Thursday, May 02, 2013

Why are people losing faith in conventional politics?


People in many countries are losing faith in politics as usual. Some are returning to the politics of an earlier age, voting for neo-fascist parties such as Golden Dawn in Greece and Jobbik in Hungary. Elsewhere, those calling for transparency and direct democracy, whereby those elected should represent the people rather than powerful vested interests, are achieving success. The most newsworthy example was in Italy, where a party led by a professional comedian emerged as the largest single party in the 2013 general election although elsewhere, the Pirate Party, which originated in Sweden, is seeing electoral success in a growing number of countries, with Iceland only the most recent. In the England, the UK Independence Party is now in third place in opinion polls, despite revelations from e-mails exchanged by its senior officers that it is so desperate to have semi-coherent policies on a range of topics that it is considering buying them from sympathetic think-tanks. 
History, especially that of Europe in the first half of the twentieth century, reminds us that a failure by politicians to manage an economic crisis can lead to a rejection of conventional political parties so, to some extent, what is happening now should not be a surprise. But history also reminds us that the importance of these developments should not be underestimated. No matter how justified it may seem to describe parties such as UKIP as being composed of “loonies and fruitcakes”, this rather misses the reason why a disillusioned electorate has lost faith in conventional politics.
Two recent health-related events typify this view. The wave of revulsion that followed the shooting of 20 children and six staff in Sandy Hook Elementary School, in Connecticut, seemed to many people to be a game changer. The National Rifle Association attracted ridicule when it suggested that the best way to prevent more deaths in school shootings was to arm teachers. Opinion polls shows overwhelming support for tighter gun control measures, with 92% supporting the closure of loopholes that enable those buying firearms at gun shows to avoid background checks. Yet, when even such a modest measure such as this reached the Senate, it was defeated. 43 of the 46 senators voting against it had received campaign donations from the National Rifle Association. They found every excuse possible, no matter how incredible, to justify their failure to act against products responsible for the murders of over 8,000 Americans every year.  Having striven relentlessly to prevent any research that might challenge their position being undertaken, they ignored or dismissed what did exist, such as that showing a clear link between the laxity of state-level gun control laws and shootings. Bizarrely, a few days later, many of the same senators, who had rejected what they saw as intrusive surveillance by the federal government, rushed to condemn the FBI for failing to identify the Boston bombers before they acted.
About the same time, the upper chamber of the UK parliament was debating another health-related matter, the regulations requiring NHS services to be opened to competition. Ministers had offered copious reassurances that the Act, from which the regulations flowed, meant something other than what it plainly said. When the regulations confirmed its true meaning they claimed it was a mistake and, after scattering a few words such as integration almost at random, claimed to have fixed it. Legal opinion, not refuted by the government’s response that sidestepped the key issues, confirmed that the revised version was effectively unchanged. A major campaign was launched to ensure that peers were aware of this and the concerns of by health professionals and their representatives, some of whom seemed finally to have woken up to the threat being posed. Yet as in the US Senate, the government dismissed the evidence. A subsequent detailed legal analysis suggests that the speech by the minister introducing the regulations was incorrect in almost every respect. Despite overwhelming opposition by those who had studies the provisions, the government was successful, leaving those responsible for managing the NHS struggling to reconcile the regulations with ministers’ stated intentions. Quite why so many peers supported this obviously flawed legislation remains unclear but, as with the US Senate, a growing number of people are asking questions about the financial links between the private healthcare industry and some of the most eloquent supporters of the Act and the subsequent regulations.
 Politicians are meant to represent the views of the people, not powerful vested interests. Unfortunately, at times, they seem to echo the suggestion by Bertolt Brecht when he observed that, as the East German communist party had lost the confidence of the people, “would it not be simpler if the government simply dissolved the people and elected another?” Maybe they should reflect on this if they don’t want to join the Communist Party of the DDR in the dustbin of history. 

Wednesday, December 26, 2012

Hinchingbrooke - a (very minor) correction


Mr Birrell has, correctly, pointed out that I was mistaken in saying that the Public Accounts Committee had condemned the franchising arrangements at Hinchingbrooke Hospital. In fact, the Committee has yet to issue a final report. I should instead have said that members of the Committee had condemned it. I was thinking, in particular, of the closing comments of one of their members in their report of evidence taken: “I have to say, this should never ever happen again, because it is a financial disaster for value for money and for taxpayers.
I should also have mentioned the report into the franchising by the National Audit Office, which was the basis of the Committee’s hearing. Although measured in its wording, concludes that “The Authority should work with the Department to undertake a formal lessons learned process before agreeing any further franchise agreements.” This is on the basis of a long catalogue of problems, including a lack of clarity about transfer of risk and what measures of success were being used. One of the Committee members, used to reading these reports, describes it as “probably the worst report of financial incompetence in the NHS that we have seen. The chair noted that “I haven’t read a Report as bad as this on the health service. This is probably the worst.”
The views of the members suggest a fairly consistent tone of incredulity, such as “this report is chock-a-block full of people saying, "Never before anywhere in the NHS has this level of savings been achieved." McKinsey, who are probably the consultants who are around the NHS more than anybody, say that they think it is unachievable. We accept that it is early days. We know from Mr Parsa that they have not got to where they planned to be when they put the bid in to you. We know from the document here that they added 25% savings in at the last minute to give you a viable bid that you could accept. You seriously sit here and think that that will be achieved? You are seriously doing that?
Of course, as the evidence presented to the Committee and the NAO report indicate, there are many serious concerns about the franchising process, and not just the fact that Circle has a get out clause if it racks up excessive losses. But then, maybe this is unsurprising, given the description of the calculation of risk in public-private partnerships as "pseudo-scientific mumbo-jumbo".
I do hope that this has put the record straight. The Committee has not yet reached a considered conclusion on the Hinchingbrooke franchise but, I would suggest, it is already pretty clear what it is likely to be.

NHS privatisation - we are right to be afraid

Just before Christmas David Cameron’s former speechwriter, Ian Birrell, wrote in praise of private sector involvement in the delivery of healthcare (NHS privatisation fears? Grow up). It is no secret that many members of the current government see the NHS, along with the BBC and the Royal Mail, as ripe for privatisation (or what you and I might describe as untapped opportunities for profiteering by their friends and supporters in large corporations). Yet Birrell’s enthusiasm for privatising the NHS overlooks two fundamental characteristics of private companies. They hate uncertainty (as their advocates tell us again and again) and they will invest their capital wherever they can be sure of making the greatest profits.

For health care to be attractive to them it is necessary to distort the delivery of care so much as to make it almost unrecognisable. As Margaret McCartney has set out in detail in her excellent book, The Patient Paradox, it must exclude anyone whose condition cannot be put into a tidy box and costed. Hence, the concern he voices for elderly and disabled patients seems at odds with the profit imperative to get rid of them, ideally to the social care sector where their care will be means tested. As we have shown in a recent paper, this is only part of a multipronged attachment on older people (or as certain politicians would say, sotto voce, those who have outlived their usefulness). Consequently, while no-one wants to see older people stuck inappropriately in hospital, we must consider the motives of those now suggesting that they should never be in a hospital at all. Recall that, in many cases, it is only possible to know that someone is entering the final few months of life in retrospect. The exclusion of old people from the health system will free space needed to screen the worried well until some harmless anomaly can be found and treated at a guaranteed profit.

Private providers will only contract with the NHS if the market is rigged in their favour, for example by capping their losses as happened in the deal with Hinchingbrooke Hospital, since condemned by the Public Accounts Committee. He invokes Germany as an example of a country where the private sector is heavily involved in health care delivery but seems unaware of the very different model of Rhineland capitalism in force there, with trade unions represented on supervisory boards of firms. The benefits of this approach over the Anglo-Saxon model we use have been set out at length by Will Hutton. The situation in our two countries is entirely different.

Birrell’s claim that “competition works in health, just as it works elsewhere” displays an ignorance of a literature stretching back fifty years. The theory was set out in 1963 by the Economics Nobel Laureate Ken Arrow and the empirical evidence gathered since then. He must surely know that the research he cites has generated results that are medically implausible and have been heavily criticised.

People with complex disorders, cannot be commodified. The abject failure of the market-based health system in the USA to improve health outcomes, despite spending vast sums of money, should give him pause for thought. On a whole range of measures, the NHS in the UK outperforms those in other industrialised countries. When someone is proposing something so completely at odds with the evidence, it is only reasonable to ask why and who will benefit?

Friday, August 17, 2012

My perspective on London 2012

This blog originally appeared on the LSHTM site


Something quite remarkable has happened to me in the past 10 days. Normally I find televised sport barely more exciting than watching paint dry and I share Dr Samuel Johnson’s view that patriotism is the last refuge of a scoundrel.
Yet, somehow, I’ve found myself avidly watching sports events that, if I knew they existed (omnium, keirin?) I certainly didn’t understand the rules. Now I’m even beginning to understand what the judges are looking for in gymnastics, beyond not falling off the apparatus. So what has happened?
It began even before Danny Boyle’s fantastic opening ceremony. What an amazing surprise! But there was the clue. It was a surprise even though many thousands of people, the performers, the technicians, those present at the rehearsals, knew what was going to happen.
But they kept it to themselves so that they wouldn’t spoil the surprise for the rest of us. Not because they were threatened with arrest under the many powers that the British government now has to prevent freedom of speech. Rather, because Danny Boyle asked them to.
And what a surprise! A feat of sheer technical mastery, with the most amazing special effects presented with superb timing. A combination of seriousness (the tribute to the dead in the London bombings the day after London was awarded the Olympics, even if not shown in the version on NBC in the USA) and comedy (combining the queen – not Helen Mirren but the real one – and Mr Bean). But above all, a celebration of Britain, showing where it has come from but also where it is going.
There was something for everyone, with Chelsea pensioners alongside rap artists. Well, not quite everyone.
There was Aidan Burley, the Conservative MP who complained on Twitter of “multicultural crap” and a columnist in the Daily Mail who ridiculed the idea that one could find an ethnic minority father living with a white British family in a stable family union. He obviously didn’t know who Jessica Ennis was, but presumably he does now as the story has been removed from the paper’s website.
But the storm of protest that these comments provoked showed that, at a time when politicians are doing their best to divide us, vilifying migrants (perhaps we need a few more like Mo Farah), older people (like Hiroshi Hoketsu, the 71 year old Japanese equestrian  team member who is at his last Olympics as his horse will be too old at Rio), and anyone who is different, the vast majority of the British people realises just how much we benefit from diversity and we will not tolerate those who seek to divide us.
And of course we have the actual events. For years it has seemed that there has been no association whatsoever between ability and fame in Britain. News stands are lined with “celebrity” magazines telling us the latest exploits of some sad individual plucked off the streets to be exploited by the producers of reality TV, the modern equivalent of the Victorian habit of going to Bedlam to laugh at the lunatics.
Now they are covered with images of people who really do have talent and, most importantly, have worked to develop it. The commitment that these athletes have made is remarkable. Interviewed after winning Gold in the 10,000 metres, Mo Farah said that running 120 miles a week was hard, and long distance running was lonely. What an understatement!
Yet, as Malcolm Gladwell wrote in his book Outliers, real success at anything seems to require about 10,000 hours of work. What a difference from today’s celebrities with their 15 minutes of fame.
Of course, none of this could have happened without the volunteers. People of all ages, smiling and cheerful even in pouring rain, doing everything possible to welcome the world to this great cosmopolitan city. What a contrast to those who sought to exploit the games for profit.
The reputation of G4S, which so spectacularly failed to provide the security it promised is now in ruins. Coca-Cola and McDonald’s sponsorship of the games has simply attracted attention to the contrast between the health promoting focus of the games and the health damaging effects of their products.
The involvement of ATOS in the Paralympics, given its treatment of disabled people being assessed for work has appalled those who watched recent television investigations into their practices, is beyond parody.
But here I am rather more pessimistic. Will anything change? The idea that G4S should receive any money for its lamentable performance is bizarre and, if they do, it begs the question of what was going through the mind of whoever wrote the contract. How can they possibly be allowed to bid for another government contract for many years?
And now we must look forward to the legacy. These games have surely inspired countless young people to take up sport. Few will become the elite athletes winning medals at future Olympics (although some will). But that is not the point.
In a country with rapidly increasing rates of childhood obesity, what we need is simply to move us all up a notch on the activity scale. But this means investment. We are forever being told by ministers seeking to cut spending that “it is not simply a matter of money”.
Maybe not entirely. But Britain’s success (recall the one Gold medal at Atlanta) is very substantially about money. Yet there are now real fears that as soon as the Olympics are over the budget for sport will be slashed.
This would be a tragedy and the British people must not allow it to happen. What is more important – high quality sports facilities in every school or a nuclear deterrent almost entirely under American control and which no-one can suggest a realistic scenario in which it would ever be used?
This takes me to my final point. What the Olympics have shown is that government works, whether in its investment in athletes or its stepping in, with the armed forces, when a private corporation fails (yet again).
If a government funded sports strategy can work so well, why do we seem so determined to avoid a government funded industrial strategy? The reason that politicians were given brains was so that they could learn from experience. Now is the time to break the habit of a lifetime and do so.

Monday, February 27, 2012

Politicians and media pundits from across the political spectrum have been lining up to compare the Health and Social Care Bill to the Poll Tax. The comparisons are obvious. A seemingly simple idea that was scrambled beyond recognition as it was transposed into legislation, that was hugely unpopular, unworkable in practice, and which ended the career of a member of the cabinet and his prime minister. Yet there is a much more recent analogy, Tony Blair’s decision to invade Iraq. The parallels are striking.

Few questioned John Major’s rationale for going to war with Iraq in 1990, given that it had just invaded Kuwait but, a decade later, many people struggled to ascertain quite why we were attacking Iraq, given that the countries most closely linked to the events of September 11th were Afghanistan and Saudi Arabia. Similarly, having been promised “no top down reorganisation of the NHS”, many were extremely puzzled when the Prime Minister proposed to do exactly that.

Tony Blair needed to provide evidence to justify his decision, giving the English language the alliterative term “dodgy dossier”. David Cameron had to do the same so he produced statistics that seemed to show the UK underperforming on a wide range of measures, from health outcomes to patient satisfaction and productivity. Yet within days the evidence was discredited. Although deaths from heart attacks had lagged behind France, they were catching up very rapidly and would overtake it with a year or so just by doing more of the same. The public was not clamouring for change; satisfaction with the NHS was at an all time high. And, as a recent Lancet paper showed, the story of declining productivity is a myth.

But there was other evidence underpinning the government’s case. In 2000 it was secret material that we were unable to see on grounds of national security. Now it is a risk register that must be hidden lest it alarm us.

Of course, Tony Blair could point to the widespread international support he enjoyed. Countries such as Georgia, Macedonia, Latvia and Albania, each contributed a few companies of troops to the overwhelmingly Anglo-American effort, encouraged by some judiciously targeted financial support.  Yet the big guns, such as France, were missing this time round. David Cameron can also point to support, from groups such as National Association of Primary Care, which on a good day could also contribute the equivalent of a few companies, although as disillusionment has set in even among these groups, it might be more optimistic to hope for a platoon. In contrast, the Royal College of General Practitioners, comprising the equivalent of four NATO divisions, is displaying open disdain. Almost all of the other Royal Colleges, each of which could contribute at least a few brigades, are equally perplexed, with the few that continued to believe that the government must understand what it is doing, such as the paediatricians and physicians, finally jumping ship, just as Turkey when it realised the folly it risked being sucked in to. Then there are organisations that have discovered, to their bemusement, their names listed among supporters of the Bill (or at least of its highly debated “intentions”) when they are nothing of the sort, just as Costa Rica and the Solomon Islands had to ask to be removed from the list of members of the “coalition of the willing”.

In 1990, Tony Blair made clear that, once the troops had deployed to Saudi Arabia, there was no going back, regardless of what decisions were made by the UN Security Council, in the same way that events in the first few weeks of the First World War were dictated by the railway timetables. Once started, they could not be stopped. In 2012, even though the Bill has not even been approved by parliament, and indeed if it is, it is unlikely to bear much resemblance to what it looks like now, David Cameron says that it is essential to advance and any delay will cause chaos. Those warning that chaos will instead be the consequence of advance are ignored.

In 2000 the invading troops were closely pursued by a pack of multi-national corporations, such as Blackwater and Haliburton, salivating at the prospects of the vast profits they were about to make, accompanied by organisations whose ownership and business model was opaque in the extreme. In 2012, the Health and Social Care Bill is being pushed forward by a different set of corporations, such as McKinsey & Co and KPMG, again accompanied by operations such as Circle Health, whose business model in Hinchingbrooke Hospital remains a mystery to outside observers.

Finally, there is the aftermath. Few believe that life under Saddam Hussein was perfect. Yet what came after was far, far worse. What will happen if the Health and Social Care Bill is enacted is a matter of speculation. However, virtually all academic analyses have concluded that what emerges will be more expensive, fragmented, and dysfunctional.

David Cameron has frequently claimed to be continuing policies on public sector reform begun by Tony Blair. History will judge whether this is the only thing that these two prime ministers have in common. Indeed, there may be a case for booking Sir John Chilcot and his inquiry team to stay on to explain how we failed to learn from experience yet again. 

Monday, January 30, 2012

I'm grateful to Lucy Reynolds for additional analysis of the latest YouGov poll on attitudes to the Health and Social Care Bill. The survey was of 1601 NHS staff and was conducted between 17th and 20th January 2012.

If you take out the don't knows, the figures work out like this:
Of those who expressed an opinion:
80% expect the new system to be more costly, 89% think it will increase bureaucracy, and 78% think it will be more fragmented. 84% expect quality of care to deteriorate as a result of the passage of the Bill.
91% think the reform will introduce too much competition, and 87% expect privatisation of services to increase. 83% expect there to be loss of access to healthcare services for some of the population and 68% are expecting it to lead to the introduction of user fees.
80% consider that the Health and Social Care Bill should be withdrawn entirely. 
71% think that Andrew Lansley is failing in his role as Secretary of State.
77% feel that it is in the public interest for the Risk Registers that the government has been told to produce to made available.
  
Raw data (before correction to remove don't knows):
72% expect the new system to be more costly,
83% think it will increase bureaucracy, and
68% think it will be more fragmented.
74% expect quality of care to deteriorate as a result of the passage of the Bill. 81% expect privatisation of services to increase.
Two-thirds of people polled think that the Lansley reform will make the NHS worse (66%) and that the Health and Social Care Bill should be withdrawn entirely (65%).
84% think it will introduce too much competition.
78% expect there to be loss of access to healthcare services for some of the population and 68% are expecting it to lead to the introduction of user fees.
71% think that Andrew Lansley is failing in his role as Secretary of State.
77% feel that it is in the public interest for the Risk Registers that the government has been told to produce to made available.
 

Friday, October 07, 2011

Lucy Reynolds and I offer our views on the provisions for competition in provision in the Health and Social Care Bill


“It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner but their regard to their own self-interest.”
Adam Smith, 1776[1]

“That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg is enough to make one despair of political humanity.”
George Bernard Shaw 1913[2]


EXECUTIVE SUMMARY
Without basis in any solid evidence, the NHS is about to undergo a market reform which may well be, for all practical purposes, irreversible. It is likely to cost the country much more than the existing system, because of extra bureaucracy, loss of economies of scale and full bargaining power with suppliers, maintenance of redundant capacity, and the need to cover return to capital and the costs of commercial borrowing. It will deliver less, not just because of the diversion of effort into the copious administration of commissioning and contracting, but because the embedded incentives of market-based healthcare will lead to physician-induced demand (unneeded tests and treatment undertaken to increase provider income, which may harm patients subjected to them). More effective regulation will be needed to control the problems to which this system is prone, again elevating costs. Overall, the reforms will reduce the quantity of front-line care which can be provided for each pound of the NHS budget spent.  This paper comments specifically on the theoretical weakness of the Cooper and Propper econometric studies which are being used to justify the reform.
In conclusion, the proposed market-based reform to the NHS will be an expensive step in the wrong direction.  It was rushed through the Commons and its content needs to be carefully scrutinised: in addition the policy consequences of adopting a market-based reform should be examined.
FIGURE 1


FIGURE 2



Introduction
This market-based reform (see Figures 1 and 2 above for the financial changes involved) has been presented to the electorate as essential in the interests of cost-saving for the taxpayer. It has been justified on the basis of saving money and improving outcomes, neither of which hold up to more than cursory inspection.

The only “evidence” that competition can benefit healthcare performance is at best debatable
After a quarter of a century of assertions that competition benefits healthcare[3], lobbyists finally, in 2010-11, found three UK-based studies which purport to test and prove this theory.  They are known as the Cooper et al paper[4] and the Propper et al[5],[6] studies.
As these authors could not measure competition per se they used the density of service provision as a proxy, comparing it with routine health service data on heart attack mortality. These three papers stand against a background of many other studies which do not find a positive association (as noted in a review of the literature in one of them5) and in contrast to the theoretical case for why market-based competition in healthcare would be harmful, as set out by the Nobel Laureate Kenneth Arrow and explained in section 4 below. While the three papers contain elaborate mathematical models corrected for many relevant confounding factors including distance to hospital, they suffer from a basic scientific error, the confusion of association and causation: they document the former and impute the latter. A small but perceptible difference in the outcomes before and after the introduction of small-scale competition mechanisms in the NHS is present, but the authors do not offer any convincing mechanism for how reduction of heart attack mortality might result from higher hospital density (which, as noted, they treat as a proxy for greater market competition between providers). Instead they postulate a general “halo” effect of greater operational efficiency arising from bidding for some types of work in the same hospitals that treat heart attacks, via a more “competitive” culture. Alternative explanations for the outcomes generated from the models they have devised exist, such as under-correction for the time taken for ambulances to drive heart attack patients to the nearest hospital. They also ignore the possibility of “upcoding”, although this exaggeration of the gravity of illness in incoming patients is a well-known consequence of paying hospitals according to the quantity and type of cases they treat[7], a change which is part of the competitive internal market introduced in the NHS. If hospitals are judged on mortality and outcome data there is an incentive to record medical problems as more severe than they are, a practice that is hard to detect even by tracking back to case notes. For this overlooked explanation both motive and mechanism are evident, and so is much precedent7. Even if there is a true effect, these studies provide no evidence that it was competition that brought it about: it could as easily have been due to other changes taking place at the same time. None of these papers actually provide any evidence that the market competition reform proposed will in any way improve the NHS, and their citation as the best proof available tells its own story.
 Contrary to the government’s line, the new arrangements will be much more expensive than the Beveridge system that they replace[8]. The change will benefit only corporate market entrants, many of them foreign. The main reasons for the extra costs are:

1.  Fragmentation of purchasing among more entities
The single purchaser system that the NHS has moved away from in recent years can provide excellent value for money. This is demonstrated by the success of the PHARMAC single purchasing agency in New Zealand[9],[10], and the contrasting failure of cost control in many parts of the American health care market[11]. The arrangement we are moving to, with purchasing decentralised into hundreds of consortia, involves multiplication of procurement arrangements, reducing the bargaining power of each purchasing entity, and requiring creation of extra bureaucracy to enable this more costly arrangement.
  
2.  Competition between providers involves redundant capacity and loss of economies of scale
Government insistence on trying to run the system through “consumer choice” (a nonsense in this context, as explained in section 4 below) involves the need for redundant capacity; providers will need to charge more for the services they do provide in order to cover the costs of having capacity lying idle in order merely to allow creation of a competitive market.  In addition, market competition generally involves spending on marketing.  Obviously, unification of provision as in the Beveridge-system NHS allows services to be supplied more cheaply because of economies of scale, avoidance of redundant capacity and no need to spend money on marketing.

3.  Shift to individual billing to facilitate competition between providers multiplies bureaucracy
To facilitate competition between providers, the future arrangement in the NHS will be that “the money follows the patient”, in the words of the White Paper. This results in a shift from efficient pooling of cost and risk across the nation toward the use of individual healthcare budgets. The change will require both providers and commissioning groups to maintain administrative capacity to set up and monitor individual billing.  Again this requires a multiplication of unnecessary bureaucracy which provides no benefit to patients, while increasing costs to the taxpayer.

4.  The structural problem of supplier-induced demand results from competition in healthcare
Henceforth all hospitals will be required to generate their income from selling services to private patients or to Clinical Commissioning Groups (CCGs: composed of GPs and others). This is to occur through what is known in general as fee-for-service and in the NHS as “payment by results”, although in fact it is activity not results which is rewarded. Except for a few facilities which offer essential services which are otherwise unavailable, they will need to cover their costs from such sales or face insolvency and closure. The government has explicitly rejected calls from the Chief Executive of the NHS to maintain the mechanism for a failing hospital to be taken back into public ownership[12]. Hospitals will be permitted to retain any profits they make, for reinvestment or payment to their shareholders or partners.  This arrangement ensures that hospital staff are keen to provide services, and is represented as encouraging them to maximise efforts to provide patient-friendly service of high medical quality so as to generate repeat custom and patient recommendations.  However, it also incentivises clinicians to recommend and provide services that are unnecessary or of marginal medical benefit, and hospital managers to overprice services where this can be arranged. In this era of light-touch regulation[13], both of these undesirable options would be much easier and cheaper to arrange than genuine improvements in service provision, and would more reliably boost the bottom line. One corporation that is now offering commissioning services to our CCGs[14] has previously found it necessary to compensate the US government following allegations of its fraud against the Medicare scheme[15].
The setting of a fixed tariff for each procedure is intended to block over-pricing, but experience in countries which use this system shows that the profit-making provider’s response to this form of control is to miscategorise patients’ conditions, so that they are registered as suffering a more severe medical condition than is actually the case, “upcoding” or“DRG-creep”[16].  A patient miscategorised in this way could be treated more aggressively than is appropriate to their condition, so might for instance undergo unneeded surgery or suffer side-effects from treatment with stronger medication than appropriate. The patient may thus be harmed in order to generate money for the provider. 
The planned new system will be vulnerable to this sort of malpractice because the rationalisation for this market based reform (welfare economics and its offshoot public choice theory[17]) relies on a consumer versus supplier model which does not fit healthcare.  In this model, providers wishing to sell more services at higher prices to generate more profits oppose customers trying to acquire the services they need in adequate quantities at lower prices, and the two come to a mutually agreeable arrangement. This model relies on a number of assumptions including one which is rarely met in the case of medical services, as explained in 1963 by the economics Nobel Laureate Kenneth Arrow[18], the possession by both buyers and sellers of complete information about the nature and quality of the services to be supplied.  Such symmetry of information allows a balance of power between buyer and seller to facilitate a fair negotiation process between these two principals in the transaction.  However, this is evidently not the situation where medical services are concerned. Few patients are medically qualified, and they visit doctors in order to ask what is wrong with them and how it may be treated. That is, the patient relies on the clinician to provide advice as their agent.  When the clinician is also allowed or required to act as a seller of services, the two roles of agent for the patient and principal in the transaction can come into direct conflict, resulting in an increase in demand (through an upward shift of the demand curve in economist’s jargon) induced by the physician’s inclination to increase income by maximising services provided[19].
Where the survival of the service and the owners’ requirements for financial returns put pressure on clinicians to increase the money they bring in by selling more services to patients, the stage is set for systematic exploitation of patients’ ignorance through unneeded billable tests and investigations, diagnosis of minor problems as severe, unnecessary treatment, and over-aggressive treatment[20].  The ability of a patient-consumer to assess the quality of medical services received is for many types of treatment limited to such peripheral issues as waiting time, comfort of waiting rooms and wards, and friendliness of staff, while the clinician-seller is able to exploit their inability to detect profit-led over-treatment, possibly at the cost of subjecting the patient to the side-effects and risks of unnecessary procedures.  In the future NHS, the proposed use of “fee for service” payment arrangements for clinical services adds a dimension of moral hazard, incentivising this form of abuse. Where exploitation does not ensue, it is because the professional ethics of the medical profession constrain it.  But unnecessarily creating such a temptation is surely unwise.  
The more market-driven the health care system the more it is prone to this problem:
Comparing two societies of similar economic and cultural status, in 1993 doctors in the US performed hysterectomies two and a half times as often as doctors in Sweden, and caesarean sections twice as often. And doctors in the US performed 4.4 times more coronary bypasses than doctors in Canada.
Another revealing comparison can be made between certain professions and everyone else. The American Medical Association conducted a study of medical intervention in cases of stage II prostate hypertrophy. They asked urologists what they would do if it were their own case. Just 40.5% of urologists asked said they would opt to have a transurethral prostate resection, yet for the population as a whole the rate of transurethral resections actually carried out in cases of stage II prostate hypertrophy was 80%.[21]
The Economist calculated that the market-driven, corporate-dominated US health care system in 2009 generated between $250 and $325 billion of charges for unnecessary care; this comprised 10-12% of US healthcare spending that year[22].

5.  The proposed means of controlling the extra cost of supplier-induced demand involves a second layer of profit-taking and incentivises denial of needed care
It is well-known by health economists that fee-for-service medical provision causes inflation of medical spending[23].  This is the reason why the US medical system provides such poor value, consuming 18% of GDP (compared to our 8%) and yet leaving a high proportion of the population without access to decent medical care (according to the Commonwealth Fund report comparing seven developed world health systems[24]). Because medical providers in the USA are too politically powerful for the government to be able to introduce the universal coverage the population[25] and the President[26] would prefer, other means have had to be found to try to contain soaring medical costs. A mechanism, “managed care”, was devised to oppose the incentive for providers to over-treat with another which uses the profit incentive to motivate limitation of the amount of care provided.  This is the arrangement which the Health and Social Care Act would move us to, with commissioning at GP level used to restrain overcharging by hospitals through gate-keeping of referrals.
In this model, managed care is undertaken by health maintenance organisations (HMOs) which invite members of the public to pay an annual insurance premium in order to access treatment for any new illness that befalls them (in our new system this premium will initially be fully replaced by an allowance from the NHS budget, which will for now also cover treatment for pre-existing conditions).  The HMOs employ doctors who diagnose and recommend referral to hospitals as appropriate (as our GPs do).  The HMOs keep any difference between the total of the premiums they receive and the care they pay for (as our CCGs will).  This creates a financial incentive for the HMO (or CCG) to reduce total referral cost.  Proponents emphasise that this deters referrals undertaken more to keep the patient happy than for any medical benefit, and that it creates a financial incentive for referring doctors to control the amounts charged by referral services. Both are good goals if provision is under fee-for-service arrangements, which encourages excessive charges, as explained above.  Medically qualified HMO employees are more knowledgeable customers than are patients, and can better control supplier-induced demand, also clearly beneficial.  Unfortunately for patient welfare, the crude use of the profit motive also incentivises refusal to refer patients for services justified on the basis of medical need. 
Criteria for assessing efficiency in medical service provision should involve the correct and timely treatment of medical conditions which are amenable to treatment. Instead, managed care applied to profit-making provision simultaneously gives rise to both under-treatment (exclusion from medically needed care because of denial of referrals[27]) and over-treatment (medical procedures undertaken for the benefit of providers not patients[28]).
 These mismatches occur because the choices triggered by the profit motive map poorly on to the priorities set by the meeting of medical need. It is known that financial incentives raise doctors' activity levels[29] but this does not translate to better health outcomes unless doctors paid this way are underprovided in a community, in which case more activity might improve outcomes. If they are oversupplied and competing for business, then providers’ need to make a living incentivises overtreatment28,[30]. Since no treatment is devoid of adverse effects, poorer outcomes ensue28.  If the market competition that the government insists is central to the reform[31],[32] is introduced throughout the system, we will be in the second situation, where competition between providers for enough patients to cover their fixed costs (rent, salaries, etc) will create motive and opportunity for exploitation of patients.  As noted by a concerned QC, it is also likely to create stresses on staffing caused by cost-cutting which could result in many more medical errors[33].
 In contrast, the Beveridge system does not encourage overtreatment, overcharging or denial of needed care, because doctors are under no financial pressure to over-treat patients. It scores highly on value for money8,[34], quality of health outcomes[35],[36], and patient satisfaction[37], and produces a system where clinician efforts are expended on addressing medical need not on generating income. The proposed reform involving two extra layers of profit and a great deal of unnecessary administration being extracted from the NHS budget for hospital treatment appears to be in the interests of neither patients nor taxpayers; it may however produce a bonanza for foreign corporations[38] and plenty of new work for accountants and lawyers[39],[40].

6.  Privatisation will increase the costs of regulating adequately; failure to do so will result in abuse of patients
 It should be noted that once the reform has loaded our health system with incentives to over-treat patients, deny referrals, falsify or withhold information on patient outcomes and to maximise corporate profits, the cost of regulating adequately will rise.  Failure to do so will save money on “red tape” but at the cost of harming vulnerable people and squandering taxpayers’ money.  We can see how this works in practice from the poor record of the Care Quality Commission, for example at Winterbourne View[41] , mainly due to an underfunded regulatory system which operated largely on the basis of self-certification and not inspection.  It should be noted that recruitment advertising for the CQC over the past year has not required any medical qualification for any post[42].

Conclusion
 While it is clear that ways exist to improve the Beveridge system NHS, it is equally plain that replacing it with a market-driven health system is a move in the wrong direction which is likely to harm patients and waste scarce resources. 
 Market competition in healthcare does not produce desirable results, a conclusion evident from inspection of medical systems which rely upon it and also from economic theory. Despite the highest spending in the world both as a proportion of GDP and as a per capita figure, health outcomes achieved in the USA are mediocre: for instance, in 2010, the US was 44th/193 in the world ranking for the probability of dying by age five34. In the past decade,  the American health care system has made minimal progress in reducing deaths from causes amenable to medical care (the UK Department of Health’s chosen high level indicator of health system performance), falling increasingly far behind other industrialised nations; in the UK, progress on this measure has been among the fastest[43].
 This “reform” serves only corporate interests. They will gain new profit opportunities, as recently explained by Earl Howe to an audience of private sector investors[44], and by past NHS Director Mark Britnell to a group of US private equity companies[45] as follows:
 “In future, the NHS will be a state insurance provider not a state deliverer. In future ‘any willing provider’ from the private sector will be able to sell goods and services to the system. The NHS will be shown no mercy and the best time to take advantage of this will be in the next couple of years.

GPs will have to aggregate purchasing power and there will be a big opportunity for those companies that can facilitate this process.

The monolithic arm of state control will be relaxed which will provide a huge opportunity for efficient private sector suppliers.”

We believe the Bill as presently worded is largely unworkable, while attempts to implement it are likely to increase costs and reduce the level and quality of care that is provided. It is laden with incentives for opportunistic behaviour. Furthermore, as noted by the House of Lords Constitution Committee,[46] it is potentially unconstitutional. The Secretary of State has condemned his critics for relying on anecdote rather than evidence. In this paper we have presented the evidence that, we argue, he must respond to if he is to make a convincing case that his Bill should be passed.


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