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In praise of the NHS

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Dec 10, 2009
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In a recent multi-faceted study the NHS (UK health system) was ranked as the No1 healthcare system in the 11 wealthiest countries. The US system was ranked last out of the 11. Does this demonstrate that a primarily socialist national model of healthcare can be the most efficient and 'best' healthcare system? If so, what does this say about the belief in the 'efficiency of markets', presenting the optimal solution to public services?

Article here:

http://www.independent.co.uk/news/u...rn-countries-with-us-coming-last-9542833.html

Comparison table here:

http://www.independent.co.uk/incomi...nates/w1024/Davis_Mirror_2014_ES1_for_web.jpg

Paul Evans, director of the NHS Support Federation told The Independent: “It shows that the basic concept of the NHS not only works, it stands up well against all other systems.

“But within these results is a stark warning about opening up the NHS to the market and profit driven companies, like the US, as it is clearly not associated with care that is safe and effective for all.”
 
Getting a bit difficult to make the comparisons now. There never was one NHS.

NHS Scotland was set up as a different outfit in 1947, with reciprocity with the English NHS. The two systems were pretty similar for many years but have been diverging for at least ten years. Privatisation is going ahead in England and being rolled back in Scotland. England is now talking about £10 to see your GP, but Scotland isn't.

NHS Wales was devolved in 1999, and the Northern Ireland system is different again. This myth of a "UK NHS" is just that - a myth.

Watch this presentation by a consultant surgeon originally from NI but now working in Scotland.


Rolfe.
 
Does this demonstrate that a primarily socialist national model of healthcare can be the most efficient and 'best' healthcare system? If so, what does this say about the belief in the 'efficiency of markets', presenting the optimal solution to public services?
Market efficiency in health care insurance (and health care is almost always paid for by an insurance model) is spoiled by a relatively little known problem called "adverse selection", in which optional health insurance does not lead to efficient allocation of costs/benefits but instead trends towards an outcome where health care costs those insured as much as it would if they were all the "sickest" people that they could be.

The most important determinant of whether this market failure manifests or not is not so much private (profit-driven) supply of service versus public, but whether health insurance is universal (which means compulsory) or optional.

Much provision of health services in England is actually profit driven (including GPs, hospitals, pharmaceuticals manufacture and sales). But entitlements are compulsorily provided and paid for by the population, whether they want it or not, and this overcomes the negative selection problem whereby healthy some people choose to forego insurance, and the remainder are charged as though they were all particularly unhealthy.

Under the NHS, a public body negotiates the cost of the services/goods provided, and it has for sure greater negotiating power than any private individual would. But it does not necessarily drive a hard bargain to lower those costs--GPs who negotiate their charges with this body are actually very highly paid (and of course they organise collectively to bargain from their side also). I don't think there is much evidence that big-pharma is screwed over by the public buyer--those companies seem to be doing nicely. I think the main area in which costs are kept low is the rate of pay of many directly employed NHS staff.

Not all health treatment is of course covered under the NHS. And co-payment is largely absent (ex prescriptions, and even then not all that many people pay for those). One downside of this is rationing, which does not mean "death panels" but does mean difficulty often in seeing one's GP and near impossibility of--for example--seeing an NHS funded dentist. In several European countries (with universal health systems) you pay something (not the true cost) to see a GP, and my impression (which is anecdotal) is that even a small amount increases the availability of appointments due to the disincentive for completely frivolous doctor's visits and no-shows. £10 seems a little too high in this regard. But for the NHS to introduce a GP fee (with a bundle of exemptions no doubt) would be a good thing in my book.

The NHS system is somewhat less flexible than other European systems as well in that it is not really possible to "add on" extra cover without taking out a private deal on top, which will typically cost a four figure sum and contain duplication and/or more than many people might want. In some countries I think you can select what you buy to a greater extent, although there are obviously statutory minimum entitlements/requirements. This aspect does not appear to have been scored in the survey.
 
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England is now talking about £10 to see your GP, but Scotland isn't.
That's the British Medical Association and the Royal College of Nursing who are the bodies asking for fee. IIRC the government still rules it out. (One adverse impact of it that would have to be handled is people going to A&E with a cough instead--which would mimic the US state of affairs where uninsured people go there when they are sick since they can't be charged up front)

But in general, Scotland (and Wales) are both more minded to allocate more health costs publicly than England is. This is one of the reasons that the fiscal analysis/projections of Scotland's general government balance, assuming independence--conducted by investment banks' economics departments--raise doubts about the sustainability of that preference. Given that it can pretty easily be more regressive with respect to incomes, such policy preference may well not last.
 
Did you ever look at the articles on the Business for Scotland web site?

Rolfe.
 
Market efficiency in health care insurance (and health care is almost always paid for by an insurance model) is spoiled by a relatively little known problem called "adverse selection", in which optional health insurance does not lead to efficient allocation of costs/benefits but instead trends towards an outcome where health care costs those insured as much as it would if they were all the "sickest" people that they could be.

The most important determinant of whether this market failure manifests or not is not so much private (profit-driven) supply of service versus public, but whether health insurance is universal (which means compulsory) or optional.

Much provision of health services in England is actually profit driven (including GPs, hospitals, pharmaceuticals manufacture and sales). But entitlements are compulsorily provided and paid for by the population, whether they want it or not, and this overcomes the negative selection problem whereby healthy some people choose to forego insurance, and the remainder are charged as though they were all particularly unhealthy.

I'm trying hard as I can to parse your explanation of 'adverse selection', but I am not quite getting it. Perhaps you can unpack this a bit?

It seems that the NHS is at least twice as efficient as the US health system, and in fact much better on most criteria. Is this explained by 'adverse selection'? How so?

ETA - ok I have read a bit about this, but the evidence that adverse selection is particularly significant is sketchy. It seems like an excuse for price gouging. If insurance company A charged everyone for the worst case scenario, surely insurance company B could charge everyone based on a realistic mean and undercut insurance company A, driving them out of business? Why does this not happen?
 
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Not all health treatment is of course covered under the NHS. And co-payment is largely absent (ex prescriptions, and even then not all that many people pay for those). One downside of this is rationing, which does not mean "death panels" but does mean difficulty often in seeing one's GP and near impossibility of--for example--seeing an NHS funded dentist. In several European countries (with universal health systems) you pay something (not the true cost) to see a GP, and my impression (which is anecdotal) is that even a small amount increases the availability of appointments due to the disincentive for completely frivolous doctor's visits and no-shows. £10 seems a little too high in this regard. But for the NHS to introduce a GP fee (with a bundle of exemptions no doubt) would be a good thing in my book.

I live in Australia and the current (Liberal) government has just put a 7$ GP co-payment into the budget. It has attracted a lot of flak and there is some back peddling going on. The doctors and nurses are firmly against it. My own GP was concerned that many people who are usually reluctant to visit their GP would now have another reason to delay a visit and this disincentive may lead to the failure to detect some serious illnesses in their early stage. A percentage of frivolous visits is probably a worthwhile price to pay for those saved lives. As far as your anecdotes are concerned, do you have any evidence at all that there are more appointments available with GPs in countries that have a 'co-payment', compared to the NHS?

I think that there used to be a perception that the NHS was a failure that would only be rescued by privatisation and that the US had an unrivaled health system, but the evidence is becoming clearer that this just isn't the case.

I am fond of the NHS for some personal reasons. It saved my life twice when I was a child and I remember the local doctor coming to my home several nights in a row to monitor my condition. Of course, that was the 70s, and home visits are probably a rarity these days in any health system, but the fact remains that my mother who was an unemployed single parent never had to pay a bill for my treatment.
 
I'm trying hard as I can to parse your explanation of 'adverse selection', but I am not quite getting it. Perhaps you can unpack this a bit?
Wikipedia has a fine non-academic outline of it.

It seems that the NHS is at least twice as efficient as the US health system, and in fact much better on most criteria. Is this explained by 'adverse selection'? How so?
Well no, I wouldn't venture that that is the only explainer of the cost difference or even the largest one. It is a phenomenon from which a bunch of other perverse (inefficient) incentives flow from though.

The best non political analysis of the cause of why US health care costs so much is IMO still that prepared by McKinsey in 2008. The explanation boils down to a raft of asymmetric-information problems (adverse selection is one of these but not the only one) and principal-agent problems. These are broadly understood as market failures--IE areas where there is general agreement among economists that the price system will not actually work to maximise welfare.

The US system also faces the highest legal costs of malpractice litigation because of differences in the US legal system from most other countries. And the US federal government also manages to get itself shafted in what it pays for publicly funded health services too via what IMO amounts to a substantial problem of regulatory capture by the health services sector / medical profession--which is governance failure rather than market failure.

People can disagree, but in my view rather little of the problem has to do with the presence of profit-seeking entities being involved in the industry by itself.

ETA - ok I have read a bit about this, but the evidence that adverse selection is particularly significant is sketchy. It seems like an excuse for price gouging. If insurance company A charged everyone for the worst case scenario, surely insurance company B could charge everyone based on a realistic mean and undercut insurance company A, driving them out of business? Why does this not happen?
Does the wikipedia page help? In the theoretical limit, the selection problem can cause a market to completely disappear and competition will not save it.
 
I think that there used to be a perception that the NHS was a failure that would only be rescued by privatisation and that the US had an unrivaled health system, but the evidence is becoming clearer that this just isn't the case.
I know a few Americans who are very attached to their system. I have not once encountered anyone in the UK who held out the US system as a preferable one to the UK. And that includes people who would support reform of the NHS.
 
My own GP was concerned that many people who are usually reluctant to visit their GP would now have another reason to delay a visit and this disincentive may lead to the failure to detect some serious illnesses in their early stage. A percentage of frivolous visits is probably a worthwhile price to pay for those saved lives.
For sure it is very difficult, or impossible, to deter only frivolous appointments (and those the patient is not even likely to show up for) while at the same time not deterring any worthwhile ones. And yes--some people are reluctant to visit their GP with a worthwhile case even if it is free. In that respect it would be possible to "save even more lives" in theory by offering all patients a cash benefit to visit their GP if they have the slightest suspicion they are ill, but I know of nowhere where this is considered a worthwhile (extra) price to pay.

Also some genuine cases do not visit their GP because the wait is too long, or because the "walk-in" system necessitates lining up at the surgery a half hour before it opens in order to stand a chance of getting your name on the list, and they "can't afford" half a work-day. Rationing deters just as payment does, except on the basis of willingness to wait rather than willingness to pay. So that "percentage of frivolous visits" might be "killing people" as well as "saving lives"

The issue is whether or not there is over-consumption of GP services with zero payment (recognising that some genuine cases stay away) and/or how much over-consumption is actually desirable (because with any disincentive to consume, more genuine cases will stay away). And that may lead to a question of whether GP services are under-supplied, and if they are then obviously correcting that would increase the NHS budget and raise the per-capita cost of health care in the country.

My belief is that there is probably excess demand that some kind of co-payment (with exemption for low income) would reduce it in a net worthwhile way. That could also be a progressive change to the tax-benefit system, since universal benefits are by definition regressive in comparison with means-tested ones.
 
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