The former health secretary Alan Milburn, a close ally of Tony Blair, yesterday proposed a new wave of health reforms based on giving patients NHS credits to choose some of their own healthcare.

He said the scheme would empower patients, cut costs and radically redistribute power in society.

He said the NHS credit or personal budget would eventually be offered to patients suffering long-term conditions. But he said "the initial focus should be on those with complex long-term care needs, including patients requiring palliative care in the most disadvantaged areas where health needs are greatest and where services tend to be poorest".

He said: "The idea would be to give such patients a choice between receiving a package of care from the NHS, as they do now, or instead having their own budget - an NHS credit - which they could control directly."

The patient could then buy his or her care from the NHS or a private provider.

Speaking to a conference in the US, he said: "The value of the NHS credit could be adjusted upwards for patients who are older or poorer. It would be solely funded by government out of general taxation and would not be subject to patient co-payment."

Mr Blair has set up six policy groups under cabinet control to look at the long-term challenges facing Britain, and Mr Milburn will feed his ideas into one of these groups.

A scheme has already been introduced in social care to allow disabled and older people to buy their own support rather than relying on the council.

Mr Milburn said: "Patients, particularly those with chronic conditions, want to make choices not just about where and when they are treated but about types of care. So as more information is made available to help patients make informed decisions, those choices should be extended to cover the forms of treatment patients get, not just the location of treatment."

He claimed the proposal would drive down costs since the price of "each form of care the patient chose with their NHS credit would be transparent, patients would have strong incentives to opt for lower-cost prevention rather than higher-cost treatment".

He also proposed communities could be given more say over the NHS by opening up primary care trusts to direct elections alongside local councils.

"Such a reform would be genuinely devolutionary. It would get local services focussed more sharply on the needs of communities.

"It would fundamentally change the accountability of the NHS from one that is top-down to one that is bottom-up.

"And it would make this great public service open, for the first time, to the voices of the public."

Mr Milburn also urged that the expert patients programme, under which people are taught to understand and manage their long-term conditions, should be "more ambitious".

The government aims to cover 100,000 patients through the scheme by 2012. Mr Milburn said ministers should aim for "at least one million".

The Darlington MP, who managed Labour's 2005 general election campaign, was speaking to the Care Continuum Congress in Washington.