Department of Health and Social Care– Written Evidence (BRH0021)

Executive summary

1. The Department of Health (DH) welcomes the opportunity to submit written evidence to the House of Lords EU Home Affairs Sub-Committee inquiry into Brexit and reciprocal healthcare. This follows oral evidence given by Paul Macnaught, Director of EU, International and Public Health System, at the Oral Evidence Session on Wednesday 13th September 2017. Lord O’Shaughnessy, Parliamentary Under Secretary of State at DH, has agreed to provide oral evidence on Wednesday 29th November 2017.    

2. In the Government’s position paper on citizens’ rights, Safeguarding the Position of EU Citizens Living in the UK and UK Nationals Living in the EU, the UK made a clear commitment that it will seek to protect the healthcare arrangements currently set out in EU Regulations. Alongside colleagues in the Department for Exiting the European Union (DExEU), DH officials have been taking part in negotiations with the EU on the Withdrawal Agreement and we have made good progress. DH is optimistic that talks on a ‘future relationship’ with the EU will secure continuation of these rights but is taking responsible steps to prepare for all outcomes.  

3. This written evidence begins with an account of progress to date on negotiations with the EU, including contingency planning in the event of a ‘no deal’ scenario. It gives a historical account of the UK’s reciprocal healthcare agreements and the particular financial and operational aspects of our EU/European Economic Area (EEA) agreements. We have also highlighted the agreements the UK has with non-EU/EEA countries and described how the NHS recovers costs from individuals not eligible for free NHS care. DH values these reciprocal agreements and is working with colleagues across and outside government to ensure they continue after the UK leaves the EU. 

EU Exit – negotiations

4. DH believes that reciprocal healthcare arrangements allow older people and those with certain risk factors to travel and live abroad, giving them more life options. They also promote tourism and facilitate economic exchange and growth in the EU/EEA. For example, in 2016, UK residents spent approximately £25.4bn on visits to the EU and EU residents spent approximately £10bn on visits to the UK. This is helped by the fact that people can travel in the EU/EEA and Switzerland without worrying about their ability to access healthcare or the cost of doing so. They allow people to travel overseas for planned treatment and facilitate personalisation and choice, for example by allowing mothers to travel to a home country to give birth, including British mothers residing in another EU/EEA country (or Switzerland).  

5. During negotiations with the EU on the Withdrawal Agreement, the UK has therefore been seeking to protect the healthcare arrangements currently set out in EU Regulations 883/2004 and 987/2009. In the recent negotiation rounds, the UK has agreed with the EU to protect reciprocal healthcare rights for the following groups in the scope of the Withdrawal Agreement for social security coordination purposes:

• UK nationals who are resident in another Member State (MS) on EU Exit Day. This includes individuals who are of UK state pension age, and those who are not yet at state pension age, once they start drawing their UK state pension. This means that anyone who has retired early and moved, for example, to Spain before the UK exits the EU – having only ever worked in the UK – will be able to export their uprated state pension to Spain and benefit from the UK covering their health costs in that country. 

• Many others who have previously worked in the EU, irrespective of where they are living on EU Exit Day. We have confirmed that they will continue to benefit from the coordination rules for aggregating contributions made in the EU and UK both before and after the UK exits the EU and the rights that flow from such contributions, with regard to an uprated state pension and reciprocal healthcare. These are important points in providing financial security to UK nationals and EU citizens, allowing them to plan for the future accordingly.

• A pragmatic approach to the European Health Insurance Card (EHIC) scheme will mean that people who are visiting the EU on EU Exit Day – for example on holiday or for study purposes – will continue to benefit from EHIC coverage for the duration of their holiday or course of study.

• We have agreed that people visiting the EU for planned medical treatment or to give birth that crosses over EU Exit Day (using the S2 route) will be able to complete their course of treatment.

• Finally, although we agreed in principle with the EU to cover frontier workers’ social security rights, the EU does not agree that any guarantees should be given for posted workers in this round of negotiations. We want to return to both of these issues at a later stage in the negotiations. 

6. DH welcomes the progress made but we have been clear and continue to be clear that we want the UK to remain a part of the reciprocal healthcare scheme in the future, such that all other current and future UK state pensioners retain the right to reciprocal healthcare when they retire, to continue with the EHIC scheme and to travel to the EU for planned treatment. It is important to note that agreements with the EU to date apply only to the EU27[1]. We will discuss similar arrangements with Iceland, Liechtenstien, Norway and Switzerland (the European Free Trade Association (EFTA) States) on a reciprocal basis. 

7. A full summary of progress and comparison of EU-UK positions on citizens’ rights is available on the GOV.UK website: https://www.gov.uk/government/publications/joint-technical-note-on-the-comparison-of-eu-uk-positions-on-citizens-rights.  

Dispute resolution

8. This is a cross-government area led by DExEU. The UK Government’s position on dispute resolution was set out in the Government’s position paper on citizens’ rights published in August 2017. The appropriate dispute resolution mechanisms will be dependent on the substance and context of each agreement.

EU Exit – specific country issues

Ireland

9. The Common Travel Area (CTA) is a special travel zone between Ireland, the UK, the Isle and Man and the Channel Islands. The CTA arose to facilitate the principle of free movement for British and Irish citizens between these islands and the reciprocal enjoyment of rights and entitlements to public services of citizens when in another state. Under these arrangements Irish citizens resident in the CTA have access to UK health services, which includes emergency, routine and planned access to health services.

10.         Both the UK and Ireland intend to preserve these arrangements and joint principles have been agreed between the UK and the European Commission (EC) to ensure the continuation of the CTA. These will fully preserve the rights of UK and Irish nationals to live, work and study, and protect the associated rights to public services and social security. They recognise that the Withdrawal Agreement should formally acknowledge that the UK and Ireland will continue to be able to uphold and develop these bilateral agreements.

11.         The CTA facilitates a wide range of areas of health reciprocity and collaboration, ranging from general access to healthcare through to cross-border collaboration between healthcare providers on specific projects.

12.         The North South Ministerial Council (NSMC) further enables close cooperation and implementation within health and social care, such as emergency planning, cancer research and health promotion.  

Gibraltar

13.         The UK expects any agreement with the EU to apply to all UK nationals – this includes British citizens, British subjects with the right of abode in the UK, and citizens from the British Overseas Territories who acquire citizenship from a connection with Gibraltar. The UK Government will work closely with the Government of Gibraltar to ensure that similar guarantees apply to EU citizens in Gibraltar, in line with their constitutional responsibilities in this area.

North Cyprus

14.         The political status of the northern part of Cyprus is unusual. Cyprus as a whole is a full EU MS, legally part of the EEA, but in practice the pan-EU rules on the provision and payment of healthcare costs cannot be applied in the north because the EU acquis is suspended there. Therefore, UK state pensioners living in the northern part of Cyprus are not covered by EU reciprocal healthcare arrangements, meaning they cannot make use of the S1 scheme where the UK covers their reciprocal healthcare costs.

Contingency planning

15.         The UK has made encouraging progress in negotiations and we have now reached agreement on all aspects of reciprocal healthcare for the purposes of the Withdrawal Agreement. It is in everyone’s interests to secure a good deal for both sides. We think this is by far and away the highest probability, but of course we have a duty to plan for the alternative. So our plans for the future of reciprocal healthcare arrangements have been designed to provide the flexibility to respond to a range of scenarios, including a negotiated agreement, as well as the unlikely eventuality of leaving without a deal. Over the next few months the extent of this planning will become clear. We understand the need to reduce uncertainty wherever we can. We will continue to work to address the concerns of UK state pensioners and other groups in EU MS and will be open and clear in our communications to impacted individuals. Implementing the first stages of contingency plans in the coming months should not be interpreted as an expectation that talks with the EU should not be successful. DH remains committed to our stated aims of continuing with current reciprocal healthcare arrangements for pensioners and those on a temporary stay in the EU.

History of reciprocal healthcare

16.         In the 20th Century the UK entered into reciprocal healthcare agreements, sometimes as part of a wider agreement on social security, with a wide range of countries. Reciprocal agreements became important following the Second World War as part of the wider project of fostering peacetime co-operation and economic partnership and integration between the European countries and their close neighbours. This coincides with the widespread adoption and consolidation of universal healthcare systems across Europe, including of course the establishment of the NHS in 1948. 

17.         The formation of the European Economic Community (EEC) in 1957 was swiftly followed by an EEC regulation 3/58. 3/58 is the pre-cursor of the current EU Regulations (1408/71 and 883/2004) that govern social security coordination and reciprocal healthcare across EU MS. The UK became party to this system in 1973 when it joined the EEC.

18.         Norway, Iceland and Liechtenstein – members of the EEA but not the EU – became part of the social security coordination as of 1 June 2012, through Annex VI to the Agreement on the EEA Agreement, as updated by Decision No 76/2011 of the EEA Joint Committee. Switzerland, on the other hand, neither a member of the EU nor the EEA, is party to these agreements as of 1 April 2012 on account of Annex II to the ‘Agreement between the European Community and its MS, of the one part, and the Swiss Confederation, of the other, on the free movement of persons’, as updated by Decision No 1/2012 of the Joint Committee established by that agreement.

19.         The current social security coordination regulations were extended in January 2011 to nationals of non-EU countries (third-country nationals) legally resident in the EU and in a cross-border situation through Regulation 1231/2010.  This applies to all nationals of an EU MS, stateless persons and refugees, their family members and their survivors. This does not apply to Denmark or the UK. The UK extends Regulation 1408/71 through Regulation 574/72 to third-country nationals (TCNs). This applies to individuals who are economically active (employed or self-employed), students, their family members and their survivors. Regulation 1408/71 does not apply to paternity or pre-retirements benefits.      

20.         Before this, and during the 1950s and 1960s, the UK became a party to multilateral agreements with its European neighbours, providing for reciprocal healthcare arrangements covering emergency care, planned treatment, and making special provision for war wounded.[2] The UK also entered into bilateral arrangements with various European countries including those not covered by the multilateral agreements, including a number of agreements reached after 1973. The agreements vary in scope but in broad terms cover aspects of the current arrangements between EU/EEA/Switzerland, although without country-to-country reimbursement.

21.         The multilateral and bilateral agreements have not been applied since the UK and its neighbours have joined the EU. A notable exception is an agreement that allows the Maltese health authorities to refer 150 patients per annum for NHS treatment, which continues today, albeit for 180 patients.

22.         The UK also entered into agreements to support some Crown Dependencies and Overseas Territories by allowing them to refer patients into the NHS. Other agreements with strategic allies and Commonwealth countries provide reciprocal access to emergency care. The most noteworthy of these today in terms of tourist exchange is our agreements with Australia and New Zealand (who have similar arrangements with many EU countries) dating from 1986 and 1982 respectively.

EU/EEA reciprocal healthcare agreements 

23.         One of the four freedoms of the EU internal market, and a basic principle of the EU, is the right to freedom of movement of persons. This includes a right of movement and residence for workers, the right to enter and reside for family members, and the right to work in, and be treated on an equal footing with nationals of, another MS. EU/EEA reciprocal healthcare agreements support this by eliminating the financial or bureaucratic barriers that individuals would otherwise face, while supporting trade within the EU/EEA.

24.         The majority of European citizens receive healthcare in the country where they live, via the health system through which they are covered or insured. In the UK this is provided by the NHS. EU social security regulations 883/2004 and 987/2009 allow insured citizens to receive healthcare in another European country, on the same basis as insured residents of that country, when they are visiting, living, or working in another EU/EEA country or Switzerland. These benefits are reciprocal and apply both to UK-insured citizens in the EU/EEA/Switzerland, and EU/EEA/Swiss-insured citizens in the UK. The responsible MS then reimburses the costs.

25.         Social security arrangements vary between MS and EU Regulations are not designed to harmonise them. They protect citizens from losing all or part of their social security rights when moving to another MS and support European citizens exercising their right to freedom of movement. Entitlement to reciprocal healthcare under EU Regulations is based on the concept of ‘insurability’ and this depends on the system of the state in question. The central point of these arrangements is that the costs of healthcare are borne by the country in which the individual is insured, and is not determined by nationality. 

26.         Healthcare entitlements under EU Regulations are sometimes linked to those of wider social security benefits. If a benefit or pension is exportable to another EU/EEA country or Switzerland, healthcare entitlement (via the S1 route) automatically follows. Healthcare entitlements such as the EHIC and the S2 are not linked to exportable benefits. The UK has a residency-based healthcare system which means that insurability is generally determined by residency (being ‘ordinarily resident’) and not by the past or present payment of National Insurance contributions or UK taxes, being registered with a GP, having an NHS number or owning property in the UK. Ordinary residence (OR) means, broadly speaking, living in the UK on a lawful basis and being properly settled for the time being. 

27.         Although the UK is a net exporter under EU Regulations, meaning we pay more to other countries than we receive, this access to healthcare also benefits the NHS by reducing the likelihood that people will wait and return to the UK for treatment, potentially deterring people from seeking necessary treatment or passing undetected with infectious diseases. DH also believes the system is cost-effective for the UK, as often the cost of treatment overseas is cheaper than in the UK. For example, Spain’s average cost – despite a recent upward revision – is now €4,173 compared with £4,396 in the UK.   

28.         These rules effectively mean that UK-insured individuals in the EU/EEA/Switzerland or EU/EEA/Swiss-insured individuals in the UK can broadly access necessary healthcare in the same way as a resident of the country they are in. For example, a person, for whose healthcare the UK is competent, goes on holiday to Spain, has a car accident and breaks their leg. EU reciprocal healthcare arrangements enable them to be treated in a Spanish hospital on the same terms as a Spanish insured national living in Spain. The costs of their treatment would then be reimbursed by the UK (less any contributions that a Spanish-person would be expected to pay). 
29.         DH has been made aware of small numbers of people using their EHIC being refused in a few MS, under the assumption that the UK has left the EU. We have been proactive and written to the MS in question, providing clarification and reiterating the message that until the UK is no longer a member of the EU, the UK remains a full member and all the rights and obligations of EU membership remain in force, including the rights associated with medical treatment abroad. For EU/EEA/Swiss nationals using an EHIC in the UK, the current process will continue until the UK leaves the EU. The UK will remain a member of the EU until March 2019 and there will be no change to the rights and status neither of EU citizens living in the UK, nor UK nationals living in the EU, during this time.

30.         DH funds and administers reciprocal healthcare on behalf of the UK as a whole, liaising where appropriate with the NHS in England, Scotland, Wales and Northern Ireland.

31.         Arrangements relating to the EU rules on social security coordination involve three separate EU bodies, all of which the UK is an active member:  

• Administrative Commission consists of a government representative from each MS. It facilitates the coordination of social security systems by managing administrative matters and dealing with questions of interpretation over the provisions of the social security coordination regulations, and promotes further collaboration between MS. The composition and remit of the Administrative Commission is outlined in Articles 71 and 72 of Regulation 883/2004.

• Technical Commission is attached to the Administrative Commission. It is responsible for proposing common frameworks for the data-processing services and it advises on security and common standards. It provides reports and advice to the Administrative Commission so that it can make decisions on the use of new technologies to facilitate freedom of movement and information exchange between MS. The composition and working methods of the Technical Commission is determined by the Administrative Commission, as outlined in Article 73 of Regulation 883/2004. 

• Audit Board is also attached to, and its composition and working methods determined by, the Administrative Commission. It is responsible for determining the methods for calculating MS’s average costs, collecting data and performing calculations for MS’s statement of claims, and updating and reporting on the financial aspects of the implementation of the social security coordination regulations. This enables the Administrative Commission to consider relevant factors when drawing up accounts. This is outlined in Article 74 of Regulation 883/2004.  

32.         UK-insured individuals fall under two main categories:

a)    UK-insured individuals living in the UK who are deemed ordinarily resident, or

b)   UK-insured individuals living outside the UK where the UK is competent for their healthcare. This includes:

• UK state pensioners and their dependents (with a registered S1);

• posted workers (and their family members) who continue to be liable to pay UK National Insurance contributions;

• frontier workers (and their family members)[3];

• individuals (and their family members) receiving UK cash benefits because or as a consequence of their activity as an employed or self-employed person[4];

• individuals in receipt of a UK survivors’ pension;

• a family member of an EU/EEA/Swiss national, who is working and living in the UK and liable to pay UK National Insurance contributions, who lives in another MS (and who is not covered in their own right in their MS)[5].

c)    Other categories include:

• Mariners – if working on a vessel flying the flag of a MS, they will be covered by the legislation of that state, even if they reside in another. That means the UK would be competent for the healthcare of individuals working on vessels under the UK flag;

• Pensioners in receipt of a pension from more than one state – if there are only two pensions, from the state of origin and the current state of residence, competency for healthcare lies with the country of residence.  If there are more than two pensions, and one of them if from the current state of residence, competency for healthcare lies with the country of residence. If there are more than two pensions, and the current state of residence is not one of them, the competent MS for healthcare will be the one where they contributed the longest;

• Civil servants – continue to be liable to pay contributions in the country of the administration employing him or her. That means that an EU/EEA/Swiss national working for the UK Civil Service, the UK would be competent for their healthcare, irrespective of where the civil servant works or resides in the EU/EEA (or Switzerland). 

UK state pensioners, dependents of UK state pensioners, and other UK-insured individuals living in other EU/EEA countries (or Switzerland)

33.         These groups are clearly referenced under the following sections of Regulation 987/2009:

• Article 62 – claims for healthcare costs relating to temporary visitors (the EHIC scheme), treatment referrals (S2), and other groups (such as posted workers). 

• Article 63(2)(a) – claims for healthcare costs relating to family members of workers not resident in the same MS as the worker.
• Article 63(2)(b) – claims for healthcare costs relating to state pensioners and dependents of state pensioners. 

In Parliamentary Questions and other correspondence we refer to Articles 93, 94 and 95 which are in effect Articles 62, 63(2)(a) and 63(2)(b), for comparison and continuity reasons. Once DH has implemented a new finance system, we will make the full switch to Articles 62, 63(2)(a) and 63(2)(b) respectively.

34.         There are approximately 490,000 UK state pensioners and their dependents living in other EU/EEA countries. The UK covers the healthcare costs of around 190,000 UK state pensioners and their dependents living in other EU/EEA countries. Reasons for this disparity may include not registering and/or applying for the relevant entitlement form from the UK or being in receipt of a state pension from the country they have retired in. Popular destinations include Ireland, as many Irish citizens choose to work in the UK and return to Ireland in their retirement, along with the warmer climates of Spain, France and Cyprus. In future, we could expect to see a rise in the number of S1s from Eastern European countries as the migrant population from these countries approach retirement.

35.         There were around 45,000 EU / EEA / Swiss nationals who remained liable to pay UK National Insurance contributions in 2015 and around 28,000 of these were posted workers.

36.         In the same way, there are approximately 5,800 state pensioners from other EU/EEA countries (and Switzerland) living in the UK, who are covered by EU social security regulations. DH can seek reimbursement for the cost of their treatment from the competent MS for their healthcare. Ireland, the Netherlands and Poland are the most represented nationalities.

37.         Individuals the UK may be responsible for under the S1 scheme in future include EU / EEA / Swiss nationals working in the UK who, if they stayed in the UK to qualify for state pension status, may be entitled to a UK-issued S1 in case they decide to return to the country of origin (particularly for countries such as Poland, Lithuania, Latvia). Tables of registered pensioner S1s and total number of S1s by country are contained in Appendix 1 and Appendix 2.

Temporary visitors from the UK to the EU/EEA and Switzerland 

38.         Temporary visitors are those residing in one EEA country (or Switzerland) but visiting another EEA country/Switzerland; this includes both tourists and students. The EHIC entitles an individual to ‘needs-arising’ healthcare in another MS, as if they are an insured resident of the country they are visiting. EU/EEA-insured individuals should get their EHIC from their competent MS. There were approximately 27 million active UK cards in circulation as of September 2017.

39.         Individuals who do not have their EHIC with them, but need medical treatment during a temporary stay, can be issued with a Provisional Replacement Certificate (PRC) which proves their entitlement to an EHIC. The PRC gives the same cover as an EHIC until the individual returns home.  

40.         The EHIC is not valid for private treatment and only entitles the holder to access state-provided healthcare during temporary stays in the EU/EEA and Switzerland. It also does not cover costs such as mountain rescue (in ski resorts), repatriation to the UK, treatment on cruises or aeroplanes, or lost or stolen property. DH therefore encourages individuals to have both their EHIC and valid travel insurance when visiting the EEA (or Switzerland). The EHIC will also not cover individuals who are using the card to travel abroad specifically to have treatment.

Planned Treatment

41.         Individuals from one EU/EEA country (or Switzerland) are able to travel overseas to receive planned treatment in another MS. For example, a UK resident, subject to fulfilling certain conditions, or for giving birth in a home country, but they must be ordinarily resident in the UK (or UK-insured) with entitlement to NHS services. The treatment must receive prior authorisation from the local health board – in England that is NHS England. A total of 1,347 S2 entitlement documents were issued by the UK in 2016, allowing people to obtain planned treatment or maternity care in another MS. The full list is available in Appendix 3.

Cross Border Directive

42.         EU Directive 2011/24/EU clarifies patients’ rights to purchase healthcare in another EU/EEA country and to apply for reimbursement of eligible costs from their home system. This Directive creates a framework for people to access safe high-quality healthcare in other European countries, for instance to access specialised expertise. It does not create new rights to treatment.

43.         This Directive allows patients to receive treatment in another EU/EEA country with the costs being covered by their home country. The treatment patients receive must be one that they are entitled to receive in their home healthcare system. Reimbursement is capped at the amount it would have cost had the treatment taken place in the patient’s home country. Switzerland is not party to the Directive.

44.         In the UK, patients are only required to apply in advance of purchasing treatment for a limited number of services (currently linked to NHS specialised services), otherwise patients are entitled to apply for reimbursement without any prior-approval. Patients pay the healthcare provider directly and, in England, apply to NHS England for reimbursement (who then bills the relevant NHS commissioning body). If approved, reimbursement to the patient under the Directive is set at the costs the NHS would have incurred if it had provided the treatment, or the actual treatment cost if lower. In 2015, 1,186 individuals from the UK were reimbursed for their treatment under the Directive. Poland, Latvia and France are among the most popular destinations.

45.         The main elements of the Directive also include:

• Mutual recognition of prescriptions – the UK will dispense based on prescriptions issued by clinicians in other MS (and vice versa);

• European Reference Networks (ERNs) – these provide a platform for cross-border cooperation on complex or rare diseases and conditions between providers of specialised healthcare across the EU/EEA. They were established in Spring 2017 and are made up of over 900 highly-specialised healthcare units from 26 countries. The UK leads around a quarter of the ERNs;   

• National Contact Points (NCPs) – National Contact Points which ensure the right advice is available to users visiting that MS;
• e-Health – promotion of collaboration on e-Health.

Finance and operations

46.         Payments and claims under EU reciprocal healthcare arrangements work in arrears. Some payments and claims can take up to 3-5 years in some cases, and timescales for countries to send claims and make payments are set out in EU law. The UK does not quote cash expenditure for a given year as it is not indicative of the cost of healthcare activity received under reciprocal healthcare rules in that year. If a country breaches the timescales set out in EU legislation for submitting claims for healthcare provided under EU reciprocal healthcare rules, the receiving country can reject that claim.

47.         Payments for healthcare provided under reciprocal healthcare arrangements are settled on a country-to-country basis and the specifics of each relationship are different. EU rules provide a legal framework for payment mechanisms for healthcare, including payment timescales and methods of calculating and agreeing those payments, arrangements for settling disputes between countries, and for sharing information between different institutions about insured people (for example, being able to compel other MS to provide data necessary for determining whether a person has the right to NHS healthcare in the UK).

48.         Claims based on actual expenditure are introduced to the liaison body of the debtor MS within 12 months of the end of the calendar half-year during which those claims were recorded in the accounts of the creditor institution. Claims of fixed amounts for a calendar year are introduced to the liaison body of the debtor MS within the 12-month period following the month during which the average costs for the year concerned were published in the Official Journal of the European Union (OJEU). If a country is late submitting claims, the receiving country can reject those claims. Payments made more than 18 months after a claim is received can incur interest, however, the process can take longer if claims are disputed.

49.         When we refer to the UK budget for EU/EEA healthcare activity, we refer to estimated expenditure in a given year rather than cash expenditure. This is because the claims and payment mechanism operate in arrears; therefore, cash expenditure in a given year is not indicative of healthcare activity. The figures we use are what we estimate healthcare activity in a particular year will cost.

50.         There are currently two primary mechanisms in place for the reimbursement of healthcare costs between EU/EEA countries (and Switzerland) for healthcare provided to their insured persons:

a)    Actual costs – anything within the temporary visitor category (EHICs, planned treatment and workers) is billed on the basis of actual healthcare use. Most countries now bill everything (i.e. pensioners and dependents also) on the basis of actual costs (as stated in the bullet point below) however, the countries we pay the most for pensioners do bill us on the basis of average costs (Spain and Ireland).

b)   Average / fixed costs – costs per person, per month. For pensioners and their dependants, exportable benefit recipients and dependants in the home state of a worker, billing methods vary by country – either actual costs or average costs. For these categories, Spain and Ireland bill other countries on the basis of an average cost per person. Spain’s latest pensioner average cost is €4,172.59 per pensioner per year and Ireland’s is €7,605.41.

51.         The UK bills on the basis of an average cost but uses actual costs for the temporary visitor category as required. The UK’s current average cost is £4,396.17. However, the majority of countries do now bill only on the basis of actual healthcare costs. Only 8 countries, including the UK, now use average costs.

52.         The UK also has a number of waiver agreements with individual EU/EEA countries, which involves intentional relinquishment of healthcare costs between MS. Waiver agreements exist where they are considered mutually beneficial. This means that for some or all categories of claims, costs are renounced, easing the administrative burden. They are regularly monitored to assess value for money.

53.         The waiver agreements the UK has with other MS are listed below:

• Denmark – full waiver;

• Estonia and Norway – waiver, excepting former Article 22.1c (patient referral claims) and Article 55.1c (industrial injury claims);

• Finland, Hungary and Malta – waiver, excepting former Article 22.1c (patient referral claims).

54.         In addition to waiver agreements, the UK also has a number of ‘formula’ agreements in place with several countries, primarily when the UK bills other EEA countries (or Switzerland) for any temporary visitors to the UK. These arrangements compensate for the gap in identifying temporary visitors from the EEA who should be presenting an EHIC in order to receive treatment. 

How much do we pay?

55.         DH holds the EEA Healthcare Budget for the UK, which covers payments for exportable healthcare under EU law. In 2016/17, the net budget was £580million, of which budget expenditure was £650million.

• Around 80% of the budget is for the healthcare of UK state pensioners retired in the EEA. There are approximately 190,000 UK state pensioners and their dependants whose healthcare costs the UK covers in their EEA country of residence. The UK reimburses other MS for providing healthcare to those UK state pensioners.

• Expenditure on temporary visitors (including EHIC), which includes workers, tourists, students and planned treatment claims, is estimated to be £156million for 16/17 and was £131million for 15/16.

• Expenditure on dependant families in the EEA of a worker in the UK was approximately £6million for 16/17 and 15/16.

How much do we get back?

56.         The UK pays more money to other EU / EEA countries than it receives. This is due primarily to the greater number of UK state pensioners who retire overseas. Compared to the approximately 190,000 UK state pensioners in the EEA (and Switzerland) whose healthcare costs are covered by the UK, there are only 5,800 EEA/Swiss state pensioners in the UK who have their healthcare funded by other EEA countries (or Switzerland). Similarly, there are more UK tourists who temporarily visit other EU countries than vice versa. In 2016, there were 53 million UK visits to other EU countries (75% of all visits abroad). In the same year, there were 25.5 million EU visits to the UK.

57.         Additionally, the OR criteria, which the NHS uses to determine whether a person is entitled to free NHS treatment, can make it more difficult to recover costs from other MS, as some people, notably students, may be OR here at the same time as being entitled to a non-UK EHIC, and so do not have to provide that EHIC, meaning that the UK cannot be properly reimbursed. DH’s Visitor and Migrant NHS Cost Recovery Programme has already implemented a number of changes to NHS charging rules. This work will help to increase the number of people who should be paying for their treatment but are not, and is helping to incentivise NHS staff to identify temporary visitors from the EEA/Switzerland who should present an EHIC when receiving treatment.

Budget fluctuation

58.         Over the last 5 years the UK has changed the way that budget expenditure is calculated, which has led to a decrease in budget requirement. Previously the yearly budget impact was the cash amount paid in a given financial year, which could encompass a number of years’ costs. The UK currently accrues expenditure on a more reliable estimate for France, Spain and Ireland which removes a lot of volatility in the budget impact each year. This has also been aided by new EU rules which mean there is a shorter delay between activity and claims being submitted and paid.

59.         Over the last 5 years the GBP to EUR exchange rate has fluctuated dramatically, from highs of 1.44 in 2015 to the current exchange rate of 1.12, falling as low as 1.07 in August 2017. This has meant that the £650m expenditure budget has fluctuated in value anywhere between £936m to £696m. This is significant because the majority of the claims against us and the payments we make are in Euros. We endeavour to achieve the best timing of payments to benefit from the strongest possible exchange rate however this is not always possible due to the time limits on reimbursing other MS. Over the same time period there was an increase of 12 million UK visits to other EU countries, from 41 million in 2012 to 53 million in 2016.

Dispute resolution – current arrangements

60.         If an individual believes their interests have been harmed by a MS’s failure to implement EU law or to fulfil its obligations with regard to reciprocal healthcare, they can lodge a complaint with the EC.  Once a complaint has been lodged, the EC determines whether to treat it as such (within a month). If it does, it gathers information from the relevant MS or the individual to determine whether further action is required. If it considers an infringement has occurred, it issues a ‘letter of formal notice’ to the MS, requesting a response by a specified date. The MS adopts a position on the points of fact and law and the EC decides whether to open an infringement procedure.
61.         In the light of the response (or absence of one), the EC may decide to issue a ‘reasoned opinion’ to the MS, stating why it believes an infringement of Community law has occurred and require the MS to comply within a specified period (normally two months). Alternatively, it may decide not to proceed with the infringement procedure if it receives credible assurances from the MS. If the MS fails to comply, the EC may bring the case before the Court of Justice of the European Union (CJEU). On average, it takes about two years for the CJEU to rule on cases brought by the EC. The CJEU delivers a judgment stating whether there has been an infringement. It cannot annul a national provision that is incompatible with Community law, force a MS to respond to the request of an individual, or order a MS to pay damages to that individual. It is up to the MS to take any necessary steps to comply. If it does not, the EC may again bring the matter before the CJEU seeking penalty payments against the MS.

Cost Recovery

62.         The UK has a residency-based healthcare system which means that insurability is generally determined by residency (being ordinarily resident) and not by past or present payment of National Insurance contributions or UK taxes, being registered with a GP, having an NHS number or owning property in the UK. Ordinarily resident means, broadly speaking, living in the UK on a lawful basis and being properly settled for the time being.

63.         The NHS recovers costs in the following scenarios:

• an EU/EEA/Swiss state pensioner who lives in the UK can access free NHS healthcare as if they were a UK resident. The UK can, however, recover these costs from the competent MS;

• an EU/EEA/Swiss insured individual visiting the UK temporarily with a valid EHIC will be entitled to all needs-arising healthcare. The UK is then able to recover these costs from the competent MS;

• an EU/EEA/Swiss insured individual funded by their home country to travel to the UK to receive planned treatment (via the S2 route). The UK is then able to recover these costs from the competent MS;

• any EU/EEA/Swiss national who does not meet the OR test, for example as a tourist, is not insured by another MS, or does not have a valid EHIC, S1 or S2 form, will be charged directly for any NHS care they receive. 

64.         Certain categories of people are able to access healthcare without being charged. This includes refugees and asylum seekers. Services which can be accessed include primary care and treatment provided by a GP, as well as emergency treatment at an A&E department or walk-in centre. Since 6 April 2015, non-EU/EEA nationals need to pay a health surcharge (Immigration Health Surcharge) when applying for a visa to stay in the UK for over 6 months. An exemption from this surcharge exists for a number of people, including those who are seeking asylum, those applying for indefinite leave to remain, and those whose being made to leave the UK would be against their rights under Article 3 of the European Convention of Human Rights.

65.         As mentioned earlier, the DH Visitor and Migrant NHS Cost Recovery Programme has been established to support the NHS to better identify and recover costs from individuals not eligible for free NHS care. This includes the introduction of an EHIC incentive scheme, where NHS trusts are paid an additional 25% of all EHIC activity they correctly record. The value of claims made by the UK to recoup the costs of NHS treatment for individuals insured by other EU/EEA countries and Switzerland has risen by £16m (32%) – from £50m in 2014/15 to £66m in 2016/17.  

66.         Following Lord Carter’s review of operational productivity and performance in NHS acute hospitals, NHS trusts were not aware how their performance compared with others, particularly in relation to how productive or efficient they are. In response, NHS Improvement has set up an online portal known as the ‘The Model Hospital’. The portal now has over 2,000 users registered in NHS acute trusts, who are now able to identify variation across key areas. The cost recovery elements of The Model Hospital portal present trust-level data on visitor cost recovery, making it available for reference for the first time. It is designed to give Overseas Visitors Managers (OVMs) and their finance colleagues a holistic view of their trust’s cost recovery performance and to be able to benchmark it against other trusts. By doing so, it aims to become the main resource on cost recovery information and helps trusts incorporate visitor cost recovery into their overall performance monitoring across The Model Hospital.    

Operational arrangements

67.         Although DH is responsible for the policy and budget for reciprocal healthcare, service and operational delivery is split between the Department for Work and Pensions Overseas Healthcare Team (DWP OHT) and the NHS Business Service Authority (BSA). DWP OHT is based in Washington, Tyne and Wear, and is funded by DH under arrangements that date back to the 1970s. The team of approximately 130 people handle general public queries, patient registration for S1, and process / validate claims from other MS and claims from DH to other MS. The budget for 2017/18 is £4.9m.

68.         The NHS BSA, based in Newcastle upon Tyne, process and issue EHICs on behalf of DH. The fully absorbed cost in 2016/17 was £4.2m and the NHS BSA has a large pool of staff trained to deal with EHIC queries through their Contact Centre, and additional resource across their Patient Services team to process EHIC postal applications. They have a consistent 98% rate of accuracy and delivery of service relating to processing and delivery of requested EHICs. The work of both organisations is central to the management of the overall EEA healthcare budget. 

69.         DH takes any case of possible misuse of the system seriously and is continuously working to detect and tackle any suspected fraud and error. We have already tightened the EHIC application processes and, in addition, have commenced a major piece of work to examine and identify any areas for improvement on all our administrative systems relating to EU/EEA healthcare payments including EHIC. We are now reviewing the potential opportunities identified by this work and examining steps to take to improve the system further through a more radical redesign of our EU/EEA healthcare payment systems.

70.         There are recognised improvements to be made in the delivery of overseas healthcare and there is a programme of work led by DH to carry out an end-to-end service redesign of the functions currently spread across DWP OHT and NHS BSA. This programme, which began before the referendum on the UK’s membership of the EU, has been specifically designed over the past 18 months to deliver a flexible platform able to withstand any changes that may result from the UK leaving the EU.

71.         The UK remains fully committed to implementing the Electronic Exchange of Social Security Information (EESSI) IT system by June 2019, which will replace the current paper-based system with a faster and more secure method of communicating between national social security institutions. Electronic exchange is a legislative requirement under Article 4 of Regulation 987/2009.

Non-EU/EEA reciprocal healthcare agreements

72.         Currently, in the vast majority of cases, UK-insured individuals receiving healthcare in non-EEA countries cover the costs themselves either through private insurance, paying into the social security system of that country or through their own funds.

73.         The UK has some reciprocal healthcare agreements with the non-EU / EEA countries and territories listed below:

• Anguilla
• Australia
• Bosnia and Herzegovina 
• British Virgin Islands
• Falkland Islands
• Gibraltar
• Isle of Man
• Jersey
• Kosovo
• FYRO Macedonia
• Montenegro
• Monserrat
• New Zealand
• St. Helena
• Serbia
• Turks and Caicos Islands 

74.         These agreements do not mirror current EU / EEA reciprocal healthcare rules. They cover needs-arising treatment while on a temporary stay in that country. They do not cover people who have permanently moved there such as pensioners. No money changes hands between governments under these agreements.

75.         The UK has specific constitutional and legal responsibilities for its 14 overseas territories.

Table 1 – Levels of free treatment by country

* For these countries, the agreement will also apply to those persons requiring treatment if they are a member of the crew, or a passenger, on any ship, vessel or aircraft travelling to, leaving from or diverted to the UK and the need for urgent treatment has arisen during the voyage or flight.

Key

1. Immediate medical treatment only.

2. Only treatment required promptly for a condition which arose after arrival into the UK or became acutely exacerbated after such arrival. Services such as the routine monitoring of chronic/pre-existing conditions are not included and free treatment should be limited to that which is urgent in that it cannot wait until the patient can reasonably return home.

3. All treatment on the same basis as for a person insured in the other country, including services such as routine monitoring of pre-existing conditions, but not including circumstances where a person has travelled to the other country for the purpose of obtaining healthcare.

4. All treatment free on the same terms as for an eligible UK resident (ordinarily resident), including elective treatment.

For all levels of coverage, it will be for a doctor or dentist employed by the relevant NHS body to provide clinical input into whether required treatment meets a specific level of coverage.

Appendix 1 – Number of registered foreign authority (FA) pensioner S1s in the UK and UK pensioner S1s in the EEA and Switzerland (as at 23/11/2017)

The UK does not exchange S1 forms with Ireland so these figures do not

include UK/Irish-insured individuals.

Appendix 2 – Total number of registered foreign authority (FA) S1s in the UK and UK S1s in the EEA and Switzerland (as at 23/11/2017)

The UK does not exchange S1 forms with Ireland so these figures do not include UK/Irish-insured individuals.

Appendix 3 – Number of Portable Document (PD) S2s the UK issued in 2016 (for persons to seek planned medical treatment in the EEA or Switzerland)

The UK rejected 15 applications in 2016, as the treatments were not routinely commissioned.

24 November 2017

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