The trouble with the NHS

Two years ago the American author David Goldhill caused quite a stir in the US media with his book 'Catastrophic Care'. At the time, Obamacare was being implemented yet Goldhill argued that the extension of coverage to millions of Americans was a sideshow. His critique of the health care system focused instead on the conundrum of rising costs at times of increasing competition (which should drive down costs).

To any observer from the UK, this may appear a worry too far. Since 1948, the UK operates a monopolistic tax funded health care system without insurance intermediaries. Competition is a dirty word here, with politicians of all colour consistently arguing that it's the strong monopolistic position of the NHS that allows it to negotiate low prices with all health economy providers (we will return to this point in a moment).

Yet, Goldhill also showed clearly that all modern health systems suffered the same ills. Profits in health care provision did not amount to anything resembling the mountains of gold presumed by defenders of socialist health care. In fact, 'all the profits of the famously greedy health insurance companies ... would pay for four days of health care for all Americans. Add in the profits of the ten biggest 'rapacious' drug companies: another thirteen days. Indeed, confiscating all the profits of all American companies, in every industry, would cover only seven months of our health care expenses.' (Goldhill, p.53)

In other words, profiteering in health care provision is a red herring when it comes to the magnitude of the cost explosion.

British and European health care systems don't fare much better. Whilst productivity is slowly rising in all UK industries, the NHS is notoriously the only industry where productivity has steadily been falling. The argument has always been that medical care is a labour intensive industry. But does that mean that it is an industry like no other, exempt from the conventional laws of efficiency?

Productivity down, costs up - and still no happy Unions - NHS unions in 2007

Health care appears to be the only part in society that we positively excuse when it operates at a loss to us as taxpayers. As technology has made things easier for everyone from the local plumber to the car mechanic, health care providers appear to be saying that the more technology they introduce, the more expensive things will become for us as consumers. In fact, we are so used to this argument that, reading this, you may not even have spotted the flawed logic in this sentence. It is only in health care that technology makes things MORE expensive, when, in all other contexts, the aim of introducing technology is the opposite: to make things cheaper by increasing productivity.

So, what's going wrong? What's at the heart of the cost explosion of the NHS? The first issue is that the NHS, as any modern health care in the Western world, deliberately severed the link between patient behaviour and costs. People are not rewarded if they visit their GP less. On the contrary, the more a patient turns up at the local GP practice, the more tests (most of them often useless or positively harmful, as Atul Gawande argued) and clinical interventions are showered on her or him. The system also rewards the absence of self-management of illnesses and almost expects a lack of responsibility for our own well being.

Yet, even more important, what was supposed to be a risk sharing model for acute care needs has become a model of comprehensive health care. Once, illness was narrowly defined as urgent medical attention in cases of life threatening diseases. The NHS was founded as a response to large scale epidemics such as TB. Fast forward to the 21st century and the NHS has become the nanny for all  discomforts in life, for free!

The original model of sharing risks at times of acute medical needs, many of those very expensive, has given way to a model of comprehensive care for everything from a brain tumors to blisters on the feet. The health care systems are thus not risk sharing mechanisms anymore, helping the poorest to spread the costs of acute care needs, but a dispensary of all round care for free.

The fact that we don't share risks anymore but appear happy to pay for everything for everybody has important consequences to health care costs. It distorts positive health orientated behaviour (hence the discussion about obesity and gastroband surgery on the NHS), but it also undermines the possibility of establishing truly risk spreading mechanisms that would help share the costs in adjacent fields such as social care. Social care insurance will remain unviable in the UK, as long as much of what goes for care needs is met by the NHS or local authorities (soon helping themselves to NHS budgets in devolved areas).

The advantages of having a strong negotiating position vis-a-vis pharmaceutical industries are puny in comparison to the costs of health care in a dis-incentivised context. Not least because allegedly lower prices of medicines are likely to be cancelled out by the expansive prescribing of low or non-effective pharmaceuticals. As long as we think we have a right to free all round care, we won't be restoring the link between what we do to keep ourselves healthy and what we spend on our health.

Shall we cap profits in health care?

As the general election campaign is limping from one damp squib to another, Labour came up with an idea on the NHS. Yesterday Ed Miliband made a commitment that all profits from health care contracts with private providers should be capped at 5 per cent. Any profits above that threshold will be seized by the government and ploughed back into the NHS.

The suggestion to cap profits resonates with many people's gut feelings that health care provision should not be a matter for capitalist profit. Health, so the reasoning goes, is not up for sale.

The principle is a well respected one and echoes fundamental reservations about mixing up health and capitalism. However, at closer inspection, it seems to rest on confusing two different dimensions of health care provision. The first dimension is the relationship between doctor and patient. Whatever goes on between patient and doctor is regulated by codes of medical practice and national guidelines. Profits have never played a role in this relationship despite GPs being private enterprises since the foundation of the NHS in 1946. And neither should they.

The second dimension is the health care market grouped around the first domain, ranging from the supply of protective gloves to syringes and capital investment into NHS hospitals. To wish away the market element in the supply of the health economy is like legislating for sunshine on Tuesdays.

Labour's proposal willfully confuses the two dimensions, the doctor patient relationship and the health care economy around it. As a former Labour health minister noted today, Ed Miliband's NHS policy amounts to little more than bluster.

So, what do other countries do about profits in the health care economy? The issue has been intensely debated during the introduction of Obamacare in the US and the lead of the implementation team (no other than Larry Summers) decided against a profit cap. Why? He argued that profit caps eliminate the (only) positive effect private providers bring to the health economy: their ability to look for savings.

Private providers have an incentive to seek out lower prices for comparable services or products because they can pocket the difference (the profit). If profits are capped, that incentive does not exist and prices will inevitably rise. This can be disastrous for a tax funded service like the NHS or one like Obamacare, since without the pressure of providers to identify cheaper options prices for the buyer (the NHS) will increase. In other words, eliminating the market element in private provision leads to higher costs for tax payers.

Miliband claims he is an ideas man. Looks like precious little thinking has gone into his last policy.

Why Andy Burnham will never be health secretary (again)

Labour has built its electoral strategy for the May election around the NHS. That made sense given it polls strongly on the NHS. Yet, its NHS policy boils down to only two components: a robust rebuttal of the so-called 'privatisation' of the NHS and a proposal to integrate health and social care provision. Both are looking increasingly too weak to function as the main pillar of a general election strategy and here is why.

'Privatisation' is a serious concern for many people in the UK. Labour has read the polls carefully and consistently identified the Health and Social Care Act 2012 as being widely discredited. Andy Burnham, the Labour's shadow health secretary, built his health care policy around the repeal of the Act. This has brought him plaudits from people who dislike tampering with the NHS. However, the agreement around the rejection of the Act is brittle and insufficient to act as long term policy. And the electoral appeal of 'anti-privitisation' rhetoric does not extend much further than Labour's core supporters. In addition, repealing the Act may also quickly emerge as disruptive to the fabric of the NHS. The 'anti-privatisation' agenda could thus become tarnished with exactly the same brush as the Act itself: endless re-organisation of the health care service.

Going nowhere - Labour's Shadow Health Secretary Andy Burnham (Foto: EPA)

To offer something positive, Burnham suggested to integrate health and social care. Yet, his proposal, three years in the making, still remains obscure. Health care through the NHS is free, whilst social care is means tested. Burnham's proposal was riddled with contradictions and he knew it. So, with only slightly more than 2 months to go to the general election, he has still not spelled out how the integration of the NHS and social care is to be achieved. The policy remains a shell at best.

Cue George Osborne. On Thursday, the Chancellor announced that Greater Manchester will have direct control over the entire NHS budget for its area. In 2017, the elected Mayor of Manchester will assume full responsibility for social care and health care provision for almost 3 million people. It's hard not to see this as a preemptive stroke of genius by the Chancellor (and a snub to Burnham by the local Labour councillors who did not even bother to inform him about the imminent agreement). Without having to fill in the detail of HOW to integrate health and social care, Osborne has given local authorities the powers to embark on integration as a local response to local problems.

The consequences are devastating for Burnham. As the consensus around his 'anti-privatisation' rhetoric becomes increasingly fragile and reveals its ideological thrust, his other main policy proposal is stuck in the mud of detail. In the meantime, Osborne devolves health care budgets to local authorities, strengthening the narrative around local accountability without having to provide any detailed health care policy on the complexities of integration.

The upshot is that Labour's health policy hangs by a thread and so does Burnham's political career. During his tenure as shadow health secretary he has failed to develop any significant and substantive policy proposals and the Labour leadership knows this. Their entire electoral strategy was built around the NHS and Burnham has left their flank undefended and open to attack. He is likely to pay the price for this blunder.

Labour's NHS trap

It all seemed so clear. The battle lines were drawn and the trenches dug. As Andy Burnham came on Newsnight on Thursday night to talk about the NHS, Labour had prepared a well rehearsed argument, something well liked by its faithful and seemingly cutting through to the public: ‘The Tories are privatising the NHS’.

The Labour leadership believed that this argument resonated with rank and file members and offered the simplicity of clear ideological division. Tories equal private, Labour equals public. In addition, the argument has ‘recognition value’ as marketing experts would say, harking back to a pre-Blair time when Labour was against privatisation of public services. It also linked in with other policies, such as public ownership of the railways, a potential battleground with the Greens challenging Labour from the left.

As Burnham started the interview, the position fell apart fairly quickly. Kirsten Wark’s point of attack was Labour’s own record of ‘outsourcing’ and the fact that, under the last Labour government, private business amounted to 4.4% of the total NHS budget. Now, it stood at just above 6%. Hardly the ruthless Tory privatisation wave Labour claimed, Wark argued. Yet it seems that it was current levels of outsourcing that broke Burnham’s argument. More likely, Labour appears to have misjudged the depth of knowledge (or lack thereof) about the NHS within the population. The main confusion at the heart of Labour’s argument about the privatisation of the NHS was that, from the perspective of ordinary people, it is little more than a deliberate obfuscation.

People encounter the NHS as patients. The patient doctor relationship determines the perceptions and views of people on the NHS. That relationship is governed by clinical guidelines designed by NICE and Labour’s privatisation argument somehow suggests that this could change.

Yet, the complexity of health care delivery through the NHS in the UK means that privatisation anxiety makes little sense. GPs in the UK are in fact private enterprises. Aneurin Bevan’s National Health Service Act in 1946 made them so. Yet, this is not what Labour trained its guns on. Its main artillery was pointed at the health economy around the patient doctor relationship. It claimed that, somehow, because of private involvement, doctors would have to take profit into consideration when making clinical decisions.

This is a difficult argument to sustain for two reasons. On one hand, doctors are bound to make decisions in line with clinical guidelines, and profit is ostensibly not part of the picture. Yet, on the other hand, efficiency (and consequently rationing) is and has always been part of the NHS. In fact, NICE guidelines take into account both the effectiveness and the efficiency (in terms of life years saved) of medication and interventions before approving it. So, in a sense, considerations of efficiency have always been with us. The notion of a fully resourced health care system is a utopian make belief. Doctor’s clinical decision making process will always need to navigate patients’ expectations, in other words: say ‘no’ at times.

The real issue is whether, within the health economy that is grouped around the clinical patient doctor relationship, competition would drive down costs or increase costs for the NHS, or the tax payer. This argument is worthwhile having and Lord Darzi has made an important contribution to this recently. Everything, from pharmaceuticals to protective gloves, is after all produced within the market economy of the UK and to advocate a unilateral withdrawal of the NHS from this health economy is like saying we should bake our own bread at home. It may be wholesome and nutritious but hardly ever enough to feed a large family.

So, Labour’s argument about privatisation offers a false dichotomy. When articulating an anxiety that profit considerations would encroach on the patient doctor relationship the argument is ostensibly false. Doctors are bound by clinical guidelines. If taken to refer to the health economy around medical care, the argument is little more than a common place. The NHS always operated as a public service within a market economy. An autarkic healthcare system, insulated from economic pressures, is a pipe dream.

Boxed into the argument about privatisation and sensing its failure, on Thursday, Burnham tried to move the discussion on to the issue of integrating health and social care. It is a valuable idea and one that has been around for decades. It cannot have escaped him though that the earliest protagonists of health care integration are Kaiser Permanente; you guessed it: a private US insurance company with nearly $50 billion in revenues and more than $1.6 billion in profit. Health care may just be a policy field that proves impervious to ideological battles. And that may be a good thing.

The slow death of the NHS

Since I came to this country in 1992, the NHS has been in perpetual crisis. First, it was long waiting times, then poor cancer care and treatment outcomes with unusually high death rates, and finally, it was people unnecessarily dying in hospitals.

The answer of politicians is to throw more money at the NHS in a desperate attempt to shore up its capacities to deal with chronic diseases, long term illnesses and complex health problems of an aging population. But the real culprit in the demise of the NHS is a fundamental change in the health care needs of people and the huge financial burdens of medicine developments.

As the body for vaccine licensing in the UK published its latest shocking report, it has become clear that a tax based health care sector is creaking at the seams and is becoming untenable fast. The development of medicines has traditionally been the domain of the pharmaceutical industry, but something significant has happened over the last decade. As diseases became ever more difficult to analyse and combat, medicine development has become ever more costly. Developing an effective vaccine can easily take 20 years and cost 100 million pounds as the various substances are tested and go through a plethora of trials to improve their composition and ensure their safety.

These are enormous entrepreneurial risks and practically no company can take these risks on their own today. So, governments have stepped in and underwritten some of the financing risks of some vaccine developments. While that means broader shoulders for the risks, the costs can be devastating for the health sector as not all vaccine developments are successful.

What does that have to do with the NHS? Spiraling costs in medicine development and care delivery mean that the NHS will always fall short of caring adequately for everyone. And that has been the principle of the NHS since its inception: ration the care to those most at need. Yet, the latest decision of the Department of Health clearly shows it is not the most vulnerable who benefit from the rationing principle. What guides bureaucrats in Whitehall is a lifeless formula which decides who lives and who dies in the NHS.

This problem wont go away. In fact, it will get worse unless the government will find new sources for significant investment in the health sector. There seems to be only one answer. Open the NHS up to insurance based services. It would provide a new income for the NHS and would allow patients to decide how much they want to pay for the care they think they need.