Is state-funded healthcare the best we can hope for?

Digital governance has revolutionised the NHS. While progress has been slow and very expensive, underpinning the progress is the ease with which feedback can be gathered and processed into a target.

While early targets caused confusion and chaos (in one hospital patients were sent home still recovering from surgery to make beds available), their re-evaluation and adjustment based upon patient requirements has led to medical staff delivering better services. Effective feedback has allowed weak staff to be flagged and has made other staff work harder – although the difficult bureaucracy needed to fire employees has inhibited progress.

As well as this, competing NHS trusts enable underperforming hospitals to be identified and closed down, and good hospitals to become independent foundations. So, although the “right” targets are still developing, Labour’s NHS legacy is in the hands of technocrats reading off spreadsheets and the NHS is no longer directly run by the central state. To some extent the target culture simulates the effect of competition, without actually privatising NHS funding.

Of course the incremental and expensive improvements we currently see in the NHS could be speeded up by the de facto privatisation of healthcare – for example, the coalition could sell hospitals to private firms and surgeries to GPs. The profit motive would undoubtedly lead to better results. However, while the doomsayers who compare planning the NHS to the impossible job of organising the whole Soviet economy were right 13 years ago, their viewpoint is arguably less valid today. Local managers, accountable for local results, mean the so-called monolithic NHS is actually a fragmented umbrella body.

Ludwig von Mises demonstrated that only the free market reveals people’s preferences, and any deviation from it leads to economic inefficiency, as well as the moral conundrum of why one person should subsidise another. But – and here’s the rub – there are important reasons voters turn away from any politician who airs the idea of scrapping or privatising the NHS. Voters fear that some people wouldn’t get healthcare, maybe because they could not afford it or just decided to opt out – and for many people health is too vital an issue to take risks with. Indeed, a common perception is that accident victims with no insurance would be left to die on the street. While it may be possible to convince academics that healthcare needs radical reform, ordinary Britons strongly support the welfare state now and recoil from the risks they associate with market-based systems.

7 thoughts on “Is state-funded healthcare the best we can hope for?”

  1. Posted 10/08/2010 at 13:29 | Permalink

    The problems can be solved fairly easily by moving towards a health system similar to Singapore. Private health accounts, free at the point of service treatments, compulsary insurance and grants for those that can’t afford it. According to the WHO, Singapore’s healthcare is better than ours (we are 18th, they are 6th), everybody gets treatment and it’s free at the point of service and it costs less. It’s only the sacred nature of the NHS and the fact that most people assume any attempt to change it will be for the worst that means that it wont be touched. In terms of results, such a move would dispell any of the problems people talk about and would ensure better healthcare for everybody.

  2. Posted 10/08/2010 at 14:08 | Permalink

    Excellent points Ben, if free healthcare for all is to be provided by the state (which I believe it should be), then the current system is not only infinitely better than it was when Labour took control, but also as good as we can reasonably expect it to be, without adversely influencing the wellbeing of our population.

    The inefficiency is worth the gain.

  3. Posted 10/08/2010 at 14:10 | Permalink

    I agree that Britain has a culture of welfarism that means free market liberalisation will never be feasible. In this sense the IEA should get real in its ambitions.

    The current system is state funded but not state run and while the actual mechanism of funding is debatable the system we have is quite good (maybve the German system would be better). Furthermore there is a lot of potential for improvement by targets and state competition – if the coalition remove these checks it will surely be a step backward

  4. Posted 10/08/2010 at 14:22 | Permalink

    And how did the culture of welfarism come about? Through the creation of a welfare state that people became dependent on over time. Moving to the Singapore system would contain elements of welfarism but would mean that most people would be moving towards self-dependency. This is how the culture and dependency on welfarism can be gradually broken down.

    The current system is state run through an enormous amount of inspection, regulation and targets. Specific decisions may be made by hospitals, but most are the result of central planning.

    You can’t say targets replicate markets, targets stifle important decisions being made and state competition is basically a contradiction in terms.

  5. Posted 10/08/2010 at 14:53 | Permalink

    state competition is not a contradiction in terms when, as in the NHS, patients can pick and choose hospitals and doctors.

    The purpose of competition is to weed out the weakest firms – in the same way the worst hospitals are exposed. These hospitals are taken over and improved. [The case with doctors is slightly more complicated because it is difficult to measure success].

    Targets replicate competition by consistently pressurising hospitals into better performance – this drives efficiency, new innovative procedures and, like competition, more learning. In short, unlike other state run enterprises, stagnation is prevented.

  6. Posted 10/08/2010 at 15:19 | Permalink

    The problem with the NHS is that it combines third party payer problem with a monopolistic insurer AND deliverer.

    Even under the new plans for the NHS*, people are sidelined and central control still holds sway.

    Targets are a poor mechanism as one does not see hospitals emptied. It is all very well saying one cann choose a hospital, but unless there is surplus capacity, all hospitals will be busy.

    * which I outline here:

  7. Posted 10/08/2010 at 15:23 | Permalink

    Targets and ’state competition’ may have improved matters slightly, but they are no substitute for proper markets. In the absence of market pricing the misallocation of resources is endemic. There is a severe mismatch between the provision of services and consumer preferences (long waiting lists are one result). Moreover, investment continues to be allocated according to bureaucratic and political priorities.

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