Dr. Madsen Pirie 25/03/2015 Dr. Madsen Pirie 25/03/2015

Economic Nonsense: 33. Things like healthcare and education are too important to be privately provided

Healthcare and education are not only important; they are vital. Most of us would prefer to live in a society that so organized itself that these services were accessible to all its citizens. This is not, however, the same as saying that they should be produced and delivered by the state.

When the state goes into the mass production of services it tends to put them into the political domain, where they can be influenced by ideological or interest groups. Politicians can manipulate them to secure electoral advantage. They can be effectively captured by producer groups such as teachers' or healthcare workers' unions, to the detriment the citizens who consume them and the taxpayers who fund them.

When the state does mass-produce services, they tend to be standardized. It is easier to have a one-size-fits-all output than one that caters for individual preferences and allows a variety of choices. The private sector, by contrast, tends to find different niches being filled by a variety of producers, allowing consumers to choose the level and quality that suits them.

The state can fund education without producing it by giving people vouchers to cover the education of their child, or by routing the funding to the school of their choice, as is done in Sweden. This leaves the schools independent and in control of the education they offer. Healthcare can similarly be financed through insurance or refunds, without the state having to own hospitals and employ nurses. Again, countries that do this tend to have more variety and choice.

Education in state-run comprehensive schools is not very good. There are some good ones, but a great number that fail their parents and children by leaving them ill-equipped for life. Healthcare in state-run hospitals varies hugely in quality, with recurrent exposés of inadequate care or neglect.

Funding for state-produced schooling and healthcare depends on what politicians think taxpayers will tolerate. Their output does not depend on what customers want. Far from being too important to be privately provided, healthcare and education are too important to be publicly provided.

Tim Ambler 18/02/2015 Tim Ambler 18/02/2015

Keep Politicians out of the NHS

In the run-up to the election, politicians are trying to out-bribe us with our own money to pay for escalating NHS expectations. Democracy has a dark side. Doctors are telling politicians to: “stop messing with NHS to win votes.” (The Times, 17th February, p.15). Demand will always outstrip capacity for a free good such as health. The questions are simply two: how much money should be allocated to the NHS and how should those resources be best managed to maximise welfare? The former question is essentially political but the latter should not be. The budget should be set annually and not agonised over every day.

As every government IT project demonstrates, government does not do management well. One can blame either politicians or civil servants but it is the combination that is fatal. Apparently the present Secretary of State for Health assembles his entire team every Monday morning to micro-manage NHS issues in Darlington, Taunton or wherever. Or rather to attempt to micro-manage. This may improve media coverage but it builds confusion and disheartenment throughout the NHS.

All the best-run large businesses know that those at the top should lead, not manage. The first level of management should be empowered to deal with the micro-stuff and thereafter the next level of management should deal with matters the lower level cannot sensibly address. Because the NHS is so very large, that lesson is the more important.

How can politicians be removed from NHS management? Simple. We have a relatively new, well experienced, NHS England Chief Executive. He seems excellent and a great improvement on his predecessor. NHS England and the other national NHSs should be converted into public corporations, like the BBC, i.e. a stand alone operations funded and responsible to government but managed, day to day, independently. Whether to close, say, a cottage hospital would be a matter for NHS England. Politicians will still, rightly, lobby but they should not be making the decision.

Our political leaders should lead, not second guess local NHS doctors and managers. In addition to setting the budget, politicians should agree the budget and the strategy, i.e. what, overall, we should expect for our money. Then they should get out of the operating theatre.

Tim Worstall 27/01/2015 Tim Worstall 27/01/2015

The ethics and practice of blood donation

We've one of those lovely Guardian discussions over the morality of commercial practices. You can guess the tone just from the headline:

Blood money: is it wrong to pay donors?

And we of course observe the comments section filling up with outraged screams that of course it's morally wrong.

Which isn't actually the point that should be under discussion. What we'd really like to know is whether paid blood donation is efficient. And the answer there is that no, it's not really. When offered a choice those who purchase blood place a higher price on blood that has been donated rather than that which has come from paid donors. Such pricing is because donations do tend to be og higher quality. So, if we could fulfill our requirements for blood and blood products purely from donations we would, by preference, do so.

But we can't so fill our preferences. So, for blood products specifically in the UK, we purchase from paid donors in other countries. Shrug. It's either that or simply don't offer the treatment and it's hardly moral to deny treatment because of some squeamishness that cash was involved in the process.

The important of this observation isn't confined just to blood of course. We tend to think that kidney transplants are better than he slow death which is dialysis. But many do die simply because there aren't enough kidneys available for transplant. And this would be true even if ever potentially usable organ was stripped from corpses, the wishes of their now deceased former owner be damned. To fill this gap we must therefore ask for live donations (much the same being true of liver and lung transplants, heart such cannot of course be carried out from a live donor). But there's a rather limited supply of people willing to live donate a kidney.

When, as we do from time to time, we suggest that the obvious answer is simply to pay donors, as they do in Iran, we're told that paying for kidneys would simply be immoral. As with those shouting about blood. Shrug: this means that people will die because of some squeamishness over cash having been involved.

Oh yes, most moral that outcome is.

Tim Worstall 19/01/2015 Tim Worstall 19/01/2015

Rules and recipes are different things Mr. Burnham

We tend to think that there must be some special dictionary out there, one hidden from us mere mortals, that allows politicians to say whatever they damn well please and yet not use the words that we all do. Almost as if there's some other foreign language they use to speak to us mere voters. Take this from Andy Burnham for example:

As Burnham correctly said last week: “For change to work in a market context, all players need to be following the same rules.”

This is in the course of The Observer managing to get absolutely everything about obesity, sugar and fatty lardbuckets entirely wrong. We all consume fewer calories than our grandparents did, sugar is not addictive (we consume less of it than in the past) said fatty lardbuckets do not cost the NHS money (dying young saves the NHS money) and so on and so on throughout the entire litany. And, of course, they're entirely wrong in the basic theory of what they are talking about for the role of government is not to tell us how to live our lives but to enable us to live our lives as we would wish.

But specifically what Burnham is talking about there is that manufacturers should be forced, whether by taxation or by regulation, to put less sugar, less salt, in our food. And no doubt to throw some organic lentils in there at some point as well.

Which is where that special dictionary comes in of course. Because that's not "rules" that's "recipes".

Is it too much to hope that one who would rule the country actually speaks the language of it? Sure, Willie the Conq and George I didn't do so well on this basis but aren't we supposed to have moved on?

Kate Andrews 09/01/2015 Kate Andrews 09/01/2015

Hinchingbrooke Hospital isn't an example of bad privatisation; just an example of bad business

The first private healthcare provider to take over an NHS hospital just over three years ago is pulling out of its contract today, claiming it is “‘no longer sustainable under current terms’ because of rising demand and falling funding.” You can picture the foam forming around the mouths of hungry public-sector supporters and Burnhamites; in this ultimate battle to keep UK healthcare not only free at the point of use, but in public sector control, they’ve been craving a golden piece of evidence against the private-sector.

But Circle's contract termination isn't quite that.

Circle’s involvement with Hinchingbrooke Hospital is far from a traditional private sector model. Hinchingbrooke did not become a private hospital, but rather a privately managed hospital, that was still under the jurisdiction of NHS bureaucracy and, more importantly, dependent on public funds for its operations. Furthermore, there was nothing particularly competitive about the market, and while Circle did have an incentive to make some profit if it made a surplus, not much of its own money was at risk.

Circle’s contract with the government dictated that the hospital would be supported with public funds, give or take up to £5m worth of payments from Circle if public funds weren’t sufficient to provide necessary support for Hinchingbrooke.

Within a few years of taking over Hinchingbrooke Hospital, Circle Holdings took a failing hospital that “consistently ranked near the bottom of the 46 trusts for waiting times” – and that would have been shut down if it hadn’t been sold – and turned it into “one of the highest (ranked hospitals) for patient happiness”. Circle also corrected waiting time failures, leading the hospital to “(top) the list for short waiting times, seeing 98.2 per cent of patients within the required window”.

From ASI Fellow, Tim Evans:

Circle massively improved this hospital and the government should now do two things – 1. Recognise what a good job they have done and re-negotiate the contract to keep them on board - barring another company taking it over. 2. The government should announce that is wants more - not less - private and employee ownership of hospitals, clinics and other care facilities.

It is definitely the case that Circle brought to the table a much better management system and improved healthcare significantly for the hospital's patients. But these triumphs for both the hospital and its patients didn’t necessarily reflect a sensible business strategy. In fact, choosing to muddy the waters between public and private care under NHS supervision was a risky decision indeed.

From the ASI’s Dr Eamonn Butler:

I was very surprised that any private firm took on an NHS hospital. I spoke to private providers throughout the 90s and they all rejected the idea. An existing hospital comes with current buildings, equipment, procedures, personnel and above all culture. In schools a new head teacher can turn around a school, though there will be a lot of redundancies and redeployments along the way. In the NHS that is even more unthinkable, given the strength of the employee unions, including the doctors' trade unions, and the ease with which any changes can be dramatised as 'cuts'.

“Hinchingbrooke’s funding has been cut 10.1pc this financial year”, and having already spent £4.84m of the required £5m of its own funds, Circle claims it can no longer run the hospital in a successful, effective way.

It's always a bit risky to critique a Nobel Laureate but here goes....

There's no doubt that the work of Amartya Sen has enriched the human race. His studies of famine, as an example, have led to a general realisation that in the modern era they're not a result of insufficient food, they're a result of insufficient ability to purchase food that is extant (or to attract food from outside the area to the one of earth). The solution is therefore not to ship corn or wheat, but to ship money and simply give it to people. That this idea has so penetrated even the US government sufficiently that both the Bush and Obama Administrations have attempted to change the method of US famine relief in the face of the usual vested interests is evidence of quite how powerful the point is. However, this does not mean that Professor Sen is correct in all things. And this piece on universal health care shows us this:

The usual reason given for not attempting to provide universal healthcare in a country is poverty. The United States, which can certainly afford to provide healthcare at quite a high level for all Americans, is exceptional in terms of the popularity of the view that any kind of public establishment of universal healthcare must somehow involve unacceptable intrusions into private life. There is considerable political complexity in the resistance to UHC in the US, often led by medical business and fed by ideologues who want “the government to be out of our lives”, and also in the systematic cultivation of a deep suspicion of any kind of national health service, as is standard in Europe (“socialised medicine” is now a term of horror in the US).

The problem with this is that the US does have universal health care. What it does not have is universal health care insurance. And that's a vital distinction. We do not think that the US health care financing system is something that anyone should really be desiring to imitate. We most certainly don't suggest that the NHS, or any other of the European health care systems, should be rebuilt upon the American model. But it is the financing of the system, not the actual treatment, health care delivery, system that is the undesirable thing to copy.

Rock up to any emergency room in the US and you will be treated regardless of capacity to pay. Every county runs a health care system for the indigent and those otherwise unable to pay. Medicaid provides treatment to the poor. Everyone, but everyone, in the US has access to medical treatment. What they do not have access to is treatment without the possibility of having to pay for it out of pocket: and pay for it after the treatment has been given of course.

The importance of this distinction is that Sen is discussing how other countries, ones which don't in fact have universal health care, might move to having such. Great, excellent, a subject well worth discussing. It's also true that we wouldn't go around recommending the US system to those poor countries which currently don't have universal healthcare. But if we don't distinguish between healthcare and the method of financing access to it then we're going to get horribly confused as we try to design the appropriate systems.

Tim Worstall 03/01/2015 Tim Worstall 03/01/2015

Lord Save Us from doctors making public policy

There's an old bon mot about preferring to be ruled by the first two thousand people in the Boston telephone book than the combined faculty of Harvard, experts that they are in their subjects. And so it is when we've got doctors trying to tell us what public policy should be rather than their sticking to their knitting and trying to treat the diseases that we become prey to:

Cancer is the best way to die because it gives people the chance to come to terms with their own mortality, the former editor of the British Medical Journal has claimed.

Dr Richard Smith, an honorary professor at the University of Warwick, said that a protracted death allowed time to say goodbye to loved ones, listen to favourite pieces or music or poetry and leave final messages.

He claimed that any pain of dying could be made bearable through ‘love, morphine, and whisky.’

Writing in a blog for the BMJ, Dr Smith admitted that his view was 'romantic', but said charities should stop spending billions trying to find a cure for the disease because it was clearly the best option for an ageing population.

It's entirely possible that going out on a wave of whisky and heroin (not a combination we would recommend if you're not planning on going out just yet and yes, gin is worse than whisky in this regard, off what ~~libertines~~ liberals like us know about) having said goodbye and enjoyed those last days is indeed the "best" way to go.

But we're afraid that it's still an insane thing for anyone to say that we should not try to cure cancer. The mistake is akin to that made by so many of the slower thinkers about market interactions. Sure, if there's only one single market interaction then as game theory tells us the incentive is to rip off the other party. But most market interactions are not one off transactions, they're simply a part of a number of iterations of the same transaction. In which case the incentive is to cooperate to mutual advantage.

Looking to cancer the assumption being made is that OK, once suffered from one should simply fold one's tent and steal away into that long dark night. Which is to entirely ignore the fact that as cancer treatments get better it's possible to have a series of iterations. That first, that skin cancer, say is treated and two decades later the luck of the draw brings on, say, colon cancer which may or may not be treatable. The whisky and heroin option taken at that first iteration would then have robbed one of that 20 years of life.

It's entirely possible that cancer is that "good death" but surviving one or two brushes with it before succumbing would be even better. So no, while we might well take a doctor's advice on how to treat a cancer we shouldn't be taking same on whether to investigate treatments or not. To do so would be to succumb to the views of the experts, something that pulling names randomly from the phone book would avoid.

Tim Worstall 29/12/2014 Tim Worstall 29/12/2014

The doctors are on the rampage again

We've a letter in the BMJ signed by some thousands of doctors over plain packaging of cigarettes:

The government is heading for an explosive new year showdown with doctors who fear it is in danger of giving cigarette companies a late Christmas present by pulling out of a major anti-tobacco initiative.

Nearly 4,000 health professionals, including the presidents of many of the leading royal colleges, have signed an open letter to the prime minister and the health secretary, published on Sunday on the British Medical Journal website, expressing alarm that plans to force cigarette manufacturers to sell their products in plain packs may not be introduced before the general election, as had been expected.

The number of doctors signing the letter – 3,728 – is five times greater than the number who recently signed an open letter supporting a ban on smoking in cars, a health initiative the government has confirmed it will introduce. The thousands of signatories underscore the strength of feeling about the issue within the medical community.

We've indicated here before our suspicion of the emergency with which this particular question is being addressed. The government says that it must follow EU rules about consultation, the doctors are saying damn that and do it now. But why now? Our suspicion is that they want it enacted into law before the evidence that it doesn't actually work becomes more widely appreciated:

Australian Bureau of Statistics' data show that there has been a secular decline in the chain volume of tobacco sales since the 1970s, but this began to go into reverse in the first year of plain packaging (see graph below). In three out four quarters in 2013, sales were higher than they had been in the last quarter before plain packaging was implemented. This unusual rise in tobacco sales only came to end in December 2013 when a large tax rise on tobacco (of 12.5 per cent) was implemented, thereby leading to a fall in the following quarter.

Screaming that we've a major problem that requires action is sometimes valid. Whether you think that plain packaging is such is up to you. But it does boggle the mind that so much effort is being given to the implementation of a policy that doesn't actually achieve its predicted result. It's rather like the similar public health campaign for minimum alcohol prices. They seem to have got the bit between their teeth and thus be completely incapable of seeing that they're proposing something that is just a terribly stupid way to try and achieve that stated goal.

What really worries here is that we're really quite sure that you've got to be reasonably bright to train as a doctor. So why is it that when it comes to these public health campaigns they all seem to have left their brains at home?

Vishal Wilde 20/12/2014 Vishal Wilde 20/12/2014

Bankers earn more than medics: what can we do?!

A common criticism leveled against the financial services industry concerns their remuneration compared to those from more ‘noble’ professions – such as Medical Doctors. Proclamations such as “it’s ridiculous that the average Doctor earns less than the average investment banker” are not unusual to hear in common parlance; Doctors cure ailments and save lives whereas Investment Bankers supposedly wreck households and exploit taxpayers. It is, therefore, unfair that Bankers are paid more than Doctors. The oft-proposed solution is heavier taxation and regulation on Investment Banks. However, these critics conveniently forget the other side of the coin – the inadequate remuneration for noble professions. Increased taxation and regulation on Investment Banks does nothing to address the inadequate gratitude expressed to them (which these same critics seem to implicitly believe is measured purely by financial compensation).

For Doctors to be remunerated fairly, we need only look at the USA to find that, on that side of the Atlantic, it’s Medics (Anaesthetists, Gynaecologists, General Practitioners etc.) who dominate lists of the most highly paid professions. Their average pay in the USA is higher and their hours worked less than average Investment Bankers. Freer markets ensure fairer, more just remuneration.

Nursing and teaching are also considered noble professions (though they are often undervalued, and wrongly so, relative to Doctors). Fair remuneration and freedom with which they can care and teach in an appropriate, effective and efficient way is only viable in a mostly (if not, completely) free market.

In Higher Education, the phenomenally high research activity of US Universities is unrivalled. This can be attributed to the flourishing mix of private alternatives, the relatively generous remuneration of Professors and the abundance of private funding opportunities available for academic pursuits.

One might argue that healthcare and education must be universally accessible and it would greatly harm society if we repealed the public healthcare available via the NHS. However, a pragmatic compromise would be issuing healthcare vouchers so that individuals are given the money that they can spend freely on their own healthcare. In this way, the public can choose between public and private alternatives with their vouchers.

Free markets lead to an improvement in welfare for all those involved by providing the consumers with more choice (whether they be patients or students) and higher quality products through competitive mechanisms whilst ensuring the fair remuneration of producers - whether they are medical professionals or involved in education.

Tim Worstall 06/12/2014 Tim Worstall 06/12/2014

The latest argument for paid kidney donation

Apparently people receiving kidney transplants sometimes have to put up with pretty much any old dog end:

Almost 300 patients have been given kidneys previously turned down by other hospitals, with the majority not having been informed.

One in 11 kidneys transplanted from dead donors recently were used after at least three other units rejected them, official figures showed.

Doctors said a shortage of donors meant there was a need to use lower-quality “second-hand organs”. Critically ill patients are being forced to choose whether to hold out for a better organ that might never come.

Recipients were, however, not told that the organs had been turned down elsewhere. Patient leaders are calling for improvements to be made to enable patients to make informed choices. Patients are told what is wrong with the organs, but surgeons said it was irrelevant how many others had rejected them.

Kidneys have been offered on a “fast track” scheme after they had been rejected by five hospitals if the donor was brain dead, or three if the donor died after cardiac arrest since 2012.

This is not, to put it mildly, optimal. However, it is a useful illustration of the basic point about kidney transplantation. Which is that, very simply, not enough people die healthy enough to provide the kidneys needed for those who will die without a transplant. This is true whether we use an opt in system, an opt out one, even if we nationalised the cadavers of everyone in the country. We have to supplement that cadaveric supply with live donations.

At which point we'll make our now ritual point. There's only one country in the world with no shortage of kidneys for transplant. There's also only one country that allows direct compensation of live donors (under quite strict government and ethical control, of course). Iran is the only place that manages both. given that this does in fact work, does save lives, it's really something we ought to be doing ourselves. And, given that a transplant is vastly cheaper over time than continued dialysis it would save the NHS substantial sums if we did just bung a live donor £25k or so.

There really are some things that are just too important not to have markets in them.

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