The limits of Social Health Insurance (Part 2)
6 June 2023
SUGGESTED
Healthcare
Tax and Fiscal Policy
Economic Theory
11 November 2024
…continued from Part 1
Remuneration of medical professionals
The closer a purchaser comes to a monopsony (i.e. a demand-side monopoly) position, the greater their market power. This is why we often hear producers complain about being squeezed by big supermarket chains or big online retailers. The NHS, however, is much, much closer to a monopsony position than the likes of Tesco or Amazon could ever dream of. That near-monopsony power should, in theory, give it the power to keep prices and wages in the medical sector low.
However, since the NHS is not run like a business, and is not perceived to be one, there are other factors at play, such as political power plays. In a political confrontation between the medical profession and the government, the medical profession is almost guaranteed to have the upper hand. The medical professions enjoy an extremely high level of trust among the public, while politicians are one of the least trusted professions in the country. If health workers’ unions can add a political dimension to the confrontation by accusing the government of the day of being somehow anti-NHS – it is game over. There is no way the public would side with the government against doctors and nurses in such a situation. These political considerations, which work in doctors’ and nurses’ favour, would be absent in a less political system.
Overall, there is no clear and obvious relationship between the type of healthcare system a country has, and how well its medical professionals are paid. An SHI system does not automatically establish a competitive medical labour market, where doctors and nurses can freely search around for the best offers, either. Even in those systems, there is often a standard contract which most health insurers and most healthcare providers follow, even if there is some variation around it.
The NHS crisis of the day
The NHS is almost constantly in some sort of “crisis”, and while there is always some external trigger event for the crisis of the day (e.g. winter, Covid, a period of relative spending restraint), these triggers are usually things that other systems experience too. When SHI systems experience similar challenges, but cope much better with them than the NHS, SHI supporters should point this out – because nobody else will. And it is not widely known how often the crises we accept as “normal” are unheard of in other systems. We seek out such comparisons in other policy areas, and there was never a good reason for exempting the NHS from them.
But we need to be clear that this is very much an “I wouldn’t start from here” argument. There is nothing wrong with those. “I wouldn’t start from here” can be an entirely fair argument. For example, if you are a staunch Remainer, it is not your job to come up with solutions to the Northern Ireland issue, and if you are a staunch republican, it is not your job to come up with ideas for how the Royal Family should handle their latest PR problems. Similarly, if you are an SHI supporter, the current mess is not your mess. It is not your job to come up with short-term fixes within the system if you never wanted that system in the first place.
But we should be careful to avoid giving the impression that a switch to an SHI system could somehow be a quick fix to sort out the NHS crisis of the day. A transition to an SHI system would take years, and it would do nothing to help the person currently languishing on an endless waiting list, or stuck for hours in an A&E department.
If SHI supporters want to take part in day-to-day health policy arguments, they have to adopt a two-pronged approach. They can advocate short-to-medium term improvements within the current system, whilst also making clear that these will only take us so far, and that ultimately, system-level change is required. Otherwise, we are stuck with “I wouldn’t start from here” – which is fair, but not always hugely helpful.
Conclusion
SHI systems are clearly superior to the NHS in a number of important ways. They deliver better clinical outcomes across the board. They offer faster access to healthcare. They are more resilient and less crisis-prone. They give people greater freedom of choice along various dimensions. They are less politicised, and therefore, in politically polarised times like these, less toxic.
That is a solid-enough case for preferring a system of that type to the NHS. That is good enough. They do not have to be the solution to everything.
They share some problems with NHS-type systems, and those problems would not be solved by a switch to SHI. If we had an SHI system, it would still be true to say that there is little financial incentive to look after one’s own health, and Nanny Statists would use that as a justification for their illiberal policies. It is not clear whether doctors and nurses would be better paid than in the current system: they may, or they may not be. That would depend on other things that happen alongside. And while a switch to an SHI system would make future crises less likely, it would not offer a quick fix for whatever the NHS crisis of the day is.
The case for SHI is strong enough as it is, and it is still not widely known, so it is not as if we had run out of things to say. We should concentrate on those areas where SHI systems have demonstrable strengths relative to NHS-type systems, and promote those.
Remuneration of medical professionals
The closer a purchaser comes to a monopsony (i.e. a demand-side monopoly) position, the greater their market power. This is why we often hear producers complain about being squeezed by big supermarket chains or big online retailers. The NHS, however, is much, much closer to a monopsony position than the likes of Tesco or Amazon could ever dream of. That near-monopsony power should, in theory, give it the power to keep prices and wages in the medical sector low.
However, since the NHS is not run like a business, and is not perceived to be one, there are other factors at play, such as political power plays. In a political confrontation between the medical profession and the government, the medical profession is almost guaranteed to have the upper hand. The medical professions enjoy an extremely high level of trust among the public, while politicians are one of the least trusted professions in the country. If health workers’ unions can add a political dimension to the confrontation by accusing the government of the day of being somehow anti-NHS – it is game over. There is no way the public would side with the government against doctors and nurses in such a situation. These political considerations, which work in doctors’ and nurses’ favour, would be absent in a less political system.
Overall, there is no clear and obvious relationship between the type of healthcare system a country has, and how well its medical professionals are paid. An SHI system does not automatically establish a competitive medical labour market, where doctors and nurses can freely search around for the best offers, either. Even in those systems, there is often a standard contract which most health insurers and most healthcare providers follow, even if there is some variation around it.
The NHS crisis of the day
The NHS is almost constantly in some sort of “crisis”, and while there is always some external trigger event for the crisis of the day (e.g. winter, Covid, a period of relative spending restraint), these triggers are usually things that other systems experience too. When SHI systems experience similar challenges, but cope much better with them than the NHS, SHI supporters should point this out – because nobody else will. And it is not widely known how often the crises we accept as “normal” are unheard of in other systems. We seek out such comparisons in other policy areas, and there was never a good reason for exempting the NHS from them.
But we need to be clear that this is very much an “I wouldn’t start from here” argument. There is nothing wrong with those. “I wouldn’t start from here” can be an entirely fair argument. For example, if you are a staunch Remainer, it is not your job to come up with solutions to the Northern Ireland issue, and if you are a staunch republican, it is not your job to come up with ideas for how the Royal Family should handle their latest PR problems. Similarly, if you are an SHI supporter, the current mess is not your mess. It is not your job to come up with short-term fixes within the system if you never wanted that system in the first place.
But we should be careful to avoid giving the impression that a switch to an SHI system could somehow be a quick fix to sort out the NHS crisis of the day. A transition to an SHI system would take years, and it would do nothing to help the person currently languishing on an endless waiting list, or stuck for hours in an A&E department.
If SHI supporters want to take part in day-to-day health policy arguments, they have to adopt a two-pronged approach. They can advocate short-to-medium term improvements within the current system, whilst also making clear that these will only take us so far, and that ultimately, system-level change is required. Otherwise, we are stuck with “I wouldn’t start from here” – which is fair, but not always hugely helpful.
Conclusion
SHI systems are clearly superior to the NHS in a number of important ways. They deliver better clinical outcomes across the board. They offer faster access to healthcare. They are more resilient and less crisis-prone. They give people greater freedom of choice along various dimensions. They are less politicised, and therefore, in politically polarised times like these, less toxic.
That is a solid-enough case for preferring a system of that type to the NHS. That is good enough. They do not have to be the solution to everything.
They share some problems with NHS-type systems, and those problems would not be solved by a switch to SHI. If we had an SHI system, it would still be true to say that there is little financial incentive to look after one’s own health, and Nanny Statists would use that as a justification for their illiberal policies. It is not clear whether doctors and nurses would be better paid than in the current system: they may, or they may not be. That would depend on other things that happen alongside. And while a switch to an SHI system would make future crises less likely, it would not offer a quick fix for whatever the NHS crisis of the day is.
The case for SHI is strong enough as it is, and it is still not widely known, so it is not as if we had run out of things to say. We should concentrate on those areas where SHI systems have demonstrable strengths relative to NHS-type systems, and promote those.
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