The latest prescription price increase is likely to fall disproportionately on low-to-middle earners, writes Resolution Foundation senior economist Matthew Whittaker.
Despite the passing of legislation in the Scottish Parliament to remove prescription charges north of the border and pressure from the British Medical Association to follow suit in England (prescriptions are already free in Wales and Northern Ireland), the government announced last week that the cost of prescriptions will rise by 20p to £7.40 per item from April 1st.
For many, the decision has little relevance. A range of exemptions mean that around half of the population – for example, schoolchildren, pensioners, the unemployed and those on income support – are not liable for prescription charges.
However, because they are of working age and largely independent of state benefits, members of the 5 million low-to-middle earner households in England often fail to qualify for such assistance.
This prompted the House of Commons Health Select Committee to conclude that those most affected by charges are:
“…working adults on incomes just above the level of Income Support.”
As the chart below shows, the particularly disappointing aspect of trends in prescription charges in recent years is that, while they have declined slightly in real terms since 1995, charges have increased as a proportion of the ‘net ingredient cost’, the figure that the NHS uses as a means of calculating the appropriate reimbursement for the dispenser, of each item dispensed.
This trend has potentially serious implications. According to figures from Citizens Advice, even before the start of the recent recession 0.8 million people in England failed to collect a prescription because of the cost involved. As well as putting their health at risk, such a response is likely to require more costly intervention further down the line for some patients, eating into the £450 million a year raised from prescription charges.
Coming on top of the decade-long squeeze on living standards among low-to-middle earners that we discussed at the launch of our new Commission last Monday, the latest price increase is likely to fall disproportionately on members of the group. The ‘squeezed middle’ might be the latest political trend, but, in England at least, they’re still being overlooked.
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