An article from an unlikely future. Part 1: Healthcare

The Economist, 11 April 2020

With the 2020 General Election less than four weeks away, this special edition and the next two will provide some in-depth analysis of what we think this government got right over the past five years, where we think they failed, and where we would rate their performance as passable but unimpressive. This week, we will start with the three policy areas that we consider the clearest success stories: health, localism/devolution, and housing.

What these three areas have in common is that there had already been some reform attempts during the coalition years (2010-2015). But when faced with opposition and/or unexpected difficulties, the coalition had either U-turned on them, or quietly given up. From 2015 on, this changed radically. Emboldened by their unexpected victory, the Conservatives felt that the corporatists and paternalists in their own ranks had had their chance to reform those areas, and that the more economically liberal-minded deserved a shot this time.

It started with healthcare. As of January 2016, the concept of the ‘catchment area’ was abolished, both for primary care and for commissioning. Patients were allowed to register with any Clinical Commissioning Group (CCG) they saw fit, regardless of where they lived. This meant that CCGs ceased to be local monopolists, and became competitors in a quasi-market setting. They took on a role similar to that of a social health insurer in the Dutch or the Swiss system.

In 2017, the quasi-market was transformed into an actual market, when the commissioning/insurance side was opened up to non-NHS organisations such as patient groups, insurance companies, mutuals and integrated health groups. Faced with competitive pressures, NHS commissioners became far more willing to engage with independent sector providers, and to open up new options for patients. At the same time, the payment system for secondary and tertiary care was changed. Activity-based payments were increased in such a way that, for the vast majority of providers, these payments would cover not just their variable costs but their fixed costs as well. Crucially, this was coupled with a strict no-bailout clause. From then on, hospital bankruptcies and takeovers – including takeovers by private providers – could, and did, occur. Given that a moderate health reform had failed in the coalition years, why could the much more radical post-2015 agenda succeed?

“Up until 2016, anti-reform campaigners had incessantly accused the government of having a ‘secret agenda’ of ‘privatising the NHS’”, recalls John Beispiel, a senior economist at the Department of Health. “These accusations had made the government very nervous. They didn’t know what to do. They should have tried to reclaim the narrative, to make it all about patient choice and autonomy. Instead, they got defensive. Their whole argument boiled down to ‘We are not as radical as they say we are’, but the impression that stuck was they were up to something dodgy. So this time, they decided to take the wind out of their opponents’ sails by formulating an explicitly pro-choice/pro-competition agenda, and by being brutally upfront it.”

And while frankness is generally a good thing in politics, this time they took this approach so far that it bordered on the ridiculous. In the autumn of 2015, they ran a campaign for which they contracted the model from the infamous ‘Beach Body Ready’ advert, which had sent Twitter into a fit of rage months before. The model (this time in formal business attire) made an unexpected comeback on the London Underground and elsewere, on a poster which read “Are You Patient Choice Ready?*”. The asterisk linked to a small-print line at the bottom which read “Don’t like freedom of choice? Then don’t use it.”

“Since the campaigners’ strategy was wholly framed in a language of conspiracies and hidden agendas, they simply did not know how to respond to such brashness”, Mr Beispiel explains. “But while the ad was unashamedly populist, its content was remarkably accurate. During the coalition years, the anti-reform campaigners had said to people: ‘The NHS is yours – you, the public, rightfully own it – and the government is selling it without your permission.’ What this ad made clear was that the government was not ‘selling’ anything to anyone. It was simply expanding choices for patients. Yes, that ultimately did lead to an increase in private sector participation – but only insofar as patients actively chose private sector organisation.”

Many reform opponents actively boycotted the private entrants. They insisted on being treated by an NHS provider, even when their GP recommended otherwise, and turned this into an exercise in ‘virtue signalling’. In 2016 and 2017, #IJustSaidYesToOurNHS and #BoycottAllPrivateHealthcare trended highly on Twitter. But it turned out to be self-defeating, because it proved the reformers’ point: Nobody was forced to use private healthcare if they did not want to. Inadvertently, it revealed what the opposition was really about: denying choice to other people, lest the choices they made were ideologically impure. When it emerged that several of the leading anti-‘privatisation’ campaigners had themselves sought treatment from some of the new for-profit hospital chains, the show was over.

The new healthcare landscape which has been shaped over the past five years is here to stay, and this is for the better. The boundaries between public and private healthcare have become blurred, and a former state monopoly has been replaced by a pluralistic system. But the critics’ fears have not materialised. Healthcare is still generally free at the point of use, universally accessible, and provided on the basis of need rather than ability to pay. The old NHS is dead, but the best of its founding principles live on.

PS: For less futuristic account of how a health reform along those lines could really work, see the IEA Discussion Paper ‘Health Check. The NHS and Market Reform’.

Head of Political Economy

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).