Going ‘the whole hog’ in healthcare reform would not require a revolution

Summary:

  • In recent years, the healthcare debate has been dominated by allegations that the ‘privatisation of the NHS’ was in full swing. But this is not a new phenomenon at all. For as long as the health service has existed, there have been periodic outbreaks of ‘NHS privatisation fears’.

  • Public attitudes to healthcare could be described as a combination of ‘macro-level absolutism’ and ‘micro-level pragmatism’: When people are asked about their commitment to the NHS in the abstract, support is almost unanimous and strongly felt. But when people are asked whether treatment should be provided privately or publicly, the majority are either indifferent, or even in favour of private provision.

  • Supporters of a competitive, consumer-driven health system should try to build on this pragmatism. There will never be a democratic mandate for a privatisation programme involving healthcare facilities in the UK, but there already is an appetite for choice and pluralism.

  • In the pluralistic systems of France, Australia, Luxembourg, Japan, South Korea, Germany, the Netherlands and Switzerland, patients enjoy free choice among a range of providers, including a large private sector. These systems record some of the best health outcomes in the world, without any obvious downsides relative to the NHS.

  • The quasi-market reforms of the mid-2000s have already taken us some way towards a pluralistic system. Going ‘the whole hog’ would not require a revolution. It merely requires building on those reforms, and straightening out inconsistencies in them.

  • The whole concept of ‘catchment areas’ should be abolished. Patients should be able to register directly with any Clinical Commissioning Group (CCG) they see fit, and choose freely among primary care providers. Meanwhile, CCGs should be able to operate nationally, and to merge and de-merge with other CCGs, as well as provider organisations. CCGs would effectively become social health insurers, and the sector should be opened to private insurers as well.

  • The ‘Payment by Results’ (PbR) formula should be reformed in such a way that funding truly follows patients. In particular, PbR tariffs should cover a proportion of fixed costs as well, and they should be set in such a way that the vast majority of providers could economically survive on the basis of these activity-based payments alone. This should be coupled with a strict no-bailout clause. Hospital bankruptcies, mergers and takeovers would become a normal occurrence.

  • CCGs and other financing agencies should be able to offer selective rebates for patients who voluntarily accept co-payments, deductibles, or inclusion in a ‘managed care’ plan. The default option would still be a situation in which healthcare is free at the point of use, but people could change that default option in exchange for a tax/premium rebate.

  • CCGs and other financing agencies should be required to build up old-age reserves for their members while they are young, and draw upon those reserves in later years. This would mean a transition to a pre-funded health system, in which, on a lifetime basis, each generation ‘pays its way’.

  • The new system would continue to offer universal and equitable access to healthcare, regardless of ability to pay. But the role of the state would largely be limited to guaranteeing that access. Healthcare would otherwise be provided in a competitive marketplace.


The paper featured in The Telegraph

To read the press release, click here.

2015, Discussion Paper No. 64

In April 2015, the IEA produced What Are We Afraid Of? Universal Healthcare in Market-Orientated Health Systems, by Dr Kristian Niemietz.

In October 2014, the IEA produced Health Check: The NHS and Market Reformsalso by Dr Kristian Niemietz.

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Head of Health and Welfare

Dr Kristian Niemietz joined the IEA in 2008 as Poverty Research Fellow, becoming its Senior Research Fellow in 2013 and Head of Health and Welfare in 2015. Kristian is also a Fellow of the Age Endeavour Fellowship. He 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). In 2013, he completed a PhD in Political Economy at King’s College London. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and at King's College London, where he taught Economics throughout his postgraduate studies. He is a regular contributor to various journals in the UK, Germany and Switzerland.