Unhealthy management

The British National Health Service (NHS) is one of the largest and most interesting organizations in the world. It is perhaps the key legacy of the post-1945 Labour government, establishing the principle that healthcare is available free at the point of use and on the basis of clinical need. Almost 70 years later, an authoritative report by the Commonwealth Foundation in 2014 identified it as the best overall healthcare system of a range of developed countries (the others were New Zealand, Australia, France, Germany, Norway, Sweden, the Netherlands, Switzerland, Canada and the US), and the best in eight of the eleven criteria of the report, and in the top three for two of the other three criteria. And this was achieved despite having lower spending per head of population and/or as a percentage of GDP than those, and other, countries.

Perhaps as a result, the NHS has always been a target of dislike, even hatred, for neo-liberals because (rather like the BBC) it demonstrates how non-market, collective provision of services can be both more efficient and more equitable than market provision (by contrast, the US system was the worst of those covered by the CF Report). As such, it has for the last thirty years or more been subject to endless reforms to marketise it through actual private provision or internal competition, and to introduce private sector disciplines and management to make it more efficient. Successive governments have insisted that ‘throwing money’ at the NHS is no good – what is needed is this market-accented reform. Yet, despite this, it is constantly depicted as being in crisis, with daily stories of its failure.

The irony is that these stories reflect, precisely, the consequences of the neo-liberal reforms. This week, there are two such stories. One is about the spiralling cost of employing agency nurses and doctors (i.e. not employed by the NHS directly but bought in). The other is the ‘fatcat’ pay and perks of senior managers. It’s true that both these things are problems – but why have they come about?

In the first case, it’s because of the demand for labour market flexibility and the assumed wastefulness of paying the overheads (sick pay, pensions etc) of permanent staff and the government have been warned for some time that their market-focussed policies were causing the problem. In the second case, the roots of the problem go right back to the 1980s when the neo-liberal claim was that to get the ‘best’ managers the public sector had to pay the going private sector rate. So in both cases supposed public sector waste is a direct consequence of the assault on … public sector waste.

These are case studies in the problematic nature of efficiency which I discuss a lot in the book (especially pp 130-131), but in the case of the NHS this has a particular inflection. The efficiency of the NHS, as attested by the study mentioned earlier and others, arises from the fact that the benefits of healthcare are themselves collective. Innoculation is an obvious example: it is effective to the extent that it is widespread across the population, and it will only be widespread across the population if it is not rationed by price but available on clinical grounds. But the same is true even in less obvious cases – for example, the ill-health of an individual employee impacts upon his or her employer and colleagues. And, for that matter, a collective system will always be able to get better prices on drugs than an individualised system, and the costs of medical procedures always fall as they become mass, standardised procedures (think cataracts and hip replacements).

It has become a truism that the costs of healthcare are rising in all developed countries because of ageing populations, the fact that healthcare inflation is higher than general inflation, and the costs of new medical procedures arising from almost daily scientific advances. The only way to address this is, precisely, by throwing money at it. It’s getting more expensive and that expense can’t be met from efficiency savings. It’s a pervasive meme of neo-liberalism to imagine national finances as if they were household finances. Very well, then. Knowing that granddad and grandma are going to be living longer and needing increasingly expensive healthcare you divert resources to that. But we know that this works best (it’s cheaper, and the outcomes are better) when it is done collectively. The US spends 17.7% of GDP on healthcare compared with 9.4% in the UK (2011 figures) but with much worse health outcomes because of its system. Imagine if the UK spent at US levels using the NHS system! It would be a Rolls-Royce health system.

There are two familiar objections to this, both of them fallacious. One is that the NHS entails the rationing of care. That is true, but it is true in all systems. In an insurance-based system such as the US it is done by insurance companies adjudicating on individual cases, whereas in a socialised health system like the UK it is done via expert assessment of the cost-benefit ratio of treatments.

The other objection is that a tax-based system like the NHS is unsustainable because there is only so much tax that people can pay, so what is needed is a mixed private-public system of the sort found in France or Germany. It’s worth noting, though, that those co-payment systems are also under strain. Even more to the point, people don’t miraculously have money to spend on health insurance that they don’t have available for taxes. To see the problems of co-payment systems one only has to look at what has happened to NHS dentistry which has moved to such a model. And let's be clear what this means: it means people pulling out their own teeth without anaesthetic.

The issue, then, remains one of the best mechanism for translating spending into healthcare. In Britain, no politician is really willing to challenge the free at the point of use principle, an interesting illustration of how deeply embedded the collective principle is, despite the neo-liberal decades. Instead they say that so long as the free at point of use principle is retained, it does not matter whether the provider is public or private. In this model, the NHS is simply a commissioner of services. But this neglects the other cornerstone of the NHS: provision on the basis of clinical need. In other words, private providers will only provide services at no charge if it is cost-effective for them to do so, hence they ‘cherry-pick’. There is no way of squaring this circle: collective provision is both cost-effective and equitable because it is collective provision.