Faith based health policy: the urge to privatise
BMJ 2007; 334 doi: https://doi.org/10.1136/bmj.39237.433843.59 (Published 07 June 2007) Cite this as: BMJ 2007;334:1193
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Stephen,
As ever , your views on markets are stimulating and challenging.. but
I fear , wrong.
After Adam Smith came Karl Marx, and a hundred years of a Socialist
critique of your theoretically 'well-ordered markets'.
Essentially - most markets are NOT well-ordered.
The game is stacked such that Providers and Consumers all begin with a
variety of unfair advantages. "To them as have shall be given more..."
and only a few people at the bottom can claw their way up the heap. All
men are clearly NOT born equal, nor will they have equality thrust upon
them !
In the health market consumers are seriously disadvantaged by that
very ill-health for which they seek to purchase redress - eg: how on earth
is a well-ordered market going to provide for a homeless handicapped
orphan child ??
Unless of course, that you agree there IS still such a thing as
Society ???
Which well-ordered market providing effective health-care can you
cite, in this real dog-eat-dog, devil-take-the-hindmost world ??
Let us get real.
Competing interests:
an NHS GP and a potential patient
Competing interests: No competing interests
Well ordered markets do indeed benefit all concerned and we have
known this since Adam Smith. A great deal of the western world's well
being comes because competitive markets are a positive sum game.
Every time you buy a car, travel to the supermarket or make a phone
call you benefit from that competition. For all these activities the
public gets better goods and services for lower prices (or ever decreasing
prices). The providers in these markets need to keep improving or their
customers desert them and their profits vanish (UK observers can see an
entire cycle of this in the food sector where the previous leader,
Sainsbury's, was dethroned, saw its profits fall to negligible levels and
then, after getting its retailing act together, slowly claw its way back).
It is a common criticism of markets when applied to health to argue
that the profit private providers could make must come from the quality or
volume of care provided. If a slice of the cake goes to profit (or a
"surplus" for a non-profit organisation) then that slice must come from
patient care. But this makes the false assumption that the efficiency of
all providers is fixed (or, equivalently, that a given pound of spending
always buys a fixed volume of healthcare). In reality the efficiency of
provision varies enormously even inside the state sector (the worst
hospitals in the UK are between 50% and 100% worse than the best). If an
independent provider is more efficient than the public providers, then
they can both make a profit and offer cheaper services. The efficiency
gains from getting this right far outweigh the "cost" in terms of allowing
profits.
More importantly the incentive is not static. In competitive markets
providers strive to stay ahead of their competitors. Todays cars in
europe, for example, are more reliable, contain far more technology, use
far less fuel and are 40% cheaper than their equivalents 2 decades ago.
Today's market leaders are profitable because they continued to improve
and innovate while sharing some of the gains with their customers.
Underlying effective market mechanisms are two things: diversity of
provision and discipline for failure. Improvement over time requires
experimentation (to explore different ways to run the service) and that is
less common in monolithic systems. Even more importantly it requires
discipline about eliminating failure and rewarding success. Most markets
do this naturally via the profit motive (though we need mechanisms to
guard against monopolistic behaviour or the improvement incentive doesn't
work). But profit is not the only way to do this and not all markets need
prices: the NHS is designed to pay fixed prices but allow competition for
patients (good providers attract more patients and therefore more money).
It is the competitive aspect that really matters (for a full exposition of
the idea John Kay's "The Truth About Markets" is a good introduction).
Centrally planned systems tend to get the incentives the wrong way
round: money is pumped into failing units on the grounds that they need
the cash to fix their problems. Efficient providers have nothing to show
for their success. It may be possible to develop a better centrally
controlled system, but so far we haven't found it. The current reforms in
the NHS are a brave attempt to explore the possibilities.
Competing interests:
None declared
Competing interests: No competing interests
I am not sure I understand this. I think that what Stephen is saying
is that in
a well ordered competitive system everyone benefits. Is that true? Where
does such a system exist?
He says- "In order to maintain the incomes of their shareholders and
managers, private companies need to keep improving." True given the
paradigm but a private insurance company gives their shareholders a
return,
let's say 10-15% - even the worst public system would be better with that
much of a cash infusion each year.
Also, Stephen says-"being private and profit making has very little
to do with
it." I think he is saying that it is the competitive aspect that really
matters.
But profit has everything to do with it, because the same money that
leaves in
profit could stay in the system. (Let me ignore for the moment the not-for
-
profit system which is another issue altogether.)
I have heard it argued that without a private system this "savings"
in money
would never be produced in the first place, and somehow should not be
considered.
Some public organizations have performed poorly in the past but that
does
not mean that they are intrinsically doomed to failure. Nor is the answer
to
privatize. Are we really beyond finding a solution that works outside the
templates provided by the world of finance?
Competing interests:
None declared
Competing interests: No competing interests
Stephen Black's makes a valid and useful distinction between
"markets" and "private enterprise". One could also make the distinction
"competition" vs. "private enterprise."
The mistake many people make is that "competition" necessarily
implies competing on price and "market" inevitably means patients must
ache fiscally (through heavy vost sharing) as they ache physically. Not
so.
Hospitals and physicians under a single-payer system still must
compete for patients. They do so on quality, not quality and price.
One could even have doctors and hospitals compete on price and
quality under a single payer system without violating social equity. For
example, a single payer system could take competitive bids from competing
providers, for-profit or not-for-profit.
In short, a health system should enlist the beneficial forces of
competition in a regulated market structure wherever it can. Indeed, the
U.S. Veterans Adminsitration Health System -- purely socialized medicine -
- moved to the forefront of high quality health careonly after President
Clinton threatened to have it compete with other insurance carriers for
the custom of veterans.
Uwe Reinhardt
Competing interests:
None declared
Competing interests: No competing interests
In order to maintain the incomes of their shareholders and managers,
private companies need to keep improving. In a properly competitive market
the gains from improvement are shared with their customers.
Oh and being private and profit making has very little to do with it.
The independent health sector in the UK has several non-profit firms. What
matters is the structure of the market. If this is right, the innovators
who generate improvements in quality and efficiency can expand at the
expense of the poor quality and inefficient. This provides a net gain to
all of us as it drives long term improvement.
Badly structured markets (epitomised by US healthcare) are failures
for all, despite profit making participants. It's markets that work, not
the private sector.
Competing interests:
None declared
Competing interests: No competing interests
In order to maintain the incomes of their senior managers and
shareholders, private companies need to keep expanding. Large commercial
health companies need to move into new markets in order to do this.
Lobbyists from the healthcare industry have the ears of key politicians
and other decision makers. Thus the economic needs of companies to expand
drive healthcare policy. The clinical needs of the people are secondary to
this. This is the operation of Adam Smith's invisible hand of the market.
Competing interests:
None declared
Competing interests: No competing interests
Professor Reinhardt mentions Germany, but does not extend his
interesting observations to the UK. Here, the market is rigged in favour
of the independent sector, which has a better tariff in many places, has
not had to bother with teaching and training, and can rely on the public
sector to sort out its problems.
Competing interests:
None declared
Competing interests: No competing interests
Markets: imperfect is still better than planning
It is easy to fall into the trap of using anti-market rhetoric ("dog-
eat-dog, devil-take-the-hindmost world") but it doesn't address the real
issues. The design of the market in England gives equal spending power to
every patient: a big improvement over the centrally planned system where
the power of providers could only be challenged by those who could opt-out
(and pay for private care) or who were capable of manipulating the
bureaucracy in their favor (the middle classes have always had a
disproportionately large share of voice).
Markets don't have to be perfect to bring big improvements. And they
most certainly don't give more to those who have or only to those who can
claw their way up the heap. The rhetoric only makes sense if markets are a
zero-sum game and gains for some come at the cost to others. For example,
market-based reforms in Chinese industry have probably lifted more people
out of poverty than all the central planning ever done (and if anti-market
rhetoric were true this could not have happened as the already-rich west
would have crushed the growth of chinese competition).
The design of the health market in England is likely to do more to
improve the homeless handicapped orphan's access to healthcare than all
the planning we've ever done.
Competing interests:
None declared
Competing interests: No competing interests