NHS orthodoxy is dying: Here’s how to put patients at the heart of healthcare

Surveys often suffer from what is known as “social desirability bias”: when people sense that an opinion they hold, or a habit they engage in, is unfashionable, they are unlikely to be entirely honest about it in a survey. Instead, they may simply tell the interviewer what they think they are socially expected to say. Social desirability bias explains why alcohol and tobacco sales are under-reported in consumer surveys, and why the polls failed abjectly to predict the 2015 General Election result.

With this in mind, the latest edition of the British Social Attitudes (BSA) survey comes with a surprise. It contains a question about the delivery (as opposed to the funding) of healthcare: people are asked whether they would prefer to be treated by an NHS provider, a private for-profit company, or a private non-profit organisation.

One would have thought that, when faced with a question like that, most people would feel obliged to pledge their allegiance to the NHS. Not so. Forty three per cent of respondents said they had no general preference for either sector, and another 18 per cent even expressed an active preference for private providers. If the NHS is a “national religion”, it has become a lot less orthodox.

This new-found pragmatism opens up interesting possibilities for health reform. On this basis, my new IEA discussion paper, A patient approach: Putting the consumer at the heart of UK healthcare, outlines a potential roadmap from the current state monopoly to a competitive, pluralistic health system.

In theory, Labour’s reforms of the mid-2000s have already created a situation in which patients can choose providers, in which funding follows patients, and in which autonomous local commissioners purchase healthcare services. So all we need to do is apply these reforms more consistently, build on them, and carry them to their logical conclusion.

First, we have to get serious about patient choice. On paper, patients enjoy free choice of provider at the point of referral, but most GPs simply continue to refer patients as they see fit. GPs should no longer have the right to refer patients to any specific hospital, specialist or diagnostic centre, unless a patient specifically instructs them to do so. A letter of referral should simply be a voucher for a particular treatment, which can be redeemed at any provider offering the service in question. A referral would then work like a drug prescription, which entitles you to a specified product, but without the GP telling you which pharmacy you have to go to.

Second, we should sharpen incentives on the provider side. At the moment, providers are largely paid on the basis of activity (through the “Payment by Results” formula). But if they cannot make ends meet on this basis – and most of them cannot – the Department of Health covers the shortfall in one way or another. This system is neither here nor there. The Payment by Results tariffs should be made fully cost-covering, so that the vast majority of providers can sustain themselves on this basis alone. But this should be coupled with a no-bailout clause, so that providers which still cannot keep themselves afloat would not be kept afloat. Bankruptcies and takeovers of failing providers would then become the norm.

Third, patients should be given free choice of healthcare commissioners. Most NHS funding is allocated through Clinical Commissioning Groups (CCGs), which fulfil a role comparable to that of health insurers in more market-oriented systems. The big difference is that, while people in the latter systems can freely choose insurers, CCGs are local monopolies. They should not be. People should be free to register with any CCG they see fit, regardless of place of residence, and the funding of CCGs should correspond closely to the health profile of the populations they cover (so that, if a CCG faces higher costs because it has, say, a high share of diabetics, its funding would be commensurately higher). CCGs would then begin to compete for patients, and develop their own distinctive brand identity, for example by catering to people with specific health needs. This sector should then be opened up to non-NHS actors as well, such as patient groups, private health insurers, trade unions and professional associations.

These reforms would preserve what people value most about the NHS, namely universal and equitable access to healthcare. But they would also deliver what the NHS has so far been lacking: consumer sovereignty, freedom of choice, competition and pluralism.

Dr Kristian Niemietz is the IEA’s Head of Health and Welfare, and a Research Fellow at the Age Endeavour Fellowship (AEF). He is the author of our ‘NHS Trilogy’:

·         Health Check: The NHS and Market Reforms (October 2014)

·         What are we afraid of? Universal healthcare in market-orientated health systems (April 2015)

·         A Patient Approach: Putting the consumer at the heart of UK healthcare (August 2015)

This article first appeared in City AM.

Head of Political Economy

Dr Kristian Niemietz is the IEA's 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).