The commissioning approach has led the UK to have a variety of service models tailored to the needs specific patients groups. It is not perfect equality but not everyone’s needs are the same. Localizing the approach at the GP would surely better mirror the idiosyncrasies of different parts of the UK (or perhaps it is more precise to say England). You can ask if the same innovation and local tailoring is promoted by countries with a social insurance system.

nternational benchmark shows that nothing focuses the mind of the primary care practitioner on cost than having to choose between re-carpeting the surgery and providing medicines. The Vardval (care choice) model in Sweden has improved access and focused clinician on outcome and quality. Quality and outcome both measured by the patient’s choice not to visit poor performing GPs and not key performance indicators.

A truly free market approach would introduce a level of risk in system that would not be acceptable to the consumer (electorate). No rational governor would suggest a wholly free market approach. Not even uncle Sam. Lets get sensible, healthcare is a conspiracy of the middle ground.

As for the bureaucrat and the health economist at NICE, if rationing is where we are – all analysis points to this then they need to take second place to the politician. Why isn’t health care part of the county council budget?

Though provoking – cheers Imran.

Forgive me but please, don’t so alarmingly stupid.

There really are some things which economists have managed to find out about the strange universe we inhabit.

http://en.wikipedia.org/wiki/Baumol%27s_cost_disease

The obvious example is a symphony orchestra. You can’t ask them to increase productivity by simply playing faster now, can you?

However, you can increase the productivity of providing music for people to listen to: recording, CDs, iPods, records.

To do which you need a market in alternative methods of providing music to people.

It is more difficult to increase labour productivity in services than it is in manufacturing.

Ah, yes, argument by repeated assertion and reference to authority. Always classic signs that someone has been called on something they don’t actually understand.

“The health secretary, Andrew Lansley, has hired two NHS managers from regional quangos, which he said he would abolish, on salaries of £200,000, as part of his drive to modernise the health service.

“While former colleagues face an uncertain future, Ian Dalton, chief executive of the North East Strategic Health Authority, and Dame Barbara Hakin, head of the East Midlands Strategic Health Authority, will be given powerful roles at the heart of the new NHS.

“They will also be allowed to keep their salaries, which are about £60,000 more than the prime minister is paid.

“The revelations will be embarrassing for Lansley, who on Monday called for a tier of management to be stripped out of the NHS. In his white paper, there are plans for the 10 strategic health authorities to be abolished by 2012 and the 150 primary care trusts to be scrapped by 2013. Up to 30,000 managers face being cut or redeployed.”
http://www.guardian.co.uk/politics/2010/jul/13/nhs-quango-heads-new-roles?&

How power and accountability will transfer
http://www.ft.com/cms/s/0/5b0d90ce-8df1-11df-9153-00144feab49a.html

FT columnists and the editorial on 13 July are generally sceptical about how this upheaval will work out. For example: Political squalls before the cuts get serious, by Philip Stephens, Associate Editor

“The health service is to be spared the worst of the spending cuts. But even with a notional real increase in its budget over coming years, the NHS will not keep up with medical inflation and the rising demands of an ageing population.

“Yet the government now proposes to throw everything into the air in the fourth big organisational shake-up in less than two decades by turning local doctors into financial managers. The predictable effect will be to divert resources from front-line medical care and to replace large numbers of public sector bureaucrats with even more private sector ones. As I said, I am baffled.”
http://www.ft.com/cms/s/0/d3ffca50-8de3-11df-9153-00144feab49a.html

Tim cites the performance of entire countries then claims any difference must be attributed to the market – sorry, I just don’t buy it, neither do I think we should be framing the reform question in these terms when there are complex independent variables.

Let’s narrow it down to particular services (such as GP out-of-hours care) so that we can judge if the market brings any real benefits rather than disasters like this;
http://www.guardian.co.uk/society/2010/feb/04/doctor-daniel-ubani-unlawfully-killed-patient

“A bit of an oversight for you to cite Baumol and not mention Baumol’s Cost Disease in the context of a discussion on the NHS, Tim.”

No, not an oversight. As I’ve said elsewhere, it actually works the other way around.

Baumol on cost disease says that services are going to become more expensive in relation to manufactures as it is easier to improve productivity in manufactures than services.

Baumol on innovation says that the way to improve productivity is to have more markets. Planned systems tend not to improve productivity, market systems do.

Baumol on the system as a whole says that therefore we need more markets in services so as to overcome the difficulty of improving productivity in services.

Yes, I have been in email contact with Professor Baumol on exactly this point.

Have you? ‘

I think reading your comments you would concede that health care is not just like any other market. I am sure you have read this old Arrow paper but I will provide the link anyway.
http://www.who.int/bulletin/volumes/82/2/PHCBP.pdf

However, the NHS could be improved in some areas with markets. I fully agree. My point is that it will not reduce costs for reasons that are well known. You know that the health insurance market has elements of The Market for Lemons about it. You know that wages are not just determined by productivity in one sector but are largely determined by earnings of similar workers in other industries. You know that much of the NHS is labour-intensive so can’t make the same productivity gains that other industries have made. Robots can build cars but they can’t wipe the butt of geriatrics. Therefore, we will have Baumol’s Cost Disease in the NHS. Although reforms could slow the growth of costs they will not reduce the costs.

Only an ideologue who thinks the NHS has reached a state of perfection would be opposed to introducing changes learnt from other nations who achieve better outcomes. Therefore, we should reform it. However, we would have to believe those other cited systems were grossly inefficient if we thought we could make those changes and save on costs when we currently spend less than they do. By all means introduce more markets but we should be realistic as to what they can achieve when it comes to health care.

“A unique analysis published today of the performance of the NHS across the four countries of the UK before and after devolution has found striking differences in performance with some countries spending more on health care and employing greater numbers of health staff but performing worse when it comes to a range of indicators, such as waiting times and crude productivity of staff.

The report by the independent health charity the Nuffield Trust examines the performance of the health services in England, Scotland, Wales and Northern Ireland across three time points – 1996/7, 2002/3 and 2006/7. It also examines the performance of the ten English regions and compares them with the NHS in England as a whole and the NHS in each of the devolved countries in 2006/7. This is the first time such an analysis has been conducted. Performance was tracked against a number of key indicators, including expenditure, staffing levels, activity (outpatient appointments, inpatient admissions and day cases), crude productivity of staff and waiting times.

The main findings are:

* Historically Scotland, Wales and Northern Ireland have had higher levels of funding per capita for NHS care than England. However, the research suggests the NHS in England spends less and has fewer doctors, nurses and managers per head of population than the health services in the devolved countries, but that it is making better use of the resources it has in terms of delivering higher levels of activity, crude productivity of its staff and lower waiting times.”

No proof eh?

“In England, the parliamentary health select committee has expressed its frustration at the lack of data on the value for money and efficiency of a policy that is diverting £5bn of NHS funds to private for-profit healthcare companies, describing it as an “evidence-free zone”. It’s time the minister for England’s healthcare took a leaf from his counterparts in Scotland and Wales, to see how public and parliamentary scrutiny of public funds and their use can be improved by making data publicly available and ensuring collection of data on all patients treated”.
http://www.guardian.co.uk/commentisfree/2009/oct/21/scotland-nhs-profit-treatment-centres

Admit it Tim you are an ideologue without one shred of EVIDENCE to back up your claims when like with like is compared?

A con artist who sells quack medicines does.

The Government’s priority is to increase the national wealth. End of.

No. My argument is that markets improve productivity. So, I then show that a system which has more markets than another improves productivity with markets more than the system with no markets. This is known as offering real world evidence in favour of my theoretical supposition.

For my theoretical supposition to be correct it is not necessary for any new participant to be more efficient than what went before. It is necessary only that there is a market, competition within it, which then drives the long process of improving productivity.

“I notice you duck the question as to why NO developed country actually trusts the market sufficiently to hand over ALL its health care to them but I guess anybody with half a brain can already guess the answer to that one?”

Sure. I’m not arguing that the health care system should be solely left to the market either. Just as I don’t say that housing, food supply or wages should be entirely left to the market.

What I do argue is that compared to the current system we are often (although not always) better off in the long run with more market based mechanisms inside such systems than fewer.

To change the subject entirely but to make the same point. Yes, we’ve a climate change problem. We could use all sorts of non market means to deal with it: pass laws that you cannot do this or that, regulations, bureaucracy (as an example, insist that all green glass is recycled. But as even WRAP has admitted, this probably produces more greenhouse gasses than simply landfilling it.). Or we can adopt market based solutions like carbon taxes or cap and trade. They are of course not pure free market solutions: we are intervening in markets after all. But they are solutions using the maximum amount of market that we can within the constraints of trying to solve the problem.

And just about everyone, from Lord Stern through Greenpeace to the IPCC agrees that these interventions into markets, these attempts to bend markets to our will, rather than dispensing with markets and using command and control, will work better.

Back to health care: I’ve no problem at all with the government being the financier of the majority of health care in the country. It’s just that over time we’ll get more health care for a given level of financing by using market mechanisms than command and control ones.

Perhaps not this year, perhaps not next, but over time, as that market stuff does its wonders on total factor productivity, yes, we will.

She concludes;
“The ISTC programme provides a good case study of what happens when the private sector is introduced into clinical services”.

Common sense dictates that if large chunks of cash are being diverted to the shareholder it is not being spent on clinical services (as patients who use PFI hospitals are learning to their cost).

You want a system that benefits the fat cats – I’d prefer one that benefits patients, and the NHS despite its various weaknesses should not be undermined by nonsensical claims about ‘competition’.

Let’s try comparing like with like, shall we?
Within the NHS profiteers have been drawn to activity dominated by two key elements;
[1] its profitability (natch) – so we get those attracted to PFI finance, or those able to fleece the pockets of predominantly middle class worried well (via, walk in centres) and;
[2] uncomplicated procedures (usually with a single pathology) that can be set up like a production line, so patients are offered hernia repair, joint replacement, MRI scans, etc but NOT palliative surgery for cancer, for example.

Needless to say the profiteers are conspicuous by their absence when it comes to those health groups with little cash, or those suffering with a chronic condition that does not have a sexy drug to cure it (schizophrenia, multiple sclerosis, etc).

So I ask again, despite the fact that the profiteers have amply demonstrated their predilection for cherry picking already – which service currently offered by them outperform COMPARABLE services provided by the state, because as far as I can tell ISTCs (to take one example) have been pretty woeful so far;
http://www.guardian.co.uk/commentisfree/2009/oct/21/scotland-nhs-profit-treatment-centres

I notice you duck the question as to why NO developed country actually trusts the market sufficiently to hand over ALL its health care to them but I guess anybody with half a brain can already guess the answer to that one?

Nice try, overturning a basic economic concept in just a few sentences. But no, it doesn’t work. Try this:

http://en.wikipedia.org/wiki/Baumol%27s_cost_disease

It is more difficult to increase labour productivity in services than it is in manufacturing. Yet average wages are determined by average productivity across an economy: thus services will become more expensive relative to manufactures over time.

BTW, we all implicitly grasp this when we talk about the NHS: everyone knows that NHS inflation is above the general inflation rate, yes? This is one of the reasons why.

“By the way, Tim, sizable chunks of the NHS have already been hived off to the profiteers – can you tell us, specifically, which of these outperform comparable services offered within the state sector?”

Yes, actually I can. NHS England has had rather more “marketisation” than NHS Scotland or NHS Wales. Productivity (no, not labour productivity but total factor productivity, output against all inputs) has increased in NHS England and not in NHS Wales or NHS Scotland.

This is a reasonably general finding in economics. Planned systems can increase output through an increase in inputs. But they very rarely can produce an increase in total factor productivity. Market systems can also increase output through increased resource use: but they also can and do increase output through increases in productivity.

In the long run this is one of the strongest arguments for markets. Some Paul Krugman for you:

http://web.mit.edu/krugman/www/myth.html

“But what they actually found was that Soviet growth was based on rapid growth inputs–end of story. The rate of efficiency growth was not only unspectacular, it was well below the rates achieved in Western economies. Indeed, by some estimates, it was virtually nonexistent.”

That essay explains it all very well. And as Krugman has said eslewhere, productivity isn’t everything but in the long run it’s almost everything.

Baumol on cost disease says that services are going to become more expensive in relation to manufactures as it is easier to improve productivity in manufactures than services.

How so? Manufacturing has an absolute floor on base costs; you can never make something for less than the cost of its base materials. Services have no such floor – indeed, the fate of computer programming is an illustration of what happens to a service market once the perception of value vanishes from it. Therefore, the scope for productivity improvements is actually far greater in services than in manufacturing.

Since you made a point of boasting that you have this from the horse’s mouth, I have to suggest that the horse in question is dead, and your continuing to flog it will only tan its hide…

After all the public/private models used in much of western Europe score higher on most indicators than the NHS does.

Consistently 60% higher? Because that’s the increase we’d be looking at, assuming that GPD per capita is comparable.

After all the public/private models used in much of western Europe score higher on most indicators than the NHS does. The system Lansley is proposing and the place it might lead looks to me rather like the system they have in countries like France, Switzerland and the Netherland’s. There the lines between public and private provision are so blurred as to no longer be really visible. All of those countries are supposedly “better” than Britain when it comes to health.

The real problem which this article and many posters have touched upon isn’t that Lansley’s scheme will lead to increased inequality, rather that it will require expensive slack capacity so as to enable “choice” and will push up the costs of administration and the supplies bill as money is pushed between providers and funding bodies, each of whom takes their cut, and doctors demand branded goods and unnecessary treatments for their patients.

Loser financial constraints are in patients interests because their care will improve as waiting lists vanish and treatment rationing becomes a thing of the past. However, Lansley is left in an odd position because health costs will rise dramatically. Just look at how much most European health systems cost relative to ours. We spend <9% of our GDP on healthcare in most western European nations (even once Belgium and Germany with their legions of pensioners are stripped out) appear to spend around 13% of their GDP on health. Such an increase would wipe out most of Osbourne's savings. If we did adopt an American style healthcare system then we'd have the worst of all worlds, that is to say a massive bureaucracy, poor outcomes and we'd be spending about 20% of the national income on healthcare.

As such Lansley's scheme has its merits. But the NHS also has one massive advantage especially ATM.

(This report was given virtually zero coverage in the media – perhaps surprising that the Daily Mail decided to mention it).

Completely support the other comments that point out that, whilst we continue to spend significantly less than other countries on healthcare, it is far from clear that the answer to improving outcomes is to reorganise the NHS and introduce market style reforms.

Markets work well in some places and not in others. This is because the conditions necessary for markets to function well are not always present. Ideologues, in their black and white view of the world do not, of course, choose to recognise/accept this – but then nor presumably did central planners in the Soviet Union.