Comparing apples to apples: NHS still ranks below average

Most healthcare reporting is deeply biased. From blogs to papers to policy, most people have strong preferences for different kinds of healthcare systems that they believe to be ‘the best’, often based on what they view the role of the state to be. Obviously some beliefs are grounded in more facts and stats than others, but given how complicated healthcare systems are, it’s possible to come up with all different kinds of conclusions that appear, at least on the surface, like they’re grounded in fact. Compare, for example, The Commonwealth Fund 2014 report to the 2014 European Health Consumer Index: two studies that compare international healthcare systems. Both published within one year of each other, The Commonwealth Fund ranked the NHS the best healthcare system out of 11 countries, while the EHCI threw it down the list, ranking it 14th after all your obvious competitors, including The Netherlands, Switzerland, Germany, but also after your less obvious contenders, like Portugal.

Both reports appear to be thoroughly researched and have lots of numbers to back them up. So who do you believe? Well, if you favour single-payer health systems, you're probably going favour the Commonwealth Fund's report, which inherently favours centralised systems. (For example: out-of-pocket costs and insurer rejection of full cost reimbursement were considered a black mark against a healthcare system, regardless of access to treatment.) If you rank results higher than the principles around who delivers healthcare or who makes a profit, you're probably going to favour the EHCI's report, that gives more weight to things like waiting lists.

I personally give more credit to the EHCI report because my primary concern when it comes to healthcare systems is patient outcomes. That’s my bias.

Which is why the OECD’s healthcare efficiency reports are so important. The OECD’s stance is that “there is no “one-size-fits-all” approach to reforming health care systems. Policymakers should aim for coherence in policy settings by adopting best practices from the many different health care systems that exist in the OECD and tailor them to suit actual circumstances.” So while the OECD does make some comparisons of countries across the board, it also intentionally group countries together based on different kinds of healthcare systems in order to compare like with like.

Specifically, they break countries down into six groups to compare the efficiencies of similar healthcare institutions to each other, in an attempt to identify where the most improvement can be made within specific systems:

The UK falls into Group 6, which is characterised as:

Mostly public insurance. Health care is mainly provided by a heavily regulated public system, with strict gate-keeping, little decentralisation and a tight spending limit imposed via the budget process

Seven countries fall into this category: Hungary, Ireland, Italy, New Zealand, Norway, Poland, and the UK. The OECD uses nifty radar charts (click on links) to illustrate how each country compares to both the OECD average as well as Group 6’s average in different areas including efficiency and quality, amenable mortality, prices, resources, consumption, financing and policy. The final chart ranks each country’s to measure its comparative efficiency. The results:

High DEA Score: Norway, Italy Above Average: Poland Average: New Zealand Below Average: UK Low: Hungary, Ireland

The OECD’s analysis: “The quantity and quality of health care services (in the UK) remain lower than the OECD average while compensation levels are higher. Reinforcing competitive pressures on providers could help mitigate price pressures, e.g. by increasing user choice further and reforming compensation systems.”

On Tuesday I noted that the UK is one of the OECD countries that could do the most to improve its efficiency in public healthcare spending . But breaking that down even further, the UK doesn’t come close to topping the charts in its own group.

Perhaps the UK should be looking to make improvements to resemble Norway, which tops the ranks for public health services. Or maybe it should be looking towards other categories that focus on social insurance systems. Either way, it's time for the UK to start looking beyond the NHS.

Myth busting: NHS not so efficient after all

The NHS has long coasted on the widely held belief that it is one of the best healthcare systems in the world because it is so efficient. While European systems boast better patient outcomes, and the United States points to its excellent pre-emptive care measures, NHS loyalists cast that all aside, because unlike any of those other countries, the UK is able to keep its healthcare spending below 10% of GDP, free at the point of use, with relatively good outcomes. No other country can beat that efficiency. Well, it turns out most of them do.

In 2010, the OECD published multiple papers that specifically looked at the efficiencies of different health care systems. In its report “Health care systems: getting more value for money”, the OECD found that there was “room in all countries surveyed to improve the effectiveness of their health care spending.” Some countries, however, could see significant efficiencies gained. And the top three countries that could benefit the most: Greece, Ireland, and the United Kingdom.

By improving the efficiency of the health system, public spending savings would be large as compared to a no-policy-change scenario, amounting to almost 2% of 2017 GDP on average in the OECD. It would be over 3% for Greece, Ireland and the United Kingdom.

Breaking with myth, the UK is one of the countries that could do the most to improve its efficiency in public healthcare spending. Even more than the United States.

What the loyalists don’t seem to realise is that efficiency can’t simply be determined by how much money a country puts towards healthcare. The real question is how efficiently those monetary resources are being used to obtain better health outcomes.

And according to the OECD, both the UK and the US still have a long way to go:

Australia, Iceland, Japan, Korea and Switzerland perform best in transforming spending into health outcomes

In more than one third of OECD countries, exploiting efficiency gains in the health care sector would allow improving health outcomes as much as over the previous decade while keeping spending constant (Figure 2, Panel B). Germany, the United Kingdom and the United States fall into this group.

I’m not predicting the end of this health care tale. Perhaps, if the right reforms were made to the NHS to drastically improve efficiencies, the UK would have a system that not only demands less public spending, but also creates better health outcomes too. To compare apples with apples, Norwegian healthcare is " is mainly provided by a heavily regulated public system, with strict gate-keeping" and grouped together with the UK in the OECD's categorisations for healthcare systems; yet Norway's system is ranked much better for efficiency (more details to come in next blog...).

I just thought I'd flag up that, as things stand, the NHS under-performs on just about everything that matters.

It's terribly difficult to argue that markets are too short term

There's lovely little essay talking about how difficult it is to believe that financial markets are too short term in their outlook. To do so demands that said markets are entirely inefficient in their processing of information. And as this is something that no one but would be commissars still believes then it isn't really possible to insist that markets are short term in their outlook. Here's a part of said essay:

Basically, if capital markets price things well (with few ex ante errors, or put differently, the market is close to “efficient”) then maximizing shareholder value is a very good idea. Believing that markets make common and giant predictable errors is the only legitimate beef one can have with maximizing shareholder value, and it’s absolutely fair to debate this tenet.

But instead of confining the debate to this central point, or even realizing that this is the central point, critics attack shareholder value for many ancillary reasons. For instance, they laugh off the concept as vacuous, the absence of a strategy. They attack share‑based and particularly options‑based compensation. They attack markets and managers for being too “short-term."

The obvious point is that if markets are anywhere near efficient (and just about everybody agrees with the weak version and some more with the semi-strong) in the processing of information then the current market valuation is the value of that company from now into the indefinite future. And, given that we are measuring that flow of funds from that company off into that indefinite future then how on earth can this be short term thinking?

Sure, if you are a would be commissar then you can argue that markets aren't efficient at processing information. At which point you're going to have to explain the difference in food supply in London in 1990 and in Moscow in 1990. When that famous question got asked, "Who is in charge of the bread supply for London?".

Quite, markets are, observably, somewhat efficient at processing information. Thus they are forward looking and as such cannot possibly be short term. QED.

We can show that conscription is economically inefficient

Quite apart from the fact that conscription is vile in and of itself, it's the creation of slavery to the state, we've good evidence that it's economically irrational as well. This little snippet from Iran illustrates the point:

Iran has been hit so hard that its government, looking for ways to fill a widening hole in its budget, is offering young men the option of buying their way out of an obligatory two years of military service. “We are on the eve of a major crisis,” an Iranian economist, Hossein Raghfar, told the Etemaad newspaper on Sunday. “The government needs money badly.”

The amount people will pay to avoid conscription is higher than the value the government places on having conscripts. Thus the loss to the individual must be higher than the gain to the government. This makes the idea economically irrational: it's a destruction of wealth.

Now of course we're most unlikely to have military conscription in the UK anytime soon,. But it's worth keeping that lesson in mind. And yes, this economic reality does also apply to all of the various plans floating around for compulsory "voluntary" service and all the rest. Enslaving people to the state is simply wrong in the first place. But the value that people put on avoiding it is greater than the value the government places upon their doing it. Therefore this is a destruction of wealth: really not what we want a government to be doing, is it?