NHS reforms will distract GPs from the work that “really matters”

David Hunter accuses me of talking nonsense about the utility of
markets in healthcare.

First, to be clear so we can avoid this frustrating straw man, market
pragmatists don't argue for a general superiority of markets across all of
healthcare. For example, the case for government funding (rather than
insurance funding) is compelling: it is cheaper and better (to me this is
what the NHS is about: taking away the fear of medical costs when care is
needed). And it is also true that healthcare isn't like the market for
cars or supermarket readymeals where consumer choice has some chance of
ensuring an effective market.

But this says nothing about whether a provider market in a system
where government pays via expert intermediaries (was PCTs, will be GP
consortia) who can judge provider quality might have benefits (and this is
the system proposed in England). In this system patient choice is not the
primary driver of who gets what treatment, but merely a way of adding some
pressure on providers to pay attention to the peripheral aspects of
treatment such as waits and convenience that are often neglected in the
NHS.

I become frustrated with the anti-market argument when they refuse to
pay any attention to the nature of the market the pragmatists would like
to see. Experts and non-experts alike seem to think that because the USA
is such a catastrophe (and I agree that it is and certainly don't see
anything worth copying there) that is the end of any pro-market argument
("if markets worked why is the USA such a mess"). If you are going to use
the failures of the USA as evidence against markets you also have to show
that the proposed market structures are similar to those that fail in the
USA. No critic in these pages has yet to make that link for the specific
sorts of markets proposed in the UK.

And please stop telling me to read the famous 1963 Kenneth Arrow
paper (or the recent related comment by Krugman
http://krugman.blogs.nytimes.com/2009/07/25/why-markets-cant-cure-
healthcare/). Again the problem is whether their criticisms of markets are
at all relevant to what pragmatists want for the NHS. Arrow, for example,
is devastating in his criticism of a market for medical insurance, but
seems unable to imagine or address provider competition in anything like
the UK context. Krugman, too, is too focussed on the specific failures of
the USA to say anything at all relevant to the NHS. As far as I can tell
the critics who keep telling me to read these pieces are not themselves
looking beyond the headlines and assume, for example, that Arrow's piece
is a mathematical refutation that markets can ever do any good in
healthcare.

As for whether it is helpful to bring up the failure of communism, I
only do so because of the naivety of most of the anti-market arguments
used by those opposed to NHS reform. The idea that a system run and
coordinated from the centre by technocrats with none of the wasteful
transaction costs or overheads of markets is self evidently better, is the
argument that persuaded many intellectuals of the superiority of communism
in the early 20th century. In virtually every area of economic activity
markets thrashed central planning as a way of delivering cheaper and
better goods and services. Markets are not perfect and some work better
than others (badly regulated ones like healthcare or mobile telephony in
the USA are usually the worst). But despite the extra costs and problems
they almost always seem to do better than central planning. We should
start this debate with a huge weight of evidence in favour of markets. Of
course markets incur extra costs, but the overwhelming weight of evidence
is that the benefits outweigh those costs by a very large margin over
time. If health is different the debate should start with specific reasons
why the specific markets proposed in NHS reform can't work. To argue using
logic that appears to ignore the failure of communism is either shockingly
naive or just dishonest.

And what are the transaction costs or the costs of commissioning in
the current NHS? Certainly not 14% (as reading the report should make
clear, paragraphs 36 and 37). In fact 14% is probably the total cost of
all administrators and managers in the NHS. Somehow the poorly referenced
worst case somehow became our best estimate of the total costs of
commissioning.

What I would like to see is a proper debate. That means not starting
with the USA as the only possible system; admitting that markets are
almost always better than central planning; and a specific critique of the
sorts of markets proposed for the NHS. So far the debate has not moved
beyond naive rhetorical sloganising (and, to be fair, both sides are
guilty as the government have thoroughly botched the case for the
reforms).