Feature

Risky treatment for the NHS

In a review essay of a Chris Ham’s recent Demos publication, Geof Rayner cautions against uncritically importing US policy ideas into the NHS

Given the state of the monarchy, the NHS might now be our most popular national institution — despite the enormity of demand placed on it and the yards of critical headlines. From where does the NHS’s popularity originate?

Richard Titmuss had it nearly right. He thought that the NHS symbolised an arrangement for altruistic exchanges and collective risk-sharing in a society otherwise beset by commercialisation, civil privatism and social inequality. In The Gift Relationship, Titmuss set out an ethical-cum-economic theory based on the giving and receipt of blood without reward, a situation he contrasted with the less efficient commercial blood markets of the US.¹ His argument was narrowly based — blood is only one small part of healthcare — but in addressing how the NHS institutionalises a reliance on strangers (including health workers) he put his finger on why the British value state intervention in healthcare.

In Public, private or community Chris Ham, like Titmuss, aims to breathe fresh life into the NHS but, unlike Titmuss, he thinks it is no longer necessary for the state to provide healthcare, only to ensure both that there’s enough money to pay for it — including making people pay extra outside the tax system — and that it is effectively regulated.

Central to Ham’s analysis are Thatcher’s NHS ‘reforms’. In his view, traditionalism, bureaucracy and professional dominance have held back the NHS, resulting in performance variations, limited patient choice, and limited pressure to improve efficiency.

Thatcher’s reforms ‘transformed’ the NHS into a contract-based service. They increased management control with a more critical eye to the ‘medical model’ of treatment and more focus on patients. Tax finance and universal coverage were retained and new ideas like Health of the Nation, the ‘primary care-led’ NHS and ‘evidence-based medicine’ were added.

Ham feels that GP fundholding was limited and timid, while ‘the use of block contracts between purchasers and providers meant that in many cases money did not follow the patient as these contracts did not provide incentives for increased productivity’. Equity probably suffered, the market increased transaction costs, and it has not been possible to say whether the service has really improved because new money was made available. But Thatcher’s reforms were not the predicted disaster.

Ham describes the NHS as a ‘state monopoly’, a view that could only be held if one ignored everything but the hospital sector, and then also ignored pay-beds, the private acute sector and the freedom of consultants to work privately. Ham says the pre-reform (actually pre-Griffiths) NHS was a ‘bureaucracy’, but even though form filling has increased, the critique of NHS bureaucracy seems to have been left behind, presumably because the NHS is now run by ‘managers’, not administrators. He accepts at face value the Thatcherite critique, that the NHS set ‘perverse incentives’ and ‘efficiency traps’ which could be solved by money ‘following the patient’.

The source of this critique was the American academic Alain Enthoven, who identified lack of incentives as the NHS’s central failing. Enthoven claimed neutrality towards the NHS but was a full-blooded advocate of ‘the American way’ in healthcare (i.e. employer-controlled healthcare and second class services for the poor).² He proclaimed his liberalism to the British but, as former chief Pentagon ‘whiz kid’, Enthoven’s role had been to chastise the army’s lack of efficiency.³ The slogan ‘money following patients’ appeared neatly wrapped in good sense and consumer appeal, but making it work would have led to an explosive ‘monetarisation’ of the NHS. Civil servants drew back — to the consternation of the Adam Smith Institute.⁴

Such seemingly innocent concepts stem less from empirical findings than from value judgements and political bias. In accepting them it is hardly surprising that Ham misunderstands the reforms, saying that ‘the challenge facing the Thatcher review was to find a way of reforming the NHS which enabled its weaknesses to be tackled and its strengths preserved’. In fact, the real ‘challenge’ was political, the application of Thatcher’s pro-market precepts to a popular public service which was threatening to explode in her face. Thatcher took the compromise route, and the reforms were not a disaster mainly because of the timidity of their implementation.

Money following the patient, Ham says, was a promise unfulfilled. But then he says that high transaction costs have been its undoing, noting that Tory ministers now support long-term contracts. Ham thinks that ‘contestability’ — purchasers taming monopoly behaviour by small but significant actions — can be as effective as the market, but this thesis leaves GP-based individual patient transactions hanging in the air.

When Ham asks ‘what next?’ he means ‘what next for Labour?’ The bits of Working for Patients that Labour generally supports (public health, etc) are those which Ham himself says were never originally part of the reforms, while those he acknowledges to be in contention — the purchaser/provider split, markets, fundholding — are its core ideas. Ham favours the purchaser-provider split. It has resulted in decentralised and accountable management and left HAs to set strategy.

The dark cloud hanging over the NHS is the private finance initiative (PFI). It threatens to turn the NHS into a ‘virtual organisation’ like British Airways. Ham says that it is too early to say whether this matters. His alternative draws on the expertise of the hospice movement and HIV and AIDS provision. Why an ‘empowering’ alternative is needed is not clear, since there are no demonstrations protesting ‘Down with the PFI. We salute a community-empowering NHS alternative!’

People’s desire for health security is conservative. Upset expectations too much (like the monarchy) and heads start to roll. There are risks, including the loss of overall co-ordination and fragmentation, but Ham says: ‘This is no reason why non-profit organisations should not once again play a part in service provision, so long as government is actively involved in regulation’.

Ham’s big idea is a ‘community health agency’. Funded by capitation and with ‘a range of providers... available’, these would be primary care-based but able to run hospitals or ‘procure’ (buy?) care from specialists. Embryonic schemes include some large fundholding arrangements but they could also be formed by NHS trusts and could be ‘democratically self-governing’. To stop them being inward-looking, he says, regulatory HAs would gather data on performance including ‘indicators of consumer satisfaction’.

Ham says Canada would be a more fertile setting for this idea while the US ‘is the one country whose experience has little to offer the UK’. This is puzzling. American healthcare is dominated by charities. Ham’s own proposals seems close to what Enthoven (and several right-wing think-tanks) recommended in the 1980s. He rejects commercialism, but we might expect selectiveness to emerge even within a charity. Other ‘community empowering’ ideas, like local management of schools, have hardly discouraged selectivism; in Ham’s scheme, vocal, well-off people interested in maximising their ‘choice’ would have the incentive to exclude the poor, disabled or elderly, particularly since health costs concentrate on the worst risks.

Voluntary organisations can play a larger role in healthcare; or rather bona fide voluntary organisations. As an originator of an HIV/AIDS provider, I know that the voluntary sector can be innovative. But — and not to be disloyal — public organisations do some things better, and the public service tradition, despite years of denigration, is still something to celebrate.

Ham’s own suggestions are innocent but they risk eroding this tradition and introducing uncontrollable fragmentation. Other ‘voluntarising’ suggestions have not been innocent. David Willetts’ proposal for voluntarising NHS hospitals later became the NHS trust.⁵ John Redwood recommended voluntarisation of the NHS as a staging post to privatisation, an idea he has since disowned.⁶

The rest of Ham’s booklet looks at finance and long-term care. He says politicians are too frightened to discuss rationing in public and thinks they should achieve a consensus on ‘tough decisions’. The UK should be ‘brought into line with other OECD countries’ in raising the level of expenditure from private sources. The ‘commitment to comprehensiveness is gradually being abandoned’ and this ‘may be inevitable’ while the distinction between public and private no longer holds. Ham recommends ‘personal savings accounts’ to pay for long-term care. This is a version of the US right-wing’s medical savings accounts, whereby taxpayers subsidise the tax breaks of those able to afford such schemes.

Government, he says, should accept ‘a major responsibility’ for finance and regulation but should do ‘better by doing less’. Key words include ‘modernisation’, ‘maintaining the principles’, ‘striking a balance between collective and individual responsibility’. This is the ‘reinvention of government’ theme beloved of the right-wing of the US Democratic Party and the ‘hollowing out the state’ school in the UK. But whether the virtual state is virtual nonsense is not a technical question: it’s political.

Paul Starr, who later reshaped Enthoven’s market ideas for President Clinton, observed that British public corporations were an international model for public enterprise; much of the literature on public enterprise economics and management was British. Thatcher’s embrace of privatisation, says Starr, was thus an event ‘laden with symbolism and of wide international consequence’.⁷ Today British thinking is inspired by the US. No longer having confidence in our own institutions, our policy making resembles a cargo cult, with the ‘think-tanks’ waiting on the dock for the next shipment of US policy goods.

This characterisation does not altogether fit Chris Ham’s booklet, but there are strong traces of it, and much of his advice is sugar to help us swallow the bitter pill of a more unequal society along with lower expectations of public services. He sets out some options for the future of NHS and, laudably, introduces democratisation, but he underplays the risks of voluntarisation and the blurring of private and public boundaries.

The result is symptomatic of the current weathervane, post-Thatcher drift among Labour-leaning ‘modernisers’.

Chris Ham. Public, private or community: What next for the NHS? London: Demos, 1996. Available from: Demos, 9 Bridewell Place, London EC4V 6AP. Price: £8.95.