patient, raised the cost of the NHS and Government had little experience of running a health service with an explosive tendency to expand.

Category: Insurance

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