tag:blogger.com,1999:blog-25200961.post2537029441577404759..comments2024-03-14T09:50:40.819+00:00Comments on Dr Grumble: Rape of the NHS or crafty seduction?Dr Grumblehttp://www.blogger.com/profile/04417731064007601504noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-25200961.post-78187797695060872102009-04-07T15:06:00.000+01:002009-04-07T15:06:00.000+01:00Q: How many economists does it take to change a li...Q: How many economists does it take to change a lightbulb?<BR/>A: None. The market will sort it out.<BR/><BR/>There are a lot of reasons why markets and healthcare do not mix tremendously well. This is because markets are not identical for every sector of an economy.<BR/><BR/>In the abstract, markets are good at allocating things between providers who want to sell and consumers who want to buy: however, in the words of Adam Smith, "people of the same trade seldom meet together ... but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices".<BR/><BR/>So markets require effective and appropriate regulation. This is more difficult than it seems: as we have seen recently in both healthcare and banking (and in the media since … well, pick your own date), in reality, regulation often fails to protect the consumer - and indeed the provider, from their own folly. Competition and monopoly issues are significant ones.<BR/><BR/>Markets are also places where the bad, the unpopular, the un-business-savvy or those simply ahead of their time can fail. This is acceptable if a) adequate warning of a failure can reasonably be gained by a consumer, b) there are other providers and suppliers to whom customers can turn, and c) that failure will not cause disproportionate material loss or loss of amenity to customers and trading partners - ‘too big to fail’.<BR/><BR/>In healthcare, it is dubious that a consumer could be clearly aware of the likelihood of their NHS provider going out of business – which is, technically, now allowed. Given ‘commercial in confidence’ rules, and what has been seen in banks’ statements about their own financial health (not to mention the marvellous work of their independent auditors), we can be sure that private sector providers would not be warning of failure.<BR/><BR/>Healthcare is expensive, requires expertise, and is potentially dangerous if done badly. As a science (mostly), it is an area where profound asymmetries of information will probably always tend to exist between providers and consumers.<BR/><BR/>Classical economic theory suggests that competitive markets require ‘perfect information’ and rational agents. Classical economic theory also suggests that there is such a thing as an ‘efficient market hypothesis’. <BR/><BR/>Classical economic theory quite clearly needs to get out a bit more. <BR/><BR/>Markets are, allegedly, fantastic at pricing risk. Although there is very little evidence that this is true, and lots of evidence that they seek to avoid risk whenever possible. Insurance companies, whose business is the pooling and assessment of risk, often do their damnedest to avoid paying out on policies, and the list of caveats and exclusions to insurance policies appears to grow year on year (yes, I read the small print).<BR/><BR/>The private finance initiative (PFI) has been a masterpiece of technical obfuscation with the public sector comparator described by Jeremy Colman, ex-assistant auditor-general to Nick Timmins of the FT back in 2002 thus: “If the answer comes out wrong you don’t get your project. So the answer doesn’t come out wrong very often … (some public sector comparators used are) utter rubbish … utterly irrelevant” (thanks to George Monbiot for that one.) Moreover, there is very little or no evidence of real risk having been transferred.<BR/><BR/>Another useful learning point from market jargon is ‘externalities’ to a transaction. Externalities arise when prices do not reflect the full costs or benefits in production or consumption of a product or service (a positive impact is an ‘external benefit’, and a negative impact is an ‘external cost’). <BR/><BR/>The implications in healthcare are surely obvious. In the insurance-based US system (one of the most marketised on the planet), as well as the 15-20% uninsured and the large proportion of the population regarded as underinsured, they have the highest costs and cost inflation in the world. This is not what we are told markets should do. Yet it happens in the US.<BR/><BR/>Moreover, pro-market figures would surely want to be concerned about ‘job lock’ – the well-acknowledged problem affecting workforce mobility which arises when an employee is unwilling to change job because they do not believe a prospective new employer’s healthcare plan is as good as the one they would be leaving to change job.<BR/><BR/>The idea that the private sector is uniformly evil and untrustworthy in healthcare seems improbable. General practice remains (in the vast majority) the private sector, and it is vital to the NHS.<BR/><BR/>However, the private sector’s primary motivation is different from that of the NHS. The NHS is not – Dr G may interject ‘yet’ – tasked to make a profit. The private sector must do so – whether by doing things ‘better, cheaper, faster’ or by manipulating the market – or it will go bust.<BR/><BR/>Politically and economically, we are now living in a different world to the one we lived in twelve months ago. The chickens of credit have come home to roost, and they’ve got bird flu. In such circumstances, market fetishists have already started to switch their attack towards public sector pay. Although not all market mechanisms are necessarily bad ones, their introduction into healthcare requires particular care and attention.Andy Cowperhttp://www.healthpolicyinsight.comnoreply@blogger.comtag:blogger.com,1999:blog-25200961.post-45268702667181751132009-04-07T01:59:00.000+01:002009-04-07T01:59:00.000+01:00The thing is Health Care should be a community thi...The thing is Health Care should be a community thing: not all of us get ill so there is not even a point of giving us coupons in case we do. For those unfortunate enough to become ill we all chip in to have doctors, nurses and hospitals and all others helping to get you better. Now in the new Market Way: a few CEOs will earn more than the PM and the rest gets a bad service! Why? Because money matters and bonus matters and we have already seen the way many hospitals are cutting corners. It is the same CEOs going round the different Trusts and some if they do the job really badly move on to become the chief.<BR/>It has now happened to Local Councils: pay them the market rate to get the best people. Look at Wakefield with Child Care scandals and Kent with Iceland. They are still somewhere in the Local Council circuit. These are the same people that destroyed our banks. Now we want the Heath Service run like this. <BR/><BR/>Then there are Poly Clinics: how do you monitor the geeks that could invent patient episodes and what if PCTs are charged for each episode. It is worrying. In the US some hospitals are paying for homeless to go to ERs so that the hospitals claim from the government by a multiple of a few thousand. <BR/><BR/>Just look at the expenses claim of MPs and I agree with you Dr Grumble, we do not stand a chance. How about moving to Zimbabwe.<BR/><A HREF="http://cockroachcatcher.blogspot.com" REL="nofollow">The Cockroach Catcher</A>Cockroach Catcherhttps://www.blogger.com/profile/14440000294855006966noreply@blogger.comtag:blogger.com,1999:blog-25200961.post-86151977154936262912009-04-07T00:37:00.000+01:002009-04-07T00:37:00.000+01:00The problem is that the notion of markets in healt...The problem is that the notion of markets in healthcare is based on a faulty premise.<BR/><BR/>People look at NHS care and they look at private care and they conclude that private care is better.<BR/><BR/>So they assume that if their NI was paid to private care providers, they would get that apparently better care.<BR/><BR/>The missing factor is price. Private health care at present is (a) expensive and (b) limited as to what conditions it covers (it doesn't cover most emergency treatment). <BR/><BR/>If the government buys private healthcare instead of NHS healthcare, it won't buy the expensive healthcare that people see at present and envy. It will buy cheaper private healthcare to compete with NHS prices, and that won't be so much to envy by the time the profit element has been deducted.Nuttynoreply@blogger.comtag:blogger.com,1999:blog-25200961.post-36920604543265800052009-04-06T00:18:00.000+01:002009-04-06T00:18:00.000+01:00The thing that nobody stops to consider is that pr...The thing that nobody stops to consider is that proper healthcare is expensive, and can only be afforded if we pool our resources on a national level. Markets work on moral hazard; they accept your custom on the understanding that they will not have to pay out, and so people that do have health problems will be turned away, while those without health problems will be welcomed with open arms. It's like car insurance but much more expensive.Juliehttps://www.blogger.com/profile/10556587747031166439noreply@blogger.com