I quote this from another forum (with their permission)

“Due to the differing information posted on forums and elsewhwere I contacted the Department of Health for a definitive answer in December last year.

This was their reply:-

Thank you for your email of 3 December about healthcare in Spain . I have been asked to reply.

The UK pays Spain a lump sum of ?274.11 per state pensioner, per month, regardless of the level of healthcare accessed by that person.

The Department understands that some local doctors may be under the impression that, as they do not receive this funding directly, the UK is not paying its bills. This is incorrect as the UK pays the Spanish health department in Madrid on an ongoing basis. The question of how such payments are further distributed is, of course, a matter for the Spanish authorities.

Yours sincerely,

Ministerial Correspondence and Public Enquiries
Department of Health”

The UK will pay health care costs for any qualifying Brit who is a permanent resident in Spain, there is obviously a process to set this up and should the person return to the UK permanently the arrangement will revert to normal ie UK National Health cover.

This link might be useful

http://healthcareinspain.eu/

The system is quite logical when you think about it.