Feature

Uh...haven’t we been here before?

As Labour’s new wave of NHS reforms take shape, with their emphasis on market mechanisms and increasing private sector provision, the continuities with the policies of the Thatcher era are becoming all too clear, argues Richard Lewis

It has taken five years in government for Labour’s long-term health policy to emerge in full sight. While conspiracy theorists may assume that the vision was always in the back pocket, it is more likely that the past few years have been characterised by policy-making on the hoof.

When Labour took office, it had few touchstones of its own in the health arena: it stood for the NHS as an institution and largely against the policies of the previous Conservative administration. In the run-up to the general election of 1997, particular bile was reserved for the so-called internal market and GP fundholding.

Labour’s early thinking was evident in the approach of Frank Dobson, the first secretary of state for health in the new administration. One of his first acts was to instruct health authorities to pull back on developing contractual relations with the private sector.

Yet it was clear right away that, rhetoric aside, the new government was unwilling to ditch much of the paraphernalia of the internal market. Instead, it preserved the purchaser-provider split, together with the basic infrastructure of a quasi-market. Other Conservative features were also retained, not least the role of the GP in commissioning services and allocating resources (albeit now within more the collective structure of the primary care trust, or PCT). This, together with the decision to stick to Conservative spending plans for the NHS, meant it was difficult in the early days to identify a distinctive (and certainly not a radical) Labour health policy.

However, this is set to change. A series of policy documents are at last laying down some important markers about the future of the NHS.^{1 2} What is interesting, if not surprising, is how similar these policies are to those introduced by Tory prime minister Margaret Thatcher in the early 1990s. Three key themes have emerged which seem likely to define Labour’s approach to socialised medicine:

• The reinvigoration of market mechanisms and incentives intended to increase efficiency, responsiveness and patient choice;
• The devolution of managerial responsibility to new ‘arm’s length’ agencies;
• The acceptance of a mixed economy of care provision within a publicly funded NHS.

Back to market

The retention of the purchaser-provider split has meant that a vestigial market has continued to operate throughout Labour’s tenure (commissioners can move service agreements in response to quality and/or price, at least in theory). Yet the rhetoric was firmly located in a world of ‘collaboration’ rather than competition.³

In future, the market will apply more vigorously. New incentives will be introduced from next April and PCTs will select from among a range of providers to secure the highest quality services and the shortest waiting times. Contracts will adopt ‘cost-per-case’ currencies and the ‘best’ providers will attract resources at the expense of the ‘worst’. Providers that do not perform will receive short term developmental support, with the threat of a management takeover in the longer term. Of course, if the market is allowed to run unfettered, some hospitals may simply become unviable and will have to close.

However, a twist has been introduced. According to the Department of Health, the competition on price that was the hallmark of the previous Conservative government proved an abject failure. In Labour’s market, a regional price tariff will apply to ‘health resource groups’ and competition will apply only to service quality and waiting times. Even the ghost of GP fundholding is walking abroad again. In speeches last year, both prime minister Tony Blair and health minister John Hutton spoke favourably about the use of indicative GP-based budgets as a means of engaging clinicians in planning health services.

Patients are also to be allowed to directly exercise choice as part of a new consumerism. This has already begun, with the pilots of the Patient Choice initiative. Patients waiting six months or more can opt to go to another provider who can offer treatment more quickly. To support consumers in this decision, more information on quality and performance will be made available and audited for accuracy and completeness.

Under Thatcher, ‘money followed the patient’. Under Labour, ‘resources will follow the choices patients make’. The NHS has come full circle.

Devolution to new agencies

The concept of ‘earned autonomy’ (whereby so-called high performing health organisations were relatively free from central control) has drawn hollow laughs in some quarters. With a fearsome inspectorate function in the shape of the soon-to-be reformed Commission for Health Improvement and the growth in national standards and guidelines, this freedom has sometimes appeared as little more than the freedom to do what you are told.

However, a new concept has now been introduced – the ‘foundation trust’. These trusts – and PCTs – will be not-for-profit, quasi-independent entities, which will be free from direct accountability to the secretary of state. They will not, however, be open to takeover from the private sector.⁴

This appears a radical change – far more radical than the ‘independent self-governing trusts’ of the Thatcher era, whose freedom from political control was more theoretical than real. While the details of foundation trusts are still being hammered out, it seems likely that they will control their own assets and have more flexibility in accessing capital funding. Accountability for these organisations will be through contractual, rather than political, means. A first wave is due to be created in April next year, drawn from so-called ‘three star’ NHS trusts.

Plurality and diversity of provision

The government recognises that the key to delivering its ambitious plans to reduce waiting times lies in a rapid increase in capacity. Yet there is a problem that goes beyond political commitment or funding – new staff and infrastructure take many years to bring on stream. With public expectations raised, Labour has looked to the private sector and to foreign providers to meet this capacity shortfall.

But new policy appears to go a significant step further. The involvement of the private sector, having started out as a short-term necessity, is now regarded as a policy end in its own right. As the Department of Health has stated: ‘It is an explicit objective of government health policy to shift towards greater plurality and diversity in the delivery of elective services’.²

The vision is now of an NHS that is defined through its state-funded universal coverage of citizens, regardless of ability to pay, and not through the public ownership of the means of delivery. A range of initiatives will be introduced to smooth the way for greater private sector involvement in the NHS (see box).

These three policy themes suggest a very new conceptualisation of the NHS. While it has been argued that some of the changes are redolent of previous Conservative policies, they seek to go further than would have been possible under health secretary Alan Milburn’s predecessors. But should these changes be welcomed or feared?

As is so often the case in the health sector, governments enter a largely evidence-free zone when they draw up policy. While the proponents of markets point to classic economic theory as evidence that they will delivery greater efficiency and innovation, in practice, reliable empirical evidence in British healthcare is rather slim.

The previous NHS market delivered few demonstrable benefits, certainly in terms of quality and patient choice. While it is true to say that crude measures of efficiency did, indeed, show a rise in quality, there was little to associate competition among trusts with higher productivity. Moreover, the market was inequitable.⁵

Of course, it could reasonably be claimed that the old market was never really tested, hamstrung as it was by political interference. But will the new NHS market be any different? It is certainly possible to believe that Milburn will take a robust stance in the face of any ‘market failures’. After all, several management regimes in NHS trusts have already been replaced with little ceremony. As noted above, with the introduction of ‘arms length’ foundation trusts ministers may struggle to control the market even if they desire to.

However, the proposed market mechanisms may themselves be flawed. That one half of the price-quality equation can simply be removed seems naïve. Setting fair regional price tariffs will be a Herculean labour with disputes at the margins almost inevitable. As John Appleby and colleagues show, more than a quarter of existing trusts may enter the market facing a loss in income of 5 to 23 per cent of their total expenditure.⁶

This would appear to be a recipe for disaster, or a stimulus for transitional arrangements that may push the market into the steady-state inertia that beset the Conservative experiment. Importantly, market incentives may push trusts into dropping the least profitable specialties, with fundamental implications for access and equity.

The arguments against private sector involvement in healthcare have been aired frequently, and many of the private sector’s claims simply do not stand up to scrutiny. As Boyle and Harrison show, under the private finance initiative risk may not be transferred to the private sector.⁷ And while it is true that some private companies may provide excellent services, innovation and excellence is not the exclusive province of private sector providers.⁸ More worryingly, a Canadian meta-analysis of studies of the US health sector suggests that patient mortality in for-profit hospitals is greater than that in not-for-profit hospitals.⁹

But is there no legitimate role for the private sector? It is difficult to suggest that in no circumstances would the experience and capacity of the private sector be valuable. Patients may be less exercised than ideologues over the ownership issue if treatment is available when it is needed. Similarly, if government commitment were forthcoming, NHS terms and conditions for healthcare staff in the private sector could be guaranteed. This might alleviate the very reasonable concerns of workers and trades unions.

More positively, there are no doubt lessons that the NHS could learn from the private sector, namely, in how to be more responsive to patients’ needs. Similarly, government proposals to empower patients through information should be welcomed and may begin to redress the power imbalance between patients and the professionals and managers who are there to serve them.

But the government’s view of private sector involvement apparently as a matter of principle should raise anxieties, even beyond queries relating to cost-effectiveness. Much government rhetoric has been expended on the concept of the patient and citizen as stakeholder. A transfer of activity from public to private surely makes that vision ever more difficult to achieve. Inevitably, the needs of ‘stakeholders’ will be mediated by those of shareholders. Public identification with the infrastructure of the NHS will diminish and the hospital and community institutions may become alienated from the very communities that they serve.