When forced to choose between saving the nation from the marauding Scots and saving the NHS from the Tories, middle England opted to face down the Jacobite rebellion. Labour’s warnings about the effect on the health service of another term for Cameron fell flat, as did the National Health Action Party’s call to turn the clock back to the good old days before purchasers and providers split (although two of their candidates did save their deposits). It all seems so difficult to understand, so perhaps we have to go back into history to see more clearly what is unfolding around us.
IN THE BEGINNING At the foundation of the NHS in July 1948 male life expectancy was around 65, the growing middle class was relieved it could access the free public health services that were available to the working class, and living standards were low. The new National Health Service had, from the outset, two features that have shaped its subsequent development; central allocation of funds (wrongly called a ‘command economy’), and contracting out of many services.
Central allocation of funds, from the Ministry down through regional bodes to local services, was not a form of planning, although attempts at planning were grafted onto it as the NHS grew. Central allocation always involved negotiation about what local services needed, and always provoked competition for resources. Competition was an inevitable consequence of need (or demand) exceeding supply. Added to this constant negotiation and competition was the problem of bottlenecks. Bottlenecks occurred when there were resource mismatches – enough surgeons to operate on those needing surgery but not enough theatre staff, or even enough theatres. Bottlenecks were removed by allocating resources to them. Most recently the Blair administrations bought operating time and space from the private sector to reduce waiting lists.
Contracting out was a dominant feature of the NHS from its first day, because most community-based NHS services – general practice, dentistry, opticians and pharmacists – were provided by for-profit subcontractors to the NHS, functioning as franchisees. The nature of the franchises varied – general practice functions as a network of small doctor co-operatives that reinvest profits in their organisations and charge patients nothing, whilst dentists operate public and private services in parallel, and charge patients using the public option.
New ways of contracting out have developed as the NHS has grown; voluntary pharmaceutical price regulation that guarantees profits whilst also capping them, hospice development through the charitable sector, the Private Finance Initiative for new hospital building and Foundation Status for hospital (which makes them into franchisees).
The important point is that from the beginning the NHS has had a public sector (the nationalised hospitals) and a public domain occupied by sub-contractors. The public sector took 80% of the NHS budget, but to this day 90% of citizens’ contacts with the NHS take place in the public domain. So if we want the NHS to stay public, what are we asking for, a bigger public domain or a bigger public sector? The Conservative government can live with the former, and is anyone calling for the nationalisation of dentistry?
THE END OF THE BEGINNING Although the Conservatives were hostile to the NHS for some time after its foundation, this attitude changed to one of bipartisan support; the first large scale hospital building programme was initiated in the early 1960s by the then Conservative health minister, Enoch Powell.
In 1983 a group of health policy analysts, heads of teaching hospitals and Conservative politicians met at the Carlton Club for a private discussion about the future of the NHS. The meeting came up with two over-arching objectives; the NHS needed to be ‘fully costed’, and its financial basis should shift from general taxation to a form of compulsory health insurance, based on National Insurance.
‘Fully costed’ means knowing the price of every part of every treatment, from the cost of cashing a prescription to the price of a major operation. This has been largely achieved (although there are some details of costing that remain unclear, and these are now discussed in terms of “unbundling”). The advantage of having services ‘fully costed’ is obvious – prices are central to markets, and so help the extension of contracting-out that we have seen since the middle of the Blair/Brown administrations.
However, having prices does not necessarily mean that contracting out will spread quickly. The NHS is a difficult industry to extract profits from, on the scale that shareholders require, and the market has failed as much as it has succeeded – the Circle debacle with Hinchingbrooke Hospital being an example. The Kings Fund’s judgement before the 2015 election is right. Most contracting out has been small-scale and marginal, except in mental health services. The over-excited advocates of market mechanisms hoped that market forces would sweep through the NHS like a whirlwind; they have been proved wrong and now look silly. Some of their opponents prophesied the end of the NHS as predatory for-profit companies swooped in; they got that very wrong, at least so far, and now sound histrionic. Of course privatisation attempts will still continue, and will demand local responses.
The second objective seems distant. The NHS is more efficient in its use of resources than European compulsory social insurance systems, and more socially just than the chaotic system of funding that has grown up in the USA. Nevertheless, if a crisis were to develop in the NHS, it could provide the opportunity for vested interests – the insurance industry that would welcome 60 million more customers, and the wealthy who could top up with personal insurance and so jump any queues – to propose a fundamental change.
Such a crisis could occur because of the cost containment being applied to the NHS. The NHS budget needs to grow by 4 to 5% per year to allow the application of new treatments and technologies, but at present it is growing by less than 1%. We are already beginning to see the consequences of this squeeze with lengthening waits in A&E departments and longer delays in starting cancer treatments. If it continues over five or so years the NHS budget will be 20% lower than it needs to be. To contain the impact of this, the current government is likely to press on with market solutions, despite their poor record, because they intensify the competition for resources that has always been a feature of the NHS, reduce job security and (in theory) increase productivity.
Productivity may not increase, and services will slow down and fail to meet demand. Key performance indicators, like time to investigation for potential cancer symptoms, will slip and treatment outcomes will not improve. The mid-Staffordshire hospital scandal shows what this could be like. On the other hand productivity might increase, but at the expense of the quality of care; when resources are tight ‘relational expertise’ – the ability to be with the ill person as a source of both information and of comfort – gives way to ‘technical expertise’ – the right treatment is given, even if the recipient does not understand its’ rationale and effects.
WHAT NEXT? The NHS has high levels of public support, and (perhaps surprisingly) support is growing. This support, even if relatively passive, will be a problem for a government hostile to the NHS. Passive support may not be enough, however. The Wanless long-term review of the NHS in 2002 argued that the health service would not survive in its current form without the “active engagement” of the population in staying healthy.
Increased funding for the NHS is needed to cope with rising technology costs, and this need will become more urgent the longer this administration survives. The decisions about containing NHS funding are political, not economic. Britain can afford to increase the NHS budget, which could have the twin benefits of improving the quality of medical care whilst also increasing consumer demand and tax income. We are a long way from the point where growth in the NHS budget could undermine other economic investment and damage the economy; this seems unlikely to occur even with an NHS budget of 14 to 16% of GDP (it is currently less than 8%).
Imminent wide-scale privatisation seems unlikely, despite the best efforts of the current administration, for the reasons given above. Reconfiguration of the NHS, on the other hand, is highly likely. One option would be for local government to become the natural home of NHS and social services combined into a single entity; this is underway in Manchester with the active involvement of Labour-led councils. Another option would be the formation of integrated services like the US Kaiser Permanente system, which contains general practitioners, specialist hospitals and social care in a single management structure; the first nine hospitals wanting to do this in England were given the green light in March 2015.
The achievement of the second Carlton Club objective, the shift to social insurance, seems unlikely in the short term. Even if this prediction is wrong, the outcome would probably be more European than American and more like a hypothecated health tax than a true insurance system that matches premiums to healthiness. A European-style compulsory health insurance plan would offer its enrolees a range of services within a prescribed tariff. Although politicians dislike hypothecated taxes because they reduce flexibility in allocating funds, some citizens might welcome the new freedom to ‘shop around’ with their new found personal health budget. Given their long lives, disposable income and high standard of living, these citizens might want to reshape a health service designed for a past society.
Steve Iliffe 23/5/15