The market has failed

Gordon Brown may be having second thoughts about market reforms in the NHS. Last week Nick Timmins described how the government is cutting back its use of the private sector (BMJ 2007;335:1066; doi: 10.1136/bmj.39405.462431.94). Expansion of the private sector is still the official line, but only as long as it provides value for money, Mr Brown told this week's conference of the Confederation of British Industry. Beleaguered as he is on almost every front, if Brown is rethinking healthcare markets he'll find support in this week's BMJ. Steffie Woolhandler and David Himmelstein argue that US health care, the biggest system in the world in which markets have been given full rein, has failed. Specifically, they point to the toxic mix of public funding (through Medicare and Medicaid) and private provision, exactly the mix that Tony Blair envisioned for the UK. Rather than copying the US model, say Woolhandler and Himmelstein, the UK and the world should put it in quarantine (doi: 10.1136/bmj.39400.549502.94).

Why do markets in health care fail to deliver the things we want? The Office of Health Economics explains that effective markets produce the goods and services we want in the right quantities at the lowest possible cost (www.oheschools.org/ohech3pg2.html). They function because they are able to transmit information about benefits and costs between producers and consumers. Markets fail when information isn't transferred properly, which prevents people from making rational decisions about what they are buying. Markets also fail when the producers have the power to influence price or quantity. Doctors and other health suppliers often have this power.

At a more fundamental level, even the most perfect healthcare market will fail to deliver what most of us want: a fair distribution. Markets are amoral about who consumes what and how much. Markets ration consumption on the basis of price and consumers' incomes. A true market has no room for equal access for equal need, the bedrock on which the NHS was built. Even those who are not hung up on equity for its own sake can see that societies need a healthy workforce and that public ill health carries threats for the rich as well as the poor.

Proof of the market's failure in US health care is nowhere more evident, ironically, than in the fact that 60% of health spending now comes from the public purse. Woolhandler and Himmelstein explore how this has happened. They conclude that using public money to buy care from private firms has led to soaring administrative costs, selective enrolment, corruption, and profiteering: “Investor owned healthcare firms are not cost minimisers but profit maximisers. Strategies that bolster profitability often worsen efficiency. US firms have found that raising revenues by exploiting loopholes or lobbying politicians is more profitable than improving efficiency or quality.”

Michael Moore's film Sicko (BMJ 2007;334:1338-9; doi: 10.1136/bmj.39258.421111.DB) used controversial documentary techniques to rage against the parlous state of US health care. Woolhandler and Himmelstein don't pull their punches and may be accused of polemic. But the facts they have marshalled speak for themselves and must give Gordon Brown, or any future government, serious pause for thought.