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Why ‘market-style reforms’ can work: a response to John Lister

Elliot Bidgood, 11 June 2013

Last week health journalist John Lister wrote an article in Open Democracy entitled ‘The neoliberal epidemic striking healthcare’, in which he critiques the use of “market-style” reforms in healthcare, both in the UK and abroad (he has also released a full book on the subject, Global Health Versus Private Profit). While he makes some valid points, there are also assertions I would take issue with, some of which are common among opponents of social market-based reforms.

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“these so-called ‘reforms’ are driven not by evidence, but by ideology. And behind the ideology is a massive material factor: the insatiable pressure from the private sector to recapture a much larger share of the massive $5 trillion-plus global health care spend, much of which only exists because of public funding.”

Ironically, in saying that social market reforms are driven “not by evidence, but by ideology”, it’s arguable that Lister himself is operating on this basis. Within the UK, research from LSE, British Medical Journal, Imperial College, the London School of Hygiene & Tropical Medicine, The King’s Fund and the Nuffield Trust has pointed to the benefits of choice and competition in healthcare. Moreover, so has evidence from comparable nations that have implemented competition measures in recent years, notably Sweden.

“Everywhere the role of the private sector and the size of its potential market is always constrained by an ‘inverse care law’. Most health care is required by those least in a position to pay the market price for it – whether this be the old, the very young, the poor or those with chronic sickness and disabilities. Nowhere in the world is there a health care system that delivers universal or comprehensive health care services purely through the development of a competitive health care market.”

Here Lister’s concerns are honest-held, but arguably somewhat misguided. The inverse care law, and the resultant need for risk-pooling and universal access premised on social solidarity, is undeniable. For this reason, almost all OECD nations have some version of universal healthcare. However, depending on what he means by “purely through the development of a competitive health care market”, this is where his argument muddles somewhat. While Lister is absolutely right to say that it is impossible to develop universality and tackle the inverse care problem without robust government action (America and its lack of universal insurance shows this, hence why no one in their right mind advocates emulating their non-system), he has not really elaborated as to why a central government near-monopoly in insurance and provision (e.g. our NHS) is specifically more desirable than a model in which the government enforces universality, administrates, provides most funding and regulates standards while allowing varied non-profit social insurers and a mix of public, non-profit and sometimes private providers to handle day-to-day activities (as in the Netherlands, Germany, France, Switzerland, Belgium, Austria, Luxembourg and Japan). In Israel, a system like this was founded by the Israeli Labour Party and its affiliated trade unions and mutual aid societies and in the US, Barack Obama also gets this distinction – he is fighting tooth and nail against asocial Tea Party Republican opponents to move America closer towards comprehensive coverage, but his exact reform plans loosely emulate the Swiss-Dutch model, as Nobel Prize economist Paul Krugman and the excellent Washington Post Wonkblog have both observed.

“England has been an unfortunate laboratory rat for some wild and costly experiments with competition. What had been one of the most integrated and publicly provided services in the world has been progressively dismantled, with ever more services sliced off to encourage private providers. Governments since Margaret Thatcher have all – perhaps for different reasons – applied a hard-line neoliberal ideology to health. In doing so they exploited a political system that tended to deliver clear parliamentary majorities, to force through policies despite popular opposition.”

An ICM/Civitas poll from March called into question to what extent the British public is troubled by greater diversity of provision in healthcare, showing that 83% are open to the use of non-profit and private providers so long as care is quality and free at the point of use. Successive Labour and Conservative governments have reformed the NHS with pluralism, efficiency and patient choice in mind, and have often stated this as a goal in their election-time manifestos. Also, though competition must be implemented in a way that does not disrupt the aim of integration, claiming that the NHS is well-integrated at current is wrong, as Liberal Democrat Care Minister Norman Lamb has pointed out (“We have got completely fragmented care already. It’s institutionally fragmented between health and social care, mental and ­physical health, and ­primary and secondary care. It’s a remarkably irrational system”).

“This has continued even under David Cameron’s opportunist coalition. The massive and complex Health Act lacked any democratic mandate. Never put to the electorate, it was passed only thanks to the willingness of the Liberal Democrats, eager to avoid a huge conflict and early election in which they would be largely wiped out.”

Lister is right about the lack of public support for the ill-advised coalition Act and its chaotic ‘big bang’ reorganisation of commissioning (only 18% have faith that the reforms will work). However, as Fabian Society member and LSE Professor John Van Reenen and former Labour Health Secretary Alan Milburn have warned, we must separate this from the more promising and evidence-based competition elements of the current reforms.

“Market-style reforms are remarkable in that they consistently serve neither to cut costs nor to improve efficiency. In fact the systems most dependent on private competing providers have the highest overhead costs and waste billions while excluding millions from proper access to health care.”

After last year’s management takeover of a failing NHS hospital in Hinchingbrooke, Cambridgeshire by a private provider with a semi-cooperative structure, the Circle Partnership (essentially authorised in the final months of the Labour government), the hospital went from having some of the worst A&E waits in the country to some of the best, it began leading in regional ‘friends and family test’ rankings, patient satisfaction jumped from 59% to 94% and it began meeting NHS cancer targets for the first time in two years. Costs are still a major problem there, granted, but it is certainly hard to assert that independent sector involvement is irrelevant to efficiency. It is also true that competition requires extra administrative costs that are not seen in monopoly systems, but if competition delivers a net gain in standards and clinical outcomes, it is arguable that these extra costs are worth shouldering. Finally, provided that care is delivered free at the point of use as it is in the UK (including at Hinchingbrooke hospital, which remains part of the NHS), there is no basis for saying that the use of independent providers “excludes millions from proper access to health care”.

“A particular concern is the international spread of ‘Public Private Partnerships’ following in the footsteps of the UK’s trail-blazing Private Finance Initiative (PFI). Despite the fact that PFI is proving itself a major liability, bankrupting trusts in a cash-strapped NHS, the model is being exported across the world”

Here, Lister’s concerns about the disastrous effects of PFI are dead-on, as I discussed last year in my report PFI: Still the Only Game in Town?. This goes to show that not every public-private partnership in healthcare is good and that the government must be sure that it and taxpayers do not get taken advantage of, but the limitations of PPP in procurement specifically tells us little about how suitable the independent sector is for provision or other functions.

Above all, while the NHS’s founding mission to provide quality care for all without regard for ability to pay remains as crucial today as it was 65 years ago, Lister’s article does little to address the big questions the service faces; how to prevent lapses in care like Mid Staffordshire, how to bring about genuine integration in health and social care services, why the NHS lags some other developed nations on amenable mortality and how it can be saved from the acute funding pressures it now faces (this fourth problem is actually far from unique to the NHS, hence why reforms are having to be made in most comparable nations as well). It is easy to critique reform, but much harder to propose it, and a robust and evidence-based debate will be needed if we are to face up to these challenges today.

For more of our work on health, including books and research papers, visit our website here.

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