Print Story She got into a mess on the NHS
By TheophileEscargot (Tue Sep 23, 2008 at 08:14:35 AM EST) Reading, MLP (all tags)
Web. Reading: "NHS plc".

Dimension game: spot 1D representations of things.

Econocrisis: Don't be too quick to predict revolution

Tip Top 1970s band (MeFi)

99 bottles of beer implemented in various computer languages.

What I'm Reading
NHS Plc: The Privatisation of Our Health Care by Allyson M. Pollock. This is going to be a complicated one: I can see USian brows furrowing already, so let me try to explain.

An American digression
Ignore this bit if you're British.

While we still have a National Health Service, both the Conservative government from 1979 to 1997, and the Labour government from 1997 to the present, have tried to introduce market-like reforms into the NHS. You can divide these into three rough categories.

  1. Some areas of health care, like dentistry and optometry, have been truly privatised. Children, the elderly and some of the unemployed get state help, but for most working-age people these are private. They're generally paid for directly rather than though private insurance.
  2. Internal pseudo-markets have been set up, with different units within the NHS charging each other for their services. Under the Conservatives, some "fundholding GPs", (i.e. family doctors, Primary Care Physicians) were given a block of money which they allocated on behalf of their patients. Under the Labour party, regional units like "Primary Care Trust" or "Foundation Hospitals" were allocated sums of money to spend within the NHS.
  3. Outsourcing has been encouraged: initially for services like cleaning and meals. Recently, some medical operations have also been bought in from private operators.
Complicating things further, many doctors within the NHS (GPs and consultants) have always operated as small businesses, getting some money from the NHS, and some money from private patients.

Now, even with these reforms, most of the money is coming from the central government. Therefore, an American looking at the current NHS sees a Socialist Abomination. However, since the actual delivery of services looks increasingly market-like, Pollock looks at the current NHS and sees a Capitalist Abomination, driven by hardcore market fundamentalism.

I know it's confusing, but you'll just have to deal with it. It's supposedly the test of a first rate mind to be able to hold two contradictory ideas at once.

The book
Pollock is a Professor of Health Policy, and goes through the history of NHS reforms from 1979 in some detail. There's a helpful list of acronyms at the start, covering a bewildering variety of schemes and institutions. She manages to keep it fairly intelligible, though she seems to have succumbed to at least a secondary infection from the jargon: it doesn't occur to her that new hospitals could "open" rather than "come on stream" for instance.

The book has long middle sections on Hospitals, Primary Care and Long-term Care For Older People. There are a couple of introductory chapters giving an overview of the reforms, and a summary at the end. The book is primarily an attack on the reforms, and does a pretty good job of exposing the problems. Some examples. the height of a financial crisis in the Merton, Sutton and Wandsworth health authority it was discovered in its eagerness to dispose of estate and beds at Springfield Hospital, a large psychiatric hospital, it had placed five-year contracts with Cumberland Nursing Home in Mitcham owned by a large for-profit chain... However bed occupancy at Cumberland Nursing Home was at one point less than 40%... this represented a lot of some £400,000 a year being paid for unfilled beds, money that was going straight to the private sector with no return whatsoever. But government guidelines required the health authority not to relax the eligibility criteria and admit more patients for fear of the longer-term revenue implications after the contract had expired. p31
The internal market never achieved the efficiencies it was supposed to achieve, above all because it was politically impossible to allow hospitals actually to compete with each other and let the less competitive ones go out of business, as would happen in a real market. Whole districts could not be left without hospitals. p42
Requiring all NHS hospitals to pay the Treasury 6 per cent annual interest on the value of their capital assets from 1992 onwards - a 'capital charge' - was presented as a way of making the NHS use its capital assets wisely. In practice... it meant that hospital trusts that had inherited expensive assets that they could not easily sell off were suddenly loaded with costs that they could not pass on... p55
New hospitals have been built, more expensively than if they had been financed in the traditional way, and for this reason they have usually been kept small, so as to minimise those costs, regardless of local health needs. p57 2003, 'reference costs' were transformed into set prices. Now all services were to be bought and sold at the prices contained in a fixed 'national tariff'. For 15 procedures there was now a fixed price that all hospitals must charge, and for other procedures there was a fixed price for all those performed above the contracted number...

The implication is that hospitals whose costs for any procedure exceed the national tariff will have to give up doing these procedures, or 'subsidise' them from some other part of their budgets. p75

Waiting lists became a political issue, so in some hospitals patients waiting for surgery were asked to let the hospital know in writing when they would be on holiday. The administrators would then remove them from the lists for this period, or even deliberately plan their admission for that period, so that when patients phoned to say they could not come in they would be dropped from the waiting list. Other hospitals created new waiting lists -- waiting-to-get-on-the-waiting-list lists. Money was diverted into meeting centrally imposed targets and away from dealing with the problems trusts actually faced. p117
Each treatment is priced according to the risk group a patient belongs to: the healthy sixty-year-old candidate for a hip replacement will fall in one category, and the seventy-year-old with diabetes and heart disease in another... But the government, while implementing the system across the NHS, was careful to exempt private sector providers of NHS services. Evidence to the Health Select Committee showed that private sector providers were being given 40% above the average NHS cost for treating patients, having also been allowed to select only standard types of low-cost, high-turnaround procedures. p120
Instead of being paid for each immunisation or cervical smear, GPs now received a payment for reaching predefined target levels, so that the risk of not achieving, for example, the immunisation of 90 per cent of the population... rested with them... if they failed to reach their targets, the practice -- and so in turn the GPs -- lost financially. In deprived urban areas where the primary care infrastructure was poor and the population not as compliant, middle-class and health-aware as in more affluent areas, many GPs struggled to achieve even the lower target... p141
...Department of Social Security officers started to pay an income-related benefit (now known as Income Support) to residents in voluntary sector care homes to enable them to pay the fees.

....many local authorities started to cut back on their own provision of care home places in the knowledge that the DSS and private sector would fill the gap... The same thing happened in the NHS... the new availability of funds from the social security budget for 'independent' care homes allowed the NHS to discharge dependent patients from long-term care hospital wards into private residential care...

Because it was essentially 'free' for local authorities to place an older person in a private care home, they tended to place them in care homes rather than provide domiciliary care or other support services which would have allowed them to maintain independent lives... By 1991 27 per cent more people had been moved into care homes than would have been the case if the 1981 balance... had been maintained... p165-6

The government even gave local authorities a further financial incentive to place older people in need in independent sector care homes by allowing the local authorities to recoup part of their residents' Income Support benefit...

...hundreds of care homes and the land attached to them were transferred to for-profit companies or voluntary associations at rock-bottom prices. In Scotland, for example, Dumfries and Galloway Council obtained consent from the government to sell five residential care homes with a total market value of £2.03 million to a private company for £1 each. p169

Pollock puts forward a detailed and largely convincing analysis of the problems and mistakes of NHS reforms since 1979. There have clearly been serious mistakes made, which need to be corrected.

However, the book is largely a critique. Pollock offers relatively few positive suggestions. Apart from turning the clock back to 1979, the main suggestion is that the private sector should be abolished completely, even the independent doctors who have existed since the beginning.

In support of this, she approvingly cites the Canadian system, where:

...for-profit hospitals, and a two-tier, public and private system are in effect illegal.
However, this seems to be a rather selective view of the Canadian health care system. If anything, they seem to have gone even further down the government pays, private sector provides route than the UK: making them even more "privatised" in her sense of the term.

Moreover, the book doesn't really attempt to look the bigger picture of health care, either in space or in time. If you do look outside this sceptered isle, it does seem that most of the developed world, whatever its healthcare system, is struggling to some extent to cope with changing demands for healthcare.

For one thing, the developed world has aging populations: older people need more healthcare. For another, more sophisticated and specialized treatments have arrived that are expensive than previously.

It's not clear to me that the NHS of the 1970s could cope with these demands. Generally, the larger an organization is, the harder it copes with change. GPs used to have an unlimited budget: could that system cope with the demand for expensive new drugs?

(I sometimes wonder if it's just a coincidence that the late 1940s to 1970s heyday of the NHS coincides with the heyday of the Soviet Union. The NHS could deal out vaccinations and manage TB wards with same efficiency as the Soviet Union churned out tractors and tanks. But when microchips came along, things got all complicated and changeable and the technocrats started struggling.)

Pollock doesn't really mention the increasing cost of healthcare. She does bring it up in one passage near the end.

How many times have we all listened to conversations in which one side goes like this: "The NHS is a multibillion pound business. With over a million employees it's the second largest employer after the Red Army. No one can run a business that size. No wonder it's bureaucratic and inefficient. The people I meet don't care if it's BUPA or Boots providing the service so long as the government is paying for it. What matters is quality. In any case, with an ageing population and the ever rising costs of news technology, we can no longer afford the NHS. The demand for health care is infinite, so rationing is inevitable. Why shouldn't those who can afford to, pay for some extras and free up some resources for those who can't? Why should those who want to not go privately or pay for their own care? Public expectations are so much higher. What people want today is choice."

Masquerading as rational arguments, these arguments permeate public discourse. Like prions, vicious sequences of malevolent proteins, they replicate in the media and insert themselves in the brains of policy-makers and eventually lethally infect government White Papers and legislation. p216

It seems notable to me that while she's a demon for detail when it comes to criticism of policy, when it comes to rebutting the problems of rising costs, she uses vague analogies instead. She doesn't explain why those arguments are not rational.

On another topic, it seems to me that in one way Pollock is much too credulous of the government says: she accepts that these NHS reforms are truly "free market". It seems to me that they're not truly free market, but pseudo-market reforms.

Free markets do not deliver efficiency gains by magic. They deliver efficiency gains through specific mechanisms.

  1. Competition between firms
  2. Creative destruction as inefficient firms go bust, and entrepreneurs create new and better ones
  3. Price signaling as tiny shortages and surpluses manifest themselves as price changes in items.
By her own analysis, the pseudo-market reforms of the NHS don't have most of the mechanisms that true markets do.

Pollock herself points out that inefficient hospitals are not allowed to go bust: creative destruction doesn't operate.

Prices are set in the national tariff decided by central government: price signaling doesn't exist.

There is a limited amount of competition, but it's massively handicapped by a lack of reality. Hospitals are built too small because the Trust has a limited slice of central government money. In a planned economy, the hospital would be built at a suitable size for the town. In a true market economy, an entrepreneur would build it with as many beds as he could profitably fill. The pseudo-market of the NHS is less effective than either.

Pollock seems to regard the pseudo-markets as real markets, and their failure as illustrating the inferiority of capitalism to planned economies. It seems to me that they've failed to be efficient because they're neither the results of planning, nor of truly free markets. A market isn't really free when the government decides how much everything's going to cost.

Even there, it's not clear to me how bad the consequences of failure has been. She provides her evidence by accumulating evidence of failure. However, healthcare is difficult: every system has some failures. The wastes she reports tend to be of a few million, or sometimes a few hundred thousands. The total budget of the NHS is 90 billion. Factors like the mishandled GP pay deal (£1.76 billion over budget over three years) may be more significant.

Another question is whether the reformed NHS have delivered worse results than other systems. For example, the NHS targets have been much criticized, and the Scottish NHS praised for using them less. But when compared, it seems the targets make a beneficial difference, even when you look at a different measurement.

It also seems to me that Pollock overestimates the degree to which free market ideas have become a "lethal brain infection" in the minds of Labour Party ministers. It seems to me more likely that they're struggling to keep the NHS going as a single publicly funded institution, and they seized on pseudo-market ideas in a genuine attempt to make the NHS dynamic enough to survive. They seem to be trying to use pseudo-markets as a kind of vaccination against genuine markets.

For instance, if you wanted to privatise the NHS, a good way to do it would be to cut back on NHS spending and force all but the desperate to get private health insurance. In fact, since Labour's election, the number of people with private health insurance has fallen from a peak of 1,457,000 in 1996 to a low of 1,088,000. Pollock seems to regard privatization as something that only applies to the provision of services. But by that measure Labour have decreased that level of privatization.

The blurb of the book warns about the threat to the "freedom from fear" Bevan promised for the NHS. But if people are becoming more afraid, how come fewer are opting for private medicine instead?

Going beyond healthcare alone, Labour are criticized for embracing the notorious Private Finance Initiative, in which the government borrows money from the private sector, generally to build stuff, paying it back over a long period. This is a bad thing, since it's more expensive for the private sector to borrow than the government, which is assumed unlikely to go bankrupt.

However, here too I suspect this is a pragmatic move driven by internal politics. Cabinet politics is dominated by a perpetual struggle between the Chancellor of the Exchequer, who doesn't want to give out any money; and everyone else, who wants to spend it. I suspect that PFI is used largely as a way for the "spending departments" to get their hands on money even if the Chancellor and the Treasury don't want to give it.

Overall then, while this book has a lot of useful information, it's too limited in scope to be a good analysis of UK healthcare. Such a book would need to take a comparative look at what works and what fails outside the UK. It would need to look at what the NHS needs today, not just what it needed in the 1970s. And it would need to make positive suggestions, as well as saying "you don't want to do it like that". Does make some pretty cogent criticisms, however.

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She got into a mess on the NHS | 36 comments (36 topical, 0 hidden)
Take 1 by Herring (4.00 / 1) #1 Tue Sep 23, 2008 at 09:13:33 AM EST
The thing I thought you would pick on was the underlying assumption by Pollock that market solutions are profit driven and worse for patients than a "care driven" NHS that (maybe) used to exist. It's treated as axiomatic throughout the book.

Now, I actually think that's true, but I think it needs to be proven to be true.

All of my working life has been in the private sector, and much of it in business related to the insurance sector. I know that the goal of private business is not market share, it's not turnover; it's profitabilty. There are some good parallels with my current employer here, but not in a public googleable diary.

With the NHS outsourcing, a good example is cleaning. A private company can do the cleaning for the same price as NHS employees, but the pivate company has to employ a marketing department, and accounts department, a legal department etc. Therefore they are paying less money for actual cleaning. Where is the "effeciency" saving? Of course in using lower paid staff who don't give a fuck. C. Diff for further information.

Anyhow, I would contend that the traditional NHS structure - led by clinicians, not managers and no pseudo-market - delivers more "healthcare" per taxpayer pound that any market-led system will. It is also driven by need not by ability to pay - which any insurance led system would be. Any system that is profit driven will, by necessity, be bad for the people who need healthcare the most - those who are unemployed through chronic illness and those with terminal diseases.

Finally, on the doublethink comment, I don't believe that there is any doublethink necessary. The people who believe that market solutions are everything and that a worker's only motivation is money, have driven the market reforms. The micromanaging, centralised targets are driven by reaction to political events (newspaper stories etc.).

OK I said finally at the top of the last paragraph so I should leave it. I did type this comment straight out rather than thinking through a preoper response so 'scuse.

Not quite finally: What the government found out in the reworking of the GOP contracts and the Hospital Consultant contracts is that goodwill was worth a fuck of a lot to the NHS. Was.

Price of everything, value of nothing etc.

You can't inspire people with facts
- Small Gods

You always ignore these points by TheophileEscargot (2.00 / 0) #2 Tue Sep 23, 2008 at 09:45:44 AM EST
But let's give them another go anyway. You say:

A private company can do the cleaning for the same price as NHS employees, but the pivate company has to employ a marketing department, and accounts department, a legal department etc. Therefore they are paying less money for actual cleaning. Where is the "effeciency" saving? Of course in using lower paid staff who don't give a fuck. C. Diff for further information.
There are specific theoretical reasons that private enterprise is usually more efficient than state provision. I'll just quote myself again:
Free markets do not deliver efficiency gains by magic. They deliver efficiency gains through specific mechanisms.
  1. Competition between firms
  2. Creative destruction as inefficient firms go bust, and entrepreneurs create new and better ones
  3. Price signaling as tiny shortages and surpluses manifest themselves as price changes in items.
So, it's not just that private enterprise exploit the workers more, or deliver worse quality. There are specific reasons to think it can deliver greater efficiency.

Those reasons are absent from the NHS pseudo-market.

Now, those reasons have to be set against the state's advantages that it doesn't have to make a profit, and its economies of scale. But in general the free market's advantages tend to dominate. See North Korea vs South Korea, or East Germany vs. West Germany prior to unification, for examples.

So, it's reasonable to think that private sector provision of health services, even if ultimately funded by the state, can be more efficient.

However in practice, the NHS reformers attempted instead to implement a pseudo-market without price signalling or creative destruction; which produced a poor outcome.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
How? by Herring (4.00 / 1) #3 Tue Sep 23, 2008 at 10:06:27 AM EST
The market mechanisms that you've listed can "trim the fat" but what if there's no fat to trim? You say these mechanisms achieve "effeciencies" but without giving a concrete example of how - just that they magically happen. I notice your use of the word "theoretical" because it is. Look where we are now with companies that offered the most attracive mortgage deals. And, although we might be able to let those go bust, to leave an entire region without health provision because "it wasn't profitable" ... how well is that going to go down?

Anyway, more considered response to follow.

You can't inspire people with facts
- Small Gods

[ Parent ]
The advantages by TheophileEscargot (2.00 / 0) #4 Tue Sep 23, 2008 at 10:21:51 AM EST
Are because a genuinely free market can aggregate a vast number of tiny bits of information better than a centralized bureaucracy.

For example, suppose the price of mercury goes up, because of some problem in the mining industry. The price of mercury thermometers then goes up slightly. By switching to digitial thermometers, a company can lower its prices and get an advantage over the competition. This attracts more customers. It also gives the competition a strong incentive to work out what they're doing.

Except under an NHS pseudo-market, the prices of treatment are set by the government, so the chain stops dead.

The advantages of a free market are largely informational. If there was one big piece of information that markets had and centralized bureaucrats didn't, the centralized bureaucrats could just incorporate it into their plan. It's the vast amount of little pieces of information that markets deal with better.

The thing about your arguments is that they're general arguments, that a centralized command and control structure is always more efficient than a free market, since it doesn't have to make a profit. But that doesn't really seem to fit reality.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Hmmm. by Herring (4.00 / 2) #5 Tue Sep 23, 2008 at 10:32:21 AM EST
I am not arguing that a free market is always worse - that would be daft. And I agree that a free market in healthcare would give better service to those able to pay for it. Those less well off will be fucked.

Your first point ... well there's nothing to back that up. Why can't a centralised system do that? Why exactly is a properly run centralised system less effecient? Becuase you are pitching a theoretical free market system against actual centralised systems, your argument seems to come out on top. I will admit that I am pitting a theoretical centralised system against an actual market based system though.

The old NHS had a far lower ratio of bureaucrats to "people who did stuff" than the current system. All private enterprises I have worked for bring in managers rather than "people who do stuff" in order to save money. This is because they are not interested in effeciency, they are interested in profitability.

You can't inspire people with facts
- Small Gods

[ Parent ]
We're talking about information processing by TheophileEscargot (2.00 / 0) #6 Tue Sep 23, 2008 at 11:26:34 AM EST
So try thinking of it in systems architecture terms.

In a command-and-control economy, you have a Central Planning Server, processing all the information in the system. The price of mercury has gone up: need to look for alternatives to mercury thermometers. Surgeon Carruthers in getting a bit doddery as he approaches retirement: should he be doing operations? There's a mini baby boom in Urban City after last year's powercuts: do we need more paediatricians? The central planning server issues instructions and processes reports back from the hospital-units, surgery-units doctor-units, nurse-units in the system, shuffling patient-packets to and between them.

(Remember of course, that these reports aren't 100% reliable. Nobody really wants to cause a fuss over dear old Carruthers little slips. Some management-units might demand extra resources to build their little management-empires)

In a market economy, the system is subdivided into many smaller units, making their own decisions, and exchanging information between each other in the form of prices. If a hospital-unit is attracting more patient-packets than it has capacity for, it can raise its prices. Patient-packets can then seek out under-employed hospital-units elsewhere.

Even better than computers: a successful hospital-units that's attracting lots of patient packets can expand its capacity, or create a second hospital-unit nearby running the same way.

Now clearly, each architecture has some advantages and some disadvantages. But you must be able to see that in some ways the free-market architecture is better at processing complicated, regional information.

Now it's not true that the free-market architecture is always better. In my manifesto, right in the preamble I listed four cases, A to D, where it is worse.

I took cases C and D in particular to show that the funding of a health service cannot be free market, and the state should provide funds for adequate healthcare (at current NHS levels) for all its citizens.

However, in terms of providing services, I don't see that any of those cases apply.

In terms of evidence, that can only come empirically. I believe that the relative effectiveness of the French and Australian systems; which combine state funding + supplementary private funding, with private provision of services; indicate that that model works well.

Now, I've given my reasoning in some detail. You say you're "not arguing that a free market is always worse".

Now we agree that in terms of healthcare funding, the free market is worse. We disagree in terms of healthcare provision: I say free market is better, you say command-and-control is better.

So, what is special about healthcare provision, that makes it different to the areas where a free market is better?
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Healthcare funding here is free market. by komet (4.00 / 1) #7 Tue Sep 23, 2008 at 11:59:47 AM EST
Have you been here? The streets are not littered with the dying.

<ni> komet: You are functionally illiterate as regards trashy erotica.
[ Parent ]
Is it? by TheophileEscargot (2.00 / 0) #8 Tue Sep 23, 2008 at 12:14:24 PM EST
Wikipedia says it's compulsory to have health insurance, and this says poorer citizens have their insurance subsidized. Those would be restrictions of the free market.

See if you can persuade Herring though. The dying bodies are probably just photoshopped out by the forces of global capitalism...
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
So what? by komet (4.00 / 1) #9 Tue Sep 23, 2008 at 12:19:38 PM EST
It's compulsory de facto to buy food, and poor citizens have access to soup kitchens. Does that mean the groceries market is not a free market?

<ni> komet: You are functionally illiterate as regards trashy erotica.
[ Parent ]
It is and it isn't. by Merekat (4.00 / 1) #15 Tue Sep 23, 2008 at 11:53:00 PM EST
What the basic insurance product covers is regulated, down to specific medicines.
However, if you look at it like a form of state mandated and defined taxation (going indirectly via insurance cos. rather than indirectly via the govt), it looks almost socialist;)

[ Parent ]
You are missing two point by Herring (4.00 / 1) #10 Tue Sep 23, 2008 at 12:24:44 PM EST
  1. That a planned health system doesn't have to be more expensive than a market provided one. In fact, due to lower overheads it can, theoretically be cheaper.
  2. That in every country that has a market provided health system - including France, costs per head are much higher than in the UK.
When I say "the free market is not always worse" I am not talking about healthcare or any other things that could be classed as necessities. People had a choice betweeen HD-DVD and BluRay and no HD player at all. Consumer choice does not apply like that in healthcare - you can live without state of the art video reproduction.

Splitting things into smaller units is not always efecient either. Dr Crippen has exmaples where perviously a patient referred to a hospital, found not to have expected condition would then get internally referred to a different hospital consultant. Nowadays, because financial effeciency (profitability) is  the key thing they have to be sent back to the GP who then has to refer them to the right consultant. This costs you & me (the taxpayer) much more and is worse for the patient but nevertheless is financially beneficial for the hospital. Have you not seen examples of this sort of behaviour within private industry just because "it doesn't get charged to my department"? The overall cost is lower to intergrate and to all work together and ..... is this wine empty?

You can't inspire people with facts
- Small Gods

[ Parent ]
Not really by TheophileEscargot (2.00 / 0) #13 Tue Sep 23, 2008 at 08:59:49 PM EST
I am not talking about healthcare or any other things that could be classed as necessities. People had a choice betweeen HD-DVD and BluRay and no HD player at all. Consumer choice does not apply like that in healthcare - you can live without state of the art video reproduction.
I've already said that the funding should come from the government. So it's not the case that people can't have the necessities. We're talking about how those necessities are delivered. You're still not explaining why this particular area of the economy works better through a centralized command-and-control system, when you accept that other areas don't.

I gave you an example of choice in healthcare in my last diary here. When I had my wisdom tooth out, I had a choice an expensive general anaesthetic, or a cheap local anaesthetic.

Either way, the outcome is the same. The price of the general is higher. A system that allows choice will therefore have higher average prices. However, that doesn't mean that the cost is higher than in a choiceless system. The cost of the minimal treatment is the same under both systems.

So, while people choose to spend more money under the choice-rich French, that doesn't mean that healthcare is intrinsically more expensive. If you live in France and choose cheap, minimal, NHS-style treatments, the cost isn't greater than under the NHS.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
(Comment Deleted) by DullTrev (2.00 / 0) #11 Tue Sep 23, 2008 at 08:20:44 PM EST

This comment has been deleted by DullTrev

[ Parent ]
It got a bit long by DullTrev (4.00 / 1) #12 Tue Sep 23, 2008 at 08:30:56 PM EST
So my comment is here.
[ Parent ]
Unfeasibly long comment by TheophileEscargot (2.00 / 0) #17 Wed Sep 24, 2008 at 12:49:51 AM EST
Commenting on that diary.
Let's try looking at how a theoretical free market model of healthcare provision in the UK could work. Now, I'm assuming that TheophileEscargot is imagining an insurance based system, with each insurer contracting with various healthcare providers, possibly with a system of government vouchers which can be topped up. So let's take a journey through this system. (Imagine wibbly-wobbly effect here.)
In other words, let's ignore the detailed manifesto and comments which addressed all these issues, and attack a suitably frail straw man.
First of all, there will be those who don't have any insurance. Fecklessness, laziness, mad optimism, or plain old poverty could be reasons for this. This gives us a base of people who don't have any healthcare (though I am going to assume some sort of A&E style healthcare will still be available). It may be that there is also a 'provider of last resort' kind of thing going on, perhaps (again) mopping up the unclaimed vouchers, but I'll come back to that later.
See manifesto. The "last resort" is NHS2, which has the same funding and similar structure. So the last resort leaves you no worse off.
After this first group, we have those who have paid for the bargain basement level of cover. Again, this is likely to be dictated by salary, so we can probably assume this group will be located in geographic clusters. At the moment, we have a system where the NHS tries to ensure that GP practices are spread around, so that there is a local surgery for most people. Now, in the new system, GPs will have to compete with other GPs to either attract lots of clients, or to attract insurance companies to hire them on retainer. Given that there are likely to be clusters of people paying the bare minimum, this means for a GP to be attracted to be in such an area he either has to have a hell of a lot of clients (as each one contributes a small amount) to forgo being in a more lucrative area, or, another possibility, be of inferior quality and thus forced to offer his services more cheaply.
See manifesto. There is no cashback for the vouchers, which are set at the same funding level as the current NHS. So, even the "bargain basement" are getting as much or more money as the current NHS.

Moreover, DullTrev doesn't seem to realise that in the current NHS, General Practictioners are already small businesses, independent of the NHS except that they're paid by it for their patients. They have been ever since the NHS was created in 1948. Pollock bemoans this in her book. So this setup which is impossible and unfair... is the way the NHS already is.

Now, imagine one of a GP's patients is ill, and needs to be referred to hospital. It may be that the insurance company (either the GP's or the patient's) requires treatment to be at a certain hospital, or even by a certain consultant. In that case, the price for each procedure will likely have been decided already between the insurer and the provider. Or it may be that the insurer only states the lowest cost provider should be used, which means a quick ring round to find out who that is at the moment.

Now hospitals in this system are likely to be placed somewhere with good transport links, just like branches of Ikea. This enables them to cover a greater area, and so have a wider possible client base. Thus a client may have to travel from quite some distance, and do so regularly if treated as an out-patient. (Presumably this will be more common, as this translates to reduced costs for the insurer.) The hospital, of course, will be seeking to charge the insurers as much as they can to maximise profit. In an area served by only one hospital (as most places are in the current system and thus presumably would be at least in the early days of a new system) this translates to a level just below which it would be cheaper in a short enough timescale for an insurer to build a new hospital, fit it out, and recruit the staff.

Essentially, I do not see how healthcare can work as an efficient market which also leads to the best health outcomes. The disconnect between the recipient of the services and the purchaser of the services is too great, and the frequency of a recipient accessing those services would )hopefully...) be low. Thus, it is in a company's best interests to keep prices down even to the point it begins to effect the quality of service. As long as the churn of customers this causes (either through direct experience or bad publicity) is not so great as to have a cost greater than paying for higher quality, it will happen. Or, of course, you put in place regulation forcing higher quality, in which case the cost of premiums goes up, and more people drop out of the bottom of the system into the pool of uninsured.

These are exactly the same allocation problems that have to be faced either by a centralized command and control structure, or a free market. Where do you put the buildings, how big are the buildings, how many people are employed in them, how do they fit in with transport links. Free markets are in general far better than centralized bureaucracies at doing it.

Now, rhere would be a problem where poor areas are deprived of hospitals... except that the manifesto is explicitly redistributive in order to remedy this. Due to the voucher system, poor people have the same purchasing power as they do under the NHS.

A possible solution to this pool of uninsured, and a method of keeping quality higher, is to have a provider of last resort. Assuming this is government owned, it would provide basic medical care, though presumably either not for all illness, or not all treatments, or at low quality (otherwise why would anyone pay for different cover?). But how would this actually work? I can see three possibilities.

Firstly, this rump NHS could continue to operate from current hospitals, while private insurers have their own hospitals. Given that the number of people using the rNHS will be smaller than now, this will give the rNHS higher running costs per patient head than currently, leading to financial pressures - not conducive to forcing the quality of care up.

Secondly, the current hospitals could be sold off to private industry, and the rNHS becomes just another purchaser of services, like any other insurance company. This would essentially make whoever ended up owning each hospital a monopoly supplier in their locality (given healthcare purchase is not particularly geographically flexible) and the associated regulatory burden to handle that situation.

Thirdly, the rNHS could maintain the hospitals as in 1, but additionally sell services to insurers. Given the current spread of NHS hospitals, this would make the rNHS the monopoly supplier across the vast majority of the country, enabling them to dictate terms and prices. However, the government could choose to keep prices at some internally defined level.
The manifesto is closest to the second option. All the service providers are private. The national insurer NHS2 is public. But hospitals are not natural monopolies like rail networks. Except for accident and emergency (relatively minor) it's perfectly feasible to choose a different hospital.
So, problems/queries.
1. Who chooses GPs? Insurers or patients? If insurers, how do we ensure high quality, given they are not the recipient of the service? If patients, how do insurers ensure there is pressure to keep prices down? If patients choose and pay, how do we ensure it doesn't drive the sick poor away from seeking treatment? Or do we keep GPs in the rNHS?
It depends what you want. If you want a particular GP, he'll let you sign up to his insurer. If you want to choose an insurer, it's up to that insurer to decide whether they allow a free choice or not.
2. How do we ensure a fairly even geographic spread of GPs, even in areas with few clients? On the whole, I'd say having this is a good thing - reduced travel time for the sick, better placed to assist in public health matters (e.g. vaccinations, health advice [presumably provided under contract from the newly shrunken DoH], monitoring of communicable diseases, etc.), and so forth.
Good grief. GPs are already independent. What's next? How can the central government insure an even geographic spread of burger bars?
3. How does the interface between GP, insurer and patient work when referring patients for further treatment? If GP paid by insurer, there is pressure to keep costs down. If paid by patient, pressure for medical quality irregardless of cost to insurer. If paid by rNHS, is the GP ambivalent to cost to insurer?
However those free agents decide is best.
4. Who owns the hospitals? If a private company, how do we deal with the local monopoly situation, the lack of competition? Is a situation of a large number of local monopolies desirable? If the rNHS own the hospitals, do we sell excess capacity to insurers? If so, how much for? If the rNHS isn't allowed to charge whatever it likes, either by diktat or regulation as a monopoly supplier, doesn't that remove price signaling? Is a national monopoly of healthcare provision by the rNHS, paid for by private insurance premiums, intrinsically better than a national monopoly of healthcare provision by the NHS, paid for by National Insurance / taxes? The problem here is that the barriers to entry into this market would be remarkably high. The financial cost, and gamble, of building a new, competing, hospital would be immense. Planning restrictions may make finding an appropriate site very difficult. Regulatory concerns (I'm assuming there would be some) are another hurdle a new player would have to face.
Everyone else in the private sector manages to build stuff somehow. There are plenty of ways for the private sector to raise money: that's where the "capital" in "capitalism" comes from. Furthermore, under PFI, this how money for new hospitals is raised at present. The problem with PFI is that the taxpayer takes the risk, not that the capital can't be raised.
5. Assuming a provider of last resort status for a rump NHS, is it actually possible to allow a hospital, whoever it is owned by, to fail and close, without adequate alternative arrangements already in place? If not, and given the high barriers to enter the market for a new hospital provider, how would 'creative destruction' enter the system? If so, how do you guarantee service to uninsured? Or do you not guarantee it?
Wrong assumption, since NHS2 is an insurer. If a hospital has to close, the patients will have to use another hospital. However, it's unlikely that a hospital will close completely if it's in an area which attracts patients: it's more likely to be taken over by a more efficient company if it's in a prime spot for business.
6. Would any mixture of the above options actually be more efficient than a central bureaucracy? GPs will need to be regulated and paid, as now, though where the pay comes from may change. Referring a patient to hospital will require the exchange of billing information. Insurers will need a bureaucracy to deal with billing, with contracts, with sales, with marketing, with retention, with quality control. Private hospitals will require the bureaucracy required to run themselves, as now, and will also need to be monitored and regulated, as now. Ditto for rNHS hospitals.
Yes. Smaller organizations are less bureaucratic than large ones, even without bringing private sector effiency into it.
But essentially, most of this argument is irrelevant. Here's the shocker: I agree that free markets are an incredibly efficient method of allocating resources. It works from crude oil to lard, from gold to manure, from Stilton to cheez-strings. They lead to all of the good or service in question (assuming there is sufficient demand) being distributed, with the final determinant being what people are willing to pay.

And that is the rub. Free markets don't find this level, this efficient distribution, through magic. No capitalist fairy comes down and sprinkles efficiency dust over the system. No, the hard work, the thinking and decision making, are all outsourced to each and every one of the participants in the market. They make a decision on whether to buy or to sell, and many participants making those decisions over and over, a vast amount of human thought, leads, finally, to the level that just enables all those willing to pay the right amount to get what they want.

And so, if you want a healthcare system where the treatment you get is, ultimately, based on the amount you can pay, then yes, a free market is the most efficient way to achieve that. Money, that handy little shared delusion we all have, is the tool you can use to share out this particular commodity.

Yes, it is indeed irrelevant. That's because the manifesto already provides for either equal or greater funding for each individual, via the vouchers.
But, and it's a big but, it is only one way of deciding how the commodity is delivered. The NHS was built on the exact opposite principle, that money should not be how healthcare is divvied up, that rather a fairer system was preferred. That it didn't matter whether you were a stockbroker or a bin-man, when you became ill it was in society's interest, in all of our interests, for you to be treated to the highest standard possible, to be treated equally, to be treated as a human being, not as a rational player in a free market. That healthcare provision is special, because it deals with life and death. That no-one should have to suffer illness or even death because they didn't earn enough.

And that isn't a rational judgement. It doesn't stand or fall on financial benefits to the country or to tax-payers. It is a moral judgement, and like most moral judgements you either agree, or you don't, and no amount of debate will change your mind.

The NHS was built on a principle, that seemed plausible at the time, that centralized command and control structures are more efficient than free markets. After the great depression, followed by World War Two, and accompanied by the unstoppable rise of the Soviet Union, that seemed to fit the facts.

If subsequent history suggests that that isn't true, then a different method must be used to achieve those ends of good healthcare for all. Different means can be used to achieve the same ends The voucher system in the manifesto is designed to achieve those ends.

This does not come down to a moral judgment. It's an economic judgment: which is more efficient: free markets or centralized command and control bureaucracy.

Now, if you accept that proposition, as many do, you are left with the problem that the tool traditionally used to allocate resources is of no use to you, but you still have the problem of trying to allocate a resource along a different principle. You need to simulate, in some way, the myriad decisions and thoughts made by perhaps millions of people in a free market, but while a free market can use money as a proxy for value, enabling the players to express how much they value a good, you are left with no proxy for fairness. And so you have to build a bureaucracy, and provide central planning, to try and allocate healthcare in a fair way. It won't be perfect, far from it. It will be expensive. And, of course, people will tell you it is inefficient (though I'm not convinced it is more inefficient than the possible alternative, as rambled about above).

But that is missing the point. If society makes the decision they want to allocate this resource on the basis of need, and fairness, then you have to pay to create a system of allocating resources. Yes, you want to make the delivery as efficient as possible, the interactions with the outside world of drug companies and so forth as efficient as possible, but the basic premise of the allocation system is intrinsically incompatible with free market analysis, because we have no way of converting the value of fairness to a society into cash terms. Without that value in the equation, the allocation system is always going to look inefficient. I know this. I accept this. Because I believe the cost to society for making health dependent on wealth is far greater than the cost for not doing so. And I still believe this, even though I can't point to it on a financial balance sheet, because, ultimately, I believe a society is more than a group of individuals trying to make money off each other, and cost and value are measured by more than just pounds and pence.

Free markets don't just look more efficient: they are more efficient. For any given expenditure, you'll get better results from a more efficient system.

So the fundamental question is: do you want people to be sick and die? If so, agree with DullTrev. If you want people to be healthy and live, agree with me.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
I think you're conflating efficiencies by lm (4.00 / 2) #19 Wed Sep 24, 2008 at 02:28:54 AM EST
The efficiencies that the market is good for (profit making) isn't necessarily the efficiency we want in a health care system (good care and universal coverage). Many companies make money hand over fist by delivering crap products. Also, many areas exist where the profits are not high enough to attract providers.

I think the system you propose will lead to a worse system in high density urban areas due to the willingness to buy crap products on the part of the average individual and in isolated rural areas due to the low volume unless it is combined with a well-run regulatory agency that enforces quality standards and some method of subsidizing providers in economically unfeasible areas. (Although, admittedly, I've ignored large swaths of the discussion, so you may have already addressed these points.)

That said, I do think that a mixed approach is the most likely to be successful in the long term. The state is in a unique position to guarantee that everyone has coverage, that no one is denied coverage because of pre-existing conditions, and that quality standards are met, that areas which are not attractive to private providers get service. If all of these bits are taken care of, I don't see why a market based system wouldn't work for the actual health care providers.

Kindness is an act of rebellion.
[ Parent ]
Well by TheophileEscargot (2.00 / 0) #21 Wed Sep 24, 2008 at 08:19:03 AM EST
It's more the efficient allocation of resources that's helpful. You're less likely to have an overutilized hospital with huge waiting lists in one place, and underutilized hospital with a bunch of people doing pointless make-work in another.

I don't think rural areas would have as big a problem as in the US, since there's a relatively low population density here.

I don't think urban areas would have a problem. The manifesto says that insurers have to be licensed, so you have both the power of regulation as well as the power of the market to keep them from being too flaky.

In practice, there seem to be four basic healthcare models in the developed world.

A. Private systems like the US.

B. Mixed public/private systems, with private provision, and a mixture of state and private funding. E.g. France, Australia..

C. Regional health services controlled by local government, e.g. Germany, Denmark.

D. National health services controlled by the state. E.g. Canada, UK.

B and C generally seem to work best. But with the UK's extremely weak and unpopular regional and local government, C didn't really seem like an option. It might work better in the US.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Licensing is a mixed bag by lm (4.00 / 1) #22 Wed Sep 24, 2008 at 08:59:11 AM EST
I used to work at a state licensed nursing home in the US. Ten years or so after I'd left, it made the news for someone hooking tanks of nitrogen up to the central oxygen supply and killing several of the residents. I was less surprised that this happened than I was surprised that such things didn't happen more frequently. It was a very badly run institution and delivered sub-standard care. It was, however, profitable and remains in business to this very day.

Licensing doesn't have to be merely an exercise in busywork. That isn't my point. My point is that licensing in and of itself is no guarantee that proper standards are being met. But if the licensing program is rigorous and robustly enforced, then it will certainly cover any of the worries I have from that angle.

As to the rural areas, surely you mean the UK has a relatively high population density rather than a relatively low one? Otherwise, I don't understand what you're getting at.

Kindness is an act of rebellion.
[ Parent ]
Yeah, that should have been high density [nt] by TheophileEscargot (2.00 / 0) #23 Wed Sep 24, 2008 at 09:05:36 AM EST

It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
[ Parent ]
hospital utilization by lm (4.00 / 1) #24 Wed Sep 24, 2008 at 03:03:23 PM EST
You're less likely to have an overutilized hospital with huge waiting lists in one place, and underutilized hospital with a bunch of people doing pointless make-work in another.

I can see how the market would tend to `creatively destroy' the latter, but I don't see how it would avoid the former. Given that a hospital at maximum capacity (or even over capacity), it seems to me that the market would trend towards hospitals at or above full capacity.

You'd have less of a problem with this, probably, with primary care physicians as the barriers to entry aren't so high. It's far harder to move a hospital to a new neighborhood than a physician's office. Come to think of it this also means that so long as a the opportunity cost of hospital operations is lower than investing that money in a new hospital, hospitals in some neighborhoods could be very well underutilized due to the way people move about.

So I'm not so certain, that for hospitals, the market is really improving efficiency by all that much. Other forms of health care, which are more mobile, wouldn't have this problem though.

Kindness is an act of rebellion.
[ Parent ]
Context by TheophileEscargot (2.00 / 0) #25 Wed Sep 24, 2008 at 09:19:01 PM EST
You have to bear in mind that in an NHS context, you expect to have to spend several months on a waiting list for anything that's not an immediate emergency. They're trying to cut waiting from 6 months to 18 weeks at the moment I think. That kind of thing isn't typical of most healthcare in the developed world: waiting lists are minimal or non-existent in most of Europe.

When I talk about efficiency I'm not imagining something magical: just the kind of level of efficiency that most of the developed world manages to achieve.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
That second article by lm (4.00 / 1) #26 Thu Sep 25, 2008 at 02:26:21 AM EST
It seems to imply that the waiting lists are mostly a function of money rather than of central planning (except inasmuch as the money is a function of central planning). If you're intending to hold the amount of money constant, I don't know that switching to private providers would do anything to increase efficiency.

Kindness is an act of rebellion.
[ Parent ]
It's widely believed in the UK by TheophileEscargot (2.00 / 0) #28 Thu Sep 25, 2008 at 08:08:09 AM EST
That insufficient overall spending is the cause. And that certainly is a big factor: more spending can create enough spare capacity to end waiting lists; and the Labour increases in spending have reduced waiting lists.

However, if you look at the big picture; long waiting lists / queues / lines do tend to appear more in command-and-control systems.

In a market economy, a persistent queue is a sign of a business opportunity: if someone else enters that market they can make some money. And price signalling tends to even things out: a service-provider with spare capacity can lower its price; a service-provider with a long waiting list can raise theirs.

The Soviet Union was plagued by long lines and waiting lists. In healthcare systems, it seems the more command-and-controlly a system is, the longer the lines are. Waiting lists are rare in mixed systems, Canada has a small problem with them, the UK a large problem.

However, you could also argue that long waiting lists are a more egalitarian way to allocate scarce resources: they hurt everyone in the system equally, whereas in a market system a poorer person will get cheaper-and-worse treatment. In practice, it's very common in the UK for people to afford it to go privately if they need an operation with a long waiting list: it may even work out cheaper than taking months off work while waiting.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
possibility does not entail actuality by lm (2.00 / 0) #30 Thu Sep 25, 2008 at 11:14:51 AM EST
``In a market economy, a persistent queue is a sign of a business opportunity''

I'd agree if `is' is changed to `can be' or `is often.' With regards to businesses with low barriers of entry and mobile locations, I'd more or less agree. But some medical services (such as hospitalization) have high barriers of entry and non-mobile locations. That hospital X is 10% overcapacity isn't necessarily going to motivate the building of a new hospital. But it might encourage the start up of some ancillary services that would otherwise be performed in the hospital.

Kindness is an act of rebellion.
[ Parent ]
Well by TheophileEscargot (2.00 / 0) #31 Thu Sep 25, 2008 at 09:14:32 PM EST
It just seems to me a bit of a coincidence that that in theory you'd expect a command-and-control system to have longer queues than a free market system, and in practice it happens too.

Remember that the waiting list problem has been endemic since the 1980s at least... possibly before. Even though it can take time to build up new capacity, the queues have been indicating that need for some time.

Again, DullTrev and Herring would argue that the government could address this equally well: it just so happens that the Thatcher government, the Major government, the Blair government and the Brown government have all been incompetent failures at healthcare. But if so many governments can mess things up, it seems to me worth thinking about whether you want the government so involved in the provision of services in the first place.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Shorter response by DullTrev (4.00 / 1) #27 Thu Sep 25, 2008 at 02:51:31 AM EST
Sorry, I hadn't gone through your previous diaries before replying to this one.  However, looking through that manifesto and comments, I don't think I have created a strawman - I did talk about the possibility of a pool of uninsured, but also about the idea of a fall back provider of last resort.  And despite your claim that "the last resort leaves you no worse off", the reality is that it will.  The fall back provider funded at the same rate per patient as the current NHS loses the economies of scale, loses control over hospitals and thus costs, and most likely loses the large pool of affluent healthy that currently pay into the system but take little out of it, while retaining the poor who tend to be unhealthy and thus use the service regularly.  Essentially, this public insurer has no control over its income, its costs, or its customers, while still required to cover anyone who asks, wherever they may be.

As for the GPs, amazingly enough I was aware that practices are currently separate legal entities.  However, as the overwhelming majority of patients are through the NHS, the overwhelming majority of GPs are contracted with the NHS, which, as virtually the only buyer of their services, happily abuses its monopsony position.  Legally the GPs are separate businesses, functionally they behave as an arm of the NHS.  This enables the NHS to require certain things, including a wide geographic spread of GPs.  In your proposed system, either we let this fall away, or the rNHS still has a requirement for this - i.e. a requirement to provide a whole nation coverage while on less than whole nation funding.  If we let it fall away, or rather leave it to the market, you can get large areas without local access to a doctor.

If the rNHS still provides a large number of GPs, then this underfunded public insurer acts as a gateway to private insurers which get the same level of public funding, but without needing to provide the high cost gateway service.  If an insurer supplies the GP, then there will commercial and financial pressure to refer to the cheapest treatment, regardless of whether it gives the best chance of survival.

Allocation problems do remain the same, with the significant difference that while "poor people have the same purchasing power as they do under the NHS" the rNHS does not.  As the only player in town, the NHS currently has massive power in the healthcare market place, enabling it to negotiate massive discounts on, for example, drugs.  When that power is broken up, the costs, paid for by the same public budget through vouchers but through different insurers, will go up.

You claim that "hospitals are not natural monopolies".  But they suffer from high barriers to entry, which help to create that monopoly.  Either you allow that monopoly to persist, or you regulate it to simulate the effect of a free market with low barriers to entry.  If you regulate it, who pays for the regulator?  If the government, then you have increased the amount of public money spent on healthcare (as vouchers are going to everyone).

Your answers to my queries... aren't.  You've not explained how quality of GPs can be maintained or increased.  You've not explained the pressure on prices (for example, a GP as a purely independent business will, presumably, charge the rNHS £1500 per annum for having a publicly insured patient on their books, knowing that the rNHS is compelled to provide a service).  You've not explained how a geographic spread would be maintained, instead comparing GPs to burger bars.  (I've already mentioned above why legally independent GPs are not functionally independent of the NHS.)  Your answer on how the interface between the gateway to healthcare and the hospitals work is a cop out, asserting that "However those free agents decide is best", regardless of the fact the interests of the "free agents" of GP, insurer and provider are substantially different to the interests of the patient.  Your answer to the problems of providing hospitals is the idea that magically the market will provide the capital, despite the fact the high barriers to entry into the market make it unlikely this will happen.  You say that hospitals can close quite happily as the slack will either be taken up elsewhere, or the hospital taken over by a more efficient operator - despite the fact that the public insurer has a responsibility to provide healthcare to all.  Does the rNHS pay travel costs (as done now in some cases)?  In which case, there is no cost to the hospital owner in forcing publicly insured patients to travel vast distance, while there is an increased cost to the rNHS.  And finally, you simply assert that it will be more efficient, without accepting or refuting the issues I mention in that question.  Small bureaucracies may be more efficient than large, though you haven't proven that.  But you are also imposing new tasks on those small bureaucracies that the larger currently simply doesn't have.

You are asserting that your theoretical free market model will be more efficient than the reality of the current system.  All I have done is try to bring some reality into your theory, because the world doesn't work as a theory.  It is always possible to claim that the system which isn't in place is better than the one that is, because realities impose stresses on systems that theory does not.

But most breathtakingly, you also assert that the NHS was built on the principle "that centralized command and control structures are more efficient than free markets", that the whole thing is just an economic debate.  This simply is not true.  To quote from the first paragraph of the White Paper on the NHS,

The Government have announced that they intend to establish a comprehensive health service for everybody in this country. They want to ensure that in future every man and woman and child can rely on getting all the advice and treatment and care which they may need in matters of personal health; that what they get shall be the best medical and other facilities available; that their getting these shall not depend on whether they can pay for them, or on any other factor irrelevant to the real need-the real need being to bring the country's full resources to bear upon reducing ill-health and promoting good health in all its citizens.

This is a moral argument.  That's not to say those who disagree are immoral - to caricature the two positions, one side wants to lift those at the bottom up, while the other wants to enable those at the top to reach to incredible heights.  Both of these have moral arguments for and against, but it is the latter that is suited to a pure free market system.  The debate is about whether such a system is compatible with the former, and I argue it is not.

[ Parent ]
I don't understand by TheophileEscargot (2.00 / 0) #29 Thu Sep 25, 2008 at 08:11:09 AM EST
How it is that you and Herring constantly try to argue, from first principles, that things that do exist, cannot exist.

Mixed public/private healthcare systems exist, and work, in France, Australia and (verging more to towards the private side) in Switzerland.

komet has already mentioned the Swiss system here. Why are you arguing with me instead of him? You really ought to be persuading him that in spite of the evidence of his eyes, the streets really are littered with the dying, since private enterprise cannot deliver adequate healthcare.

Couldn't we have a bit of variety at least? Just for a change, you could try arguing against the existence of the Moon for instance; starting from the assumption that there is no such thing as Newton's laws of motion.

But what the hey. Once again, I will walk knowingly into your trap, attacking theoretical arguments against a plain and observable fact.

You claim that "hospitals are not natural monopolies". But they suffer from high barriers to entry, which help to create that monopoly.
No they don't. Hospitals are labour-intensive, but they don't require particularly large buildings. They're not steel foundries or oil wells or sports stadia... which private enterprise seems to be able to create sometimes. Hence the fact that private hospitals exist in the real world.
This enables the NHS to require certain things, including a wide geographic spread of GPs.
In the real world, in a free market, if an area lacks a service, that creates a strong incentive to fill that gap in the market. You don't need the government to do this.
You've not explained the pressure on prices (for example, a GP as a purely independent business will, presumably, charge the rNHS £1500 per annum for having a publicly insured patient on their books, knowing that the rNHS is compelled to provide a service)
The thing that stops this happening is gravity-- no wait, you're not arguing about the Moon are you-- the thing you refuse to believe in that stops this happening is competition. GPs are in competition with each other, so they can't just charge what they want, or the insurer/patient would find another GP.
But most breathtakingly, you also assert that the NHS was built on the principle "that centralized command and control structures are more efficient than free markets", that the whole thing is just an economic debate. This simply is not true.
Let's take a look at some of the other things that the Attlee government nationalised in the same administration:
  • The Bank of England
  • Civil aviation
  • Coal
  • The railways
  • Electricity
  • Road haulage
  • Gas
  • Steel
They really thought that nationalised industries worked better than the free market, and they nationalised everything they had time to. Not just the NHS out of a unique moral vision for healthcare.
Your answer to the problems of providing hospitals is the idea that magically the market will provide the capital, despite the fact the high barriers to entry into the market make it unlikely this will happen
As I've already said, there aren't high barriers to entry. Now, I would like to draw your attention to a certain word. This word is capitalism. Look at that word closely, and see if you notice something about it. Tell you what: I'll give you a little hint: capitalism. Not getting it? Maybe another hint: CAPITALism. Now think hard: what kind of economic system might be good at providing... capital?
The fall back provider funded at the same rate per patient as the current NHS loses the economies of scale, loses control over hospitals and thus costs,
You're assuming that centrifugal force exists, but gravity does not exist, so the Moon would just fly off into space-- no wait, I'm doing it again, it's not the Moon you're arguing against. You're assuming that economies of scale exist, but market efficiencies do not exist, so that command and control bureaucracies are always more efficient than free markets. However, this assumption does not seem to be true in the real world.

I'll now move on from the obvious fallacies. Because, as sometimes happens, swimming in the ocean of your verbiage is the sardine of an actual point.

The fall back provider funded at the same rate per patient as the current NHS loses the economies of scale, loses control over hospitals and thus costs, and most likely loses the large pool of affluent healthy that currently pay into the system but take little out of it, while retaining the poor who tend to be unhealthy and thus use the service regularly.
I've addressed this in the manifesto comments, but I may as well use the chance to make it clearer.

Now, the existing public/private systems tend to have complicated subsidy systems: either the government pays part of the cost of private insurance; or the patient pays and is part-compensated by the government. The proportions tend to vary based on treatment.

However, I think given the starting point of the UK, this is unnecessarily complicated. Everyone will start off with NHS2. British Telecom still had an 82% market share twenty years after its privatisation. NHS2 is therefore unlikely to shrink to a very small level.

Furthermore, because there are no cashbacks, there's no incentive for the "affluent healthy" people to move outside it: they can't get any cheaper care elsewhere.

I think the reasons for the differences are largely historical. The other private/public systems were created by gradually socialising a private system: hence they evolved complicated subsidy schemes. My private/public scheme is being created by privatising a socialist scheme: hence we can start with a clean slate.

However, I'm not particularly committed on this point: I'd be perfectly willing to accept a subsidized private/public system rather than vouchers if adverse selection starts to look like a problem.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Helping understanding by DullTrev (4.00 / 1) #32 Fri Sep 26, 2008 at 03:32:22 AM EST
Herring can speak for himself, but perhaps the reason you are getting so confused is that I have never said a mixed public/private healthcare system cannot exist.  I have said I don't think such a system, and in particular the one you are proposing, is desirable, nor would it give good results.  I'm sure you'll agree the two positions are very different, and hopefully understanding that may allow you to try and address the issues I raise, rather than the ones you think I am raising.

As I see it, there are two strands to the argument I am making: firstly, I believe that the system you are proposing would, when introduced into the current UK environment, produce a significant number of local monopolies at varying levels of the system.  This would negate at least some of the benefits you are claiming, if not a very large amount of them.  Secondly, even if the system worked as you claim, I do not believe it gives an outcome which is desirable; I do not think that it would be a benefit to society.

The two arguments are different.  The first one is technical, the second is political and moral.  Any proposed change to a healthcare system surely has to pass tests in each of these three areas - a poor system in, for example, telecoms is unlikely to result in unnecessary deaths, while a poor system in healthcare is likely to.  That alone moves it past purely technical arguments.

Looking first at the technical arguments, I am essentially suggesting that the day after the change to your proposal, given the healthcare environment as it stands today, you get monopolies.  I have stated that there are large barriers to entry for hospitals; you claim there are not.  A hospital is more than just a building.  For example, it is very labour intensive, it requires large scale investment into expensive equipment, and it would have to gain regulatory or licensing approval, as just three examples.

In the case of GPs, if patients are able to have a free choice, there is essentially no incentive for any practice to charge less than £1500, or whatever the voucher level is set at.  At this level, the end user of the service pays nothing, so any reduced cost is invisible and irrelevant to them.  They may compete on range of services offered, but there are a limited number of differentiating services that would in fact be useful to the end user, and any incomer into the market has to face the challenge of unseating an incumbent.  This incumbent will no doubt have built up a relationship with their patients, who are likely to be unwilling to change for the sake of free foot massages, acupuncture, or whatever.  Finally, it may be the insurer does not give a free choice, at which point these practices would be able to compete on price to the insurer.  However, it is my contention that when price is invisible to the end user, they are more likely to insist on free choice of GP, which, in a competitive market, an insurer would eventually have to supply, returning us to the first situation.  This situation is not solved by having one fall back insurer insisting on no free choice for patients, thus enabling them to dictate price - an alternative insurer could simply offer free choice, pay £1450 to the GP and pocket £50.  The price of the GP services goes down slightly, but there is no reduced cost to the taxpayer, and money is taken out of the fall back provider.  Similarly, an alternative provider can set up to deal only with the affluent healthy, offering, say, £750 of talking therapies, shiatsu massage, or whatever, safe in the knowledge they are very unlikely to have to deal with an acute or chronic condition with this demographic.  Again, this takes money from the fall back provider, and reduces their ability to pay for the statistically more unhealthy demographic an insurer of affluent healthy would refuse to cover.  Essentially, within this £1500 level, the market does not function effectively.

Finally, there is likely to be a reduction in the geographic spread of GP services.  You have stated that a lack of a service in an area creates a strong incentive for a new operator to set up.  I accept that this is generally true, when something else can be substituted for the service, or, perversely, when its absence is acceptable.  Consider, for example, a shop selling flat screen TVs.  One area may not have a shop, while another does.  Those in the area without such a shop have the choice of not watching TV, continue to watch a standard TV, or travel a long way to another area to buy a flat screen TV.  Now, if the distance is great, the residents of the area will likely not bother, and do without.  Essentially, the costs in terms of money and time in making the trip aren't balanced out by the benefits they may receive.

Now consider the same situation with GP surgeries.  If a resident of the area falls ill, they now have the choice of travelling a great distance, or hoping they don't die.  This creates a remarkably strong incentive for them to travel great distances to try and access healthcare.  This is economically efficient for the healthcare providers and insurers, but inefficient for the end user.  There is therefore demand for a GP in the area.  This may indeed be met, but only if the patient, and not the insurer, has a free choice of GP - the costs of the inefficiency are met by the patient, not the insurer.  At which point, you are again in a situation when a GP, particularly in such an area, will charge the maximum voucher total per patient - the benefits of the service will be felt by the patient, while the costs will be met by the insurer.

These two situations demonstrate why, in your proposed solution, you do not get the benefits of a free market.  A free market cannot exist while the benefits of better service apply to someone who is not the entity that pays for those services.  The competing demands of lower price and higher quality do not come from the same entity.  It is an inefficient and failing market.  Either there is pressure on prices from the insurer, or pressure on quality from the patient, but not both at the same time.

Note that I have not claimed here that I refuse to believe in competition - I have said the system you have proposed does not provide it.

In summary, then, the technical arguments against your proposal are a) that it allows for local monopolies at hospital level due to high barriers to entry, and b) that at the GP level, there is no effective competition due to the voucher system.  I don't think we can usefully continue the discussion on a) - you disagree, and having had to look at market failures in the past, I know they are notoriously difficult to identify even in the real world, let alone in theoretical systems.  However, I think there are some questions to answer from b), and look forward to your response.

Next we have the political and moral dimension.  You have twice tried to dismiss this as irrelevant, and tried to paint healthcare as just a problem in economics.  It is not.  To answer your specific point about the nationalisations of the Attlee government, yes, there is no doubt they believed in nationalisation.  It was one way they saw to achieve the then current clause IV of their party's constitution.  However, it is also true that the administration came into power just after the second world war, when the infrastructure of the country was falling apart, and it needed to be supported by government.  You could as well argue that the current US administration believes in nationalisation because they have done it.  What makes healthcare special is that it formed a central part of the new welfare state that was also being put together in that period - family allowances, national insurance, rent control etc.  These flowed from the Beveridge Report, which didn't make the case for a nationalised health service being more efficient, it made the case for ensuring a universal level of healthcare available to all, regardless of ability to pay. 

No doubt both ideas (nationalisation and welfare state) had an input into the creation of the service - things rarely get done for just one reason - but what I have tried to demonstrate with the technical arguments above is that once the decision to provide a universal level of healthcare available to all, regardless of ability to pay has been made, it is incompatible with providing it through a free market system.  This means the argument about whether a centralised system or a free market system leads to a more economically efficient system is irrelevant unless a successful argument has been put for moving away from a universal level of healthcare available to all, regardless of ability to pay.  I do not believe you have yet attempted to make that argument.  You have regarded it as an assumption; I refute that assumption.  Make your case.

[ Parent ]
There is such a thing as reality by TheophileEscargot (1.00 / 1) #33 Fri Sep 26, 2008 at 09:10:14 AM EST
I don't think such a system [mixed public/private], and in particular the one you are proposing, is desirable, nor would it give good results.
So, let's see. What healthcare system is ranked Number One by the World Health Organization? The mixed public/private system of France.

But the WHO... just shifty foreigners, eh? Woefully prejudiced against the marvelous NHS, those buggers: shamefully reluctant to spend months in waiting lists. So let's look at another major study, of preventable deaths, done by the London School of Hygiene and Tropical Medicine. What comes top there? Oh look: France again.

It's not about what you think. It's about what the empirical evidence from the real world actually says.

I see you're still carrying on your bizarre argument that free markets must leave enormous gaps in GP coverage. So let's look at what the BMA says about setting up a new practice:

Any doctor fully registered with the GMC and, if necessary, with self-employment status under the immigration rules is entitled to set up in private practice. Although you do not need to inform the GMC, or seek its permission to work in private practice, you are required to follow the guidance set out in its booklet Good medical practice.
Where is this strong control over the location of GP surgeries that you say exists? You haven't supplied any evidence. I think you're mistaken or lying.

You have regarded it as an assumption; I refute that assumption. Make your case.
In my diary and comments so far, I've linked to 19 different sites to support my case. You've linked to... zero. You haven't refuted a thing: just spouted immense quantities of empty rhetoric, completely unsupported by any facts. You're still trying to disprove the moon: offering abstract arguments that the world cannot be the way it is.

I wouldn't mind... except how many thousands of British people have died unnecessarily, on waiting lists or in dirty wards or of lack of doctors, just because people like you have been so committed to an outdated ideology over reality?
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?

[ Parent ]
Health care was better in some communist states. by Tonatiuh (2.00 / 0) #34 Sat Oct 04, 2008 at 10:08:48 AM EST
The shinning example is Cuba, they do lots with very little. The trick is that they concentrate in preventing rather than curing. When this was suggested here a few months ago the GPs derided the idea as more unnecessary work, without realizing that by preventing a few diseases (obesity, smoking, etc.) vast resources would be freed up in the medium and long term to combat other serious illnesses that are not preventable...

If one checks Cuban health standards they are comparable to those of developed countries.

Of course a one party dictatorship can think medium and long term, unlike politicians in most democracies for which long term means mostly next general election.

It seems to me  like the Cuban model may be the blue print for socialized health care in the future, unfortunately nobody in the UK is prepared to be called a socialist nowadays, even if the service at hand is clearly one that should be provided for the public good.

[ Parent ]
Well by TheophileEscargot (2.00 / 0) #35 Sun Oct 05, 2008 at 02:04:54 AM EST
I think making it hard to obtain alcohol, tobacco and high-calorie foods does boost life expectancy. But I think that's a separate issue to the quality of healthcare treatment. And the UK is pretty nanny-statish already about those things, and is increasingly so all the time.
It is unlikely that the good of a snail should reside in its shell: so is it likely that the good of a man should?
[ Parent ]
We can't have it both ways. by Tonatiuh (2.00 / 0) #36 Sun Oct 05, 2008 at 03:29:20 AM EST
If we want free, state provided, egalitarian health care, then the state will want to, at the very least, advice how we should lead our lives in order to maximize the coverage of the care provided. I find it perfectly reasonable that the state tell us not to smoke, binge drink and eat rubbish if that means I will get better cancer treatment later on in life.

[ Parent ]
One thing I think is odd about the UK by nebbish (4.00 / 1) #14 Tue Sep 23, 2008 at 11:39:27 PM EST
Is that after god knows how many years of private dental care hardly any employers have dental insurance as one of their benefits. Hardly bodes well for an insurance-based system.

It's political correctness gone mad!

Why should they? by herbert (4.00 / 1) #16 Wed Sep 24, 2008 at 12:01:52 AM EST
After millenia of private bread production hardly any employers have bread as one of their benefits.

Company health insurance is a bit different because it might mean your employees get back to work faster or don't get ill in the first place.  But an employer doesn't really care if you have good teeth or not.

[ Parent ]
Good point /nt by nebbish (4.00 / 2) #18 Wed Sep 24, 2008 at 01:05:58 AM EST

It's political correctness gone mad!

[ Parent ]
I guess by Merekat (4.00 / 3) #20 Wed Sep 24, 2008 at 03:21:02 AM EST
If they're bad enough to frighten the customers away, it is probably still not illegal to discriminate on.

[ Parent ]
She got into a mess on the NHS | 36 comments (36 topical, 0 hidden)