For over 20 years now health system policy makers in developing countries around the world have had to endure a relentless sales pitch from advocates of market-style reforms.
Their menu of routine suggestions will be grimly familiar. These are not the painful measures which are clearly intended to contain spending (cash limits, centralisation of services, rationing and exclusions, “essential packages of care”, and of course user fees – which cut demand for services while seldom raising any significant resources).
The menu of market-style reforms can sound relatively harmless: the purchaser-provider split and “internal markets”; provider payment reforms (maybe even “payment by results”); provider autonomy; competition; outsourcing or privatisation of services; “partnership” with the private sector – even “Public-Private Partnerships”. But the same policies in the UK, have all cost more, not less.
And while it may seem that some of these proposals are to meet specific problems or to rescue failing public health care systems, beware: these are not tailored solutions, but off the peg “one size fits all” policies – which in practice are equally inappropriate everywhere.
They are the rote learning of academics in wealthy northern countries, who have swallowed whole the illusion that health care can somehow be delivered efficiently, equitably, or economically through a competitive market.
Look at Britain, one of the few wealthy countries to adopt most of these ideas – despite the lack of any evidence that they could deliver improvements or efficiencies. Since 1991, the National Health Service, which for decades had management overhead costs of 5%, has been increasingly subject to a “purchaser-provider split”, initially in the “internal market” created by Margaret Thatcher, then, under Tony Blair, a market involving high cost private providers.
The additional costs of this market split in England have increased overheads to over 14% of NHS spending – an extra £10 billion per year . Yet still there is no evidence that all the extra cost and bureaucracy have improved the quality of health care.
Tony Blair’s government also introduced highly complex provider payment reforms, the “payment by results” system – nothing to do with results, since it simply imposes a national tariff (cost per case). This makes it possible to drain money out of the NHS budget to pay private providers.
Are private providers cheaper or better value? No, and no.
In England Independent Sector Treatment Centres set up by Labour to create a new private sector provider network, charge an average 11.2% above the standard NHS cost. But they cherry-picked only the easiest cases – leaving the rest to the NHS. And they were given generous 5-year contracts, which paid them for a fixed number of operations, regardless of how few patients chose to use the service. Millions were wasted on this, taking resources from NHS hospitals.
England has experimented with provider autonomy in the form of Foundation Trusts – providers which run outside the main managerial structures of the NHS and are responsible not to the government but an independent regulator.
The first Foundations were set up from the wealthiest, most successful hospitals, and have accumulated surpluses of £2 billion – while NHS hospitals which are not foundations face mounting financial problems. Now ministers want to let them make unlimited money from private medicine, while funding for NHS patients is being sharply reduced.
Competition, outsourcing and privatisation are best assessed by looking at the damage done to hospital cleaning standards by Margaret Thatcher’s government putting cleaning and other support services out to tender in the 1980s, forcing health bosses to accept the cheapest bid. Two decades later hospitals are still struggling with the rising tide of infections and hygiene problems caused.
And as for partnerships with the private sector – the English experience again shows that it’s like sharing a house with a lion. Your ‘partner’ sees you as his lunch.
100 hospitals have been built since 1997 using the “private finance initiative” – in which the private sector has scooped up massive guaranteed long-term profits paid from the public purse. £11 billion worth of new hospitals are set to cost £65 billion – far more than just borrowing the capital. Some early PFI hospitals have already paid back double the cost of the hospitals, but still have 15-20 years to pay. Many PFI hospitals are closing beds and wards in the new hospitals and sacking staff to cut costs: some need rescuing by government.
Now services in the English NHS could be opened up by the new government to competitive bids by “any qualified provider”. But the private sector will only bid for services where it is certain of a profit. So if NHS and non-profit providers are all expected to behave like businesses in a market, who will bid for services which can’t be profitable – like emergency care, mental health or care of the elderly?
The policies only sound tempting until you investigate their consequences. Markets are OK for fruit and vegetables, but they don’t deliver equity – and are not good for health care, where those with the greatest needs have the least ability to pay – and the least political power.
Don’t copy the costly mistakes made in England.
John Lister is a freelance journalist with over 27 years’ experience in analysing health policy for pressure group London Health Emergency, and now senior lecturer in Health Journalism at Coventry University. His PhD is in global health policy, and his books include Health Policy Reform, Driving the Wrong Way? (2005) and The NHS After 60, for patients or profits? (2008).
Recently published research by independent experts for The King’s Fund begs to differ.
“Understanding New Labour’s market reforms of the English NHS” says that the National Health Service in England has benefited from being made subject to market forces since 2002 — and continues to serve as a good example of how ‘health for all’ can be achieved.
See: http://www.kingsfund.org.uk/publications/nhs_market_reforms.html
And:
http://www.lshtm.ac.uk/newsevents/multimedia/podcasts/2011/market_forces_have_benefited.html
The King’s Fund report referred to does to some extent accept that in certain defined circumstances some forms of regulated competition can deliver some benefits. However there are many caveats in this, and serious doubts have been raised over the credibility of some of the key research findings which are central to this conclusion, notably the controversial LSE study led by Zack Cooper and colleagues (2011) (see Pollock et al 2011).
The King’s Fund report itself notes that pro market analysts Brereton and Gubb (2010) concluded:
“We found isolated examples of the NHS market delivering the benefits that were anticipated: however, the market, by and large, has failed thus far to deliver such benefits on any meaningful or systemic scale” (Mayes et al 2011: 130).
The King’s Fund report goes on to note that
“the predominant narrative on New Labour’s period as the custodian of the English NHS must focus on the increase in spending and the size of the workforce (e.g. 50,000 more doctors and 100,000 more nurses and midwives) after 2000, together with strongly enforced targets, leading to improvements in performance.” (Mayes et al 2011: 131)
Trying to be more positive, and disentangle some role for market reforms in the context of these massive investments and changes, the authors goes on to give the market reforms a rather cagey back-handed compliment, by arguing that:
“There was no evidence of the market-related changes hampering or reversing the improving trends in other areas of performance. In other words the reintroduction of a more explicitly pro-competition approach within the English NHS most likely did help to make better use of the large increase in resources, even though it did not improve productivity enough to offset the resource increases.” (p133, emphasis added)
The King’s Fund team go on to admit that while the introduction of fixed price competition and a degree of patient choice for a limited range of elective operations
“did appear to have had some measureable positive effects[…]. The evidence for a positive impact on quality (outcomes) is more contentious, although suggestive. It is extremely difficult to assess the impact of individual components of the reforms […] (p133, emphasis added)
The authors also admit that the introduction of external competition through higher cost private (“independent sector”) competition “appeared to have contributed little at system level”. (p135)
Arguing – in the context of a massive, sustained investment of additional resources, tough targets and very limited extension of competition for a few elective services – that it appears not to do any harm and may have some advantages is one thing. But it is a long way from showing conclusively that completely restructuring the whole English NHS to introduce competitive markets into an ever-lengthening list of services – as the British Conservative-led coalition is attempting to do in the teeth of opposition from almost every group of health professionals, and at considerable financial and organisational cost – is anything but a massive gamble with no evidence to support it..
Throughout the King’s Fund analysis it is clear that the considerable transaction costs of a market-style system and the unused capacity that results from a competitive system are largely ignored. And the counterfactual (what gains could have been made by greater integration, collaboration and cooperation) was not discussed: it is considered as a threat rather than a positive way forward.
This is very different from the general findings of the King’s Fund’s present chief executive Chris Ham, an early fan of commissioning when he was advising Tony Blair in the 1990s, who in 2008 concluded a survey of international attempts at commissioning (purchaser-provider split) by warning that:
“The high level overview provided in this paper has highlighted the difficulties involved in health care commissioning. Experience and available evidence from Europe, New Zealand and the US indicates that in no system is commissioning done consistently well.
[…]
“The performance of integrated systems raises a major question about the direction of health care reform in the last two decades. Put simply, the challenge in making systems based on a separation of purchaser and provider roles work effectively, reflected in the experience and evidence summarised here, may mean that integration offers a more promising way forward.”
Ham C (2008) Health Care Commissioning in the International Context: Lessons from Experience and Evidence, University of Birmingham Health Services Management Centre, http://www.hsmc.bham.ac.uk
Similar conclusions were drawn from the evidence when in March 2010, just before the coalition government came to office and the latest round of pro-market reforms were put forward, the all-party Commons Health Committee revealed its less than complimentary report on the workings of a market-style system put in place by the Conservatives in the 1990s:
“Nearly twenty years ago the then Government introduced the purchaser/provider split whereby services were purchased or commissioned from provider bodies. The stated aim was a more efficient health service and one run more in the interests of patients than hospital doctors. The nature of commissioning systems have changed several times since 1998. It is now primarily undertaken by 152 PCTs.
“Whatever the benefits of the purchaser/provider split, it has led to an increase in transaction costs, notably management and administration costs. Research commissioned by the DH but not published by it estimated these to be as high as 14% of total NHS costs. We are dismayed that the Department has not provided us with clear and consistent data on transaction costs; the suspicion must remain that the DH does not want the full story to be revealed.
[…]
“As the Government recognises, weaknesses remain 20 years after the introduction of the purchaser/provider split. Commissioners continue to be passive, when to do their work efficiently they must insist on quality and challenge the inefficiencies of providers, particularly unevidenced variations in clinical practice. In conclusion, a number of witnesses argued that we have had the disadvantages of an adversarial system without as yet seeing many benefits from the purchaser/provider split.
“If reliable figures for the costs of commissioning prove that it is uneconomic and if it does not begin to improve soon, after 20 years of costly failure, the purchaser/provider split may need to be abolished.”
The evidence is still lacking: and even the strongest academic advocates of markets and competition are forced to admit in the light of the grotesque and costly excesses of the US health care system that these methods only work with fixed prices and strong regulation: in other words not really a market at all. It seems that there may be more merit in exploring the counterfactual and focusing on cooperation and collaboration – competing to be the best rather than to corner markets, bankrupt opponents and cream off profits.
John Lister