Privatizing primary care

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ConservativeHome's Tim Montgomerie reports:

I've now been told by an impeccable Tory source that co-payments have been ruled out for the NHS and that it will remain free at the point of use.

I'm not surprised and, indeed, have heard the same absolute commitment myself. One of David Cameron's earliest acts as leader was to rule out ever moving in the direction of an insurance-based system, and shadow health secretary Andrew Lansley has been going out of his way not to "frighten the horses" ever since.

This is understandable. Despite its failings, the British public remains bizarrely attached to the idea of a nationalized health service, so it would take a brave politician to break with orthodoxy. At the same time, the Conservatives are promising a fully-fledged internal market in the NHS, which is at least a step in the right direction.

However, I don’t believe that a universal, taxpayer-funded, free-at-the-point of use health service is sustainable – especially not in the context of a fiscal crisis. Given that healthcare accounts for about 17 percent of total public spending, no government that is serious about balancing the books can afford to 'ring-fence' it, as the Tories currently propose.

My money-saving suggestion would be a radical one: the complete privatization of NHS primary care (GP surgeries, clinics, dentists, etc), on which the government spent £18.6bn in 2007/8. Clinicians would offer their services in a free, competitive free market. Patients would be free to shop around and would then pay directly for any services. Of course, an NHS entitlement could still be available for those unable to pay their own way.

Britain's high street opticians – Specsavers, Vision Express and the like – provide a good example of how this could work in practice. They also indicate the way in which private ownership and competition could make a dramatic difference to standards, as well as working to keep down prices.
 
This would certainly be a controversial policy at first. But just as no-one would today advocate returning opticians to government control, privatized primary care would soon be accepted as a completely normal state of affairs. And given that the vast majority of patient interactions with the health service occur at the primary care level, the impact of this would be enormous.

A pointless 'privatization'

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According to Nick Timmins in the FT:

The private sector is to be invited for the first time to take over and run a big NHS hospital under plans backed by the Department of Health and the Treasury yesterday.

Needless to say, I'm generally a big fan of privatization, and an advocate of greater private sector involvement in the NHS. And yet the government's proposals do not exactly fill me with joy.

The trouble is in the way the scheme is set to operate. The government will offer a seven-year franchise on the hospital and invite private operators and NHS foundation trusts to take on its running and financial liabilities. But they will not transfer the assets of the hospital, and all staff will remain employees of the NHS.

Within that framework, you have to wonder what good the scheme will do. Sure, an organisation with private-sector expertise might be able to manage the hospital a bit more efficiently, but will they really be able to make much difference if the hospital has to be run more-or-less as it is now, with the same staff, and the same salaries and benefits (which will continue to be negotiated collectively with the Department of Health, rather than individually with the hospital's management)? No.

In the long run, I worry that politicians' obsession with 'private sector management expertise' (valuable though it is) does the cause of liberalization a lot of damage. They need to realize that the point of privatizing things is not just to introduce a new management with a better-developed profit motive. The goal should be to increase autonomy, choice and competition, and to focus services around consumer interests, rather than producer ones.

As things stand, the government's franchise proposal does not achieve any of those things.

Why we should fear American health care reform

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Tucked away in a piece about possible end runs around NICE, the health care rationing body, is something of a scary paragraph:

Pharmaceutical companies are reluctant to launch new drugs in the UK at low cost because 25% of the global market is influenced by the UK price.

No, not that one sentence, although it helps explain why this next one is scary:

It comes at a time when other countries are actively considering setting up equivalents to Nice. First among them, and most important for the pharmaceutical industry, is the US. President Obama is known to be interested in some sort of cost-effectiveness scrutiny of medicines, which is bitterly opposed by the industry.

What all too few seem to understand is that medical innovation is hugely driven by what happens in the US market. The only market that is largely free from price controls. We can see from the first sentence that price controls do indeed retard innovation but of course there is no outcry about this for we don't normally see it. Who does take note of cures that aren't invented, aren't launched, because price controls mean there is no profit in their being so?

The great release from this problem for European health care systems has been that the US market, by far the largest in the world, is not subject to such price controls. Thus 300 million of the richest people on the planet underwrite, through the prices they pay for new treatments, the developments that we get years later as prices drop.

If the US does indeed bring in some form of NICE equivalent, some form of price rationing, then medical innovation will fall....no, not cease completely, simply there will be less of it than there would otherwise have been. Thus people who could or might have been cured will not be and they will die.

Reform of the US system might still be worthwhile, something like NICE might even still make sense: but don't anyone believe that such changes will be costless, they will indeed cost lives.

Kindness not enough to cut the queues

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Cheers all round as the Human Tissues Authority announce that the number of people donating kidneys to strangers has increased by 50 per cent. The only problem, alas, is that the increase is from ten people to fifteen. And three of those have yet to undergo surgery. In a country where 7,000 people are in need of a kidney, an increase of two donors is hardly a cause for celebration. Fortunately there is a long-ignored solution: compensating organ donors.

The sacrifices made by the fifteen new altruistic donors should not to be ignored; they are committing the most noble of acts, and as a recipient of a kidney myself I cannot overstate my admiration for them. But altruism is not enough; nowhere in the world does it make serious leeway into the long queues of people in desperate need of transplants.

According to the International Society of Nephrology, kidney disease affects more than 500 million people worldwide, while in the USA the number of people dependent on dialysis tripled over the last two decades.

Also, bans on organ vending have created a terrifying global black market in organs which sees people in poor countries forced into perilous situations. Efforts have been made to clamp down on the illicit market in organs, but where demand exists, supply finds a way to meet it. Even when countries such as China, India, and the Philippines had some success in thwarting the trade, it simply switched to other areas like the Eastern Europe. Patients will go to extraordinary lengths to save their lives, turning to underground sources when legitimate avenues are banned by governments.

Due to the corrupt nature of the black market, donors get little or no protection. Deprived of the security of contract law, they often fail to receive the money they are promised, go without follow-up medical care and are forced away from the institutions designed to protect them. These appalling conditions are not a result of a marketplace, but a result of laws that drive it underground, away from where it can be a transparent regime devoted to donor protection.

Such a regime should include an impartial not-for-profit or state body matching donors to patients, with donors carefully screened for physical and psychological problems. The provision of follow-up care, potentially for the rest of the donor’s life, is mandatory. This system therefore rewards all patients, not favouring the rich. Donors, meanwhile, receive excellent levels of care.

The only way to stop illicit markets is to create legal ones. Indeed, there is no better justification for testing legal modes of exchange than the very depredations of the underground market.

Momentum is growing. In the British Medical Journal, a leading British transplant surgeon called for a controlled donor compensation program for unrelated live donors, while Israeli, Saudi and Indian governments have decided to offer incentives ranging from lifelong health insurance for the donor to a cash benefit.

I heartily applaud the donors in the UK who have given their kidneys to strangers, and know what a precious gift this is. But we need thousands more. There is currently no room for individuals who would welcome an opportunity to be rewarded for rescuing their fellow human beings. The system is gridlocked, while those on waiting lists lose their lives.

Sally Satel M.D. is a practicing psychiatrist and resident scholar at the American Enterprise Institute.

Building Britain's Future?

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As Philip mentioned yesterday, the government's latest re-launch – titled Building Britain's Future – is extremely underwhelming. It exhibits no new thinking or ideas whatsoever, and is indicative of a ruling party that has run out of steam. Nowhere is this clearer than in Gordon Brown's 'new' approach to public services.

Rather than attempting to undertake any kind of serious reform, as Tony Blair at least tried to do, the prime minister has decided to simply create lots of new 'rights' or 'entitlements', enshrine them in legislation, and hope that does the trick.

Plainly the government still believes, despite more than a decade of experience which should have taught them the contrary, that all they have to do is pass a new law and everything changes. The lack of intelligence this suggests is truly astounding.

The way to ensure that all patients are treated within 18 weeks of referral is not to pass a law to that effect, but rather to reform the health system so that supply reacts to demand. That means ditching the NHS's soviet-style central planning and letting markets (whether internal, or otherwise) allocate resources.

The government's new 'entitlements' will be no more effective than their 'targets' were. GPs met the 'appointment within 48 hours' target by only allowing people to book appointments 2 days in advance. Similarly, the 'A & E treatment within 4 hours' target was often met by keeping people waiting in ambulance bays or not registering them on arrival.

Moreover, giving legal priority to some areas of healthcare – like cancer treatment, where patients will have to right to see a specialist within 2 weeks – will invariably mean that other areas of care suffer in order to meet the requirements of the legislation. Maybe that's the right call to make when resources are limited, maybe not. Either way, it shouldn't be up to a headline-chasing government to set medical priorities. The preferences of healthcare consumers who are free to take their custom elsewhere should really be the key factor.

One last point: the government is now trying to avoid criticism for spending cuts by talking about planned 'underspends' in health, education and transport. It's just laughable.

How constitutional is government health care?

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The attempt of the Obama administration to copy the NHS is beginning to unsettle many in the US. According to the WSJ, some of them are seriously considering legal action on the grounds of the right to privacy which is threatened by government health care rationing and other regulations. The precedent is of course the famous supreme court ruling of 1973 Roe v Wade which ruled out any state intervention in family planning measures such as abortion. Although the argument was not abortion-specific, the decision legalized abortion in the United States to this day. What is interesting is the fact that the ruling was based on the principles supporting the right to privacy. The reasoning behind this is expressed in a similar ruling of 1992 Planned Parenthood v Casey:

These matters, involving the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy, are central to liberty protected by the Fourth Amendment. At the heart of liberty is the right to define one’s own concept of existence, of meaning, of the universe, and the mystery of human life.

Well the gist of all that can be similarly applied to many other medical decisions regarding disease prevention and treatment. Euthanasia is a case in point, but more generally the prioritizing of medical resources away from the elderly. This is something President Obama has openly embraced in a recent broadcast interview.

The free access to any kind of healthcare is something Americans have always taken for granted. Another way of looking at this is to consider the role model of the NHS and how far it has been allowed to trespass upon the Bill of Rights of 1688 and the principles of classical Whig liberalism. Obama's policies should give us a welcome opportunity to open up a new discussion on the right to privacy in health care in this country too.

Ideas on healthcare reform

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At times, rule by the demos leaves me feeling desperately frustrated. Especially when their instincts are entirely wrong. Take healthcare for example. How could any political party – even if they wanted to – stand up for radical reform of healthcare in this country and expect to be elected? The people are some way from voting for this, despite the manifest failures of the NHS.

What rational person could disagree with the following statement?

Unlike government coverage or coverage purchased through employers, private coverage purchased directly by individuals encourages people to choose between health coverage and all other goods. It controls health spending by pricing individual risk, encourages substantial variation in plan design to accommodate differences in individual risk tolerance, and provides incentives for cost minimization.

And yet, there appears to be a pervading collectivist approach to health care that is not accepted in any other facet of human relations in this country.

Murray Rothbard once made a great speech arguing for the power of ideas to change the world. The work of libertarians across the world is driven by this premise; great men and women have devoted their lives to this end and people in this country are as yet not ready to hear the truth.

With top-ups, the strictures of a national health service are slowly being overcome. Yet it will take a sea change in popular feelings towards the institution before radical reform can take place. Given its increasingly visible costs and failures, this is only a matter of time.

The real key to health reform

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I often feel that the healthcare debate in the UK is so limited as to be pointless. It's not just that people only ever talk about 'reforming' the monolithic NHS, rather than admitting that it’s a relic of the Soviet-era central planning which is never going to provide the standards of healthcare that 21st Century consumers rightly expect. Rather, the problem is that even people willing to consider real change usually get bogged down obsessing about the wrong issue.

Discussion inevitably revolves around whether we should have national insurance, or social insurance, or private insurance. But what is completely missed is that it is the very over-reliance on third-party payment that causes most of the economic problems in healthcare, regardless of whether governments, non-profits or businesses are in charge.

The point is that while it makes sense to insure yourself against big-ticket, catastrophic health expenses that might (but hopefully won't) happen, it really isn't sensible to use insurance to pay for unavoidable, everyday occurrences (like having to go to the doctor every once in a while).

When you introduce third party payment into those situations, it causes a number of problems. Firstly, it introduces lots of administrative costs, which frequently exceed the cost of the treatment itself. Secondly, it gives both doctors and patients an incentive to maximize expenses – the patient because he's paid his dues and wants his money's worth, the doctor because he wants to increase his income. Thirdly, it blunts incentives to stay healthy, because that's what you've got insurance for. All this makes third-party payment the main reason why medical inflations runs at 8 or 9 percent a year, even when the wider economy is only running at 2 percent.

The key to successful healthcare reform is to get patients paying doctors directly for routine services, and returning insurance (of whatever sort) to its natural role. If you want a real-world example look at Singapore (where they get great outcomes for less than 4 percent of GDP). And if you want to know how it might work in the UK, have a look at this ASI report from 2001.

The Hospital: We are all in A&E

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Channel 4 is currently showing a documentary called The Hospital which takes a frank look at the effect that teenagers have on our nation’s health service. In this three part special they speak to the doctors working on the frontline dealing with the uneducated accidents that barrel through their doors on a regular basis. The first looked at the carnage that alcohol has unleashed, the second teenage pregnancies and the final show will examine obesity. It is an eye-opener and gives a truly shocking insight into the thinking of a sub-section of society.

Politicians have created a monster. It is clear to see that the health service in this country is having an impact on behaviour as there is little or no recognition of the consequences of actions: people have been desensitized. For example, a teenage pregnancy on the NHS typically costs around £10,000 to £15,000 due to the higher than normal risks because of the natural stresses on an under developed body. The teenagers in question have no awareness of these costs. Society as a whole would probably behave differently if only the individuals/families concerned had to bear the costs.

The politicians have created a new breed of teenager who typically come from a family that has little desire to be concerned about their offspring’s education and consequentially show little emotion towards them. This could perhaps be a reason why teens have descended upon alcohol and have such a bad relationship with it. These fault lines are a politicians’ creation, yet they will claim that only they can fix them. Sadly the time has come to shock people into behaving in a ‘normal’ manner by exposing them to the true costs of their behaviour: we should do without politicians. Or at least only hold in high regard those politicians who can say no and explain why a person will be stronger by learning from their mistakes. Until that time we are all in A&E.

One small step for Brown, one giant waste of time for the rest of us

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In the midst of a complicated recession, Gordon Brown proposed a small solution to improve the status of public service in the UK. Brown wants to integrate user reviews into the NHS system: “He proffered a vision in which patients choosing a family doctor or parents looking for child care could benefit from the same kinds of reviews and ratings that are now available for books and other products on internet sites like Amazon."

Gordon Brown wants the public focusing not on why they are jobless, but on a public complaint forum where citizens review NHS professionals, centres, and hospitals. The problem with this plan is that people simply do not have enough choice of where they can be treated in the first place. These reviews will simply bring people together to complain about the problems they face at NHS clinics. Why have information without choice? It is like living as a prisoner on bread & water exclusively, but if one day the warden decided to display menus for some fabulous restaurants in the mess hall. You can look all you want at restaurant menus and reviews, but meanwhile you know what’s going to be on your plate when you sit down to eat.