Health Policy Insight
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Colloquia: markets and choice in healthcare

Publish Date/Time: 
07/13/2008 - 23:18

AC: This week, I thought we could discuss markets and market mechanisms in healthcare. Richard Smith has written a good blog for Guardian Online (, which gives a pro-market perspective. That isn't surprising, given his work with UnitedHealth Europe.

TS: Sure, but he works for UnitedHealth because he has that perspective, not the other way around.

AC: I know that, and my starting point is not that he is wrong - all I want to do is ask what market forces really add. I understand the argument put forward: I’m just not sure I buy it.

In his speech to the BMA conference, Hamish Meldrum said that is was England that had walked away from the UK NHS model, not the Celtic nations. Clinicians are not persuaded by the use of market forces, nor are all patients - not even all managers support their use. And, as we know, the policy community is divided.

In my view, we’re entering a period where the hegemonic and automatic faith that markets are always the solutions is going to face greater challenge in health policy here. As it should. The NHS was created as a response to the market failure of healthcare as it had been organised prior to 1948. Since that time, there has been very little healthcare market beyond the NHS, because anything with a single payer (HM Treasury) is not a market, but a monopsony.

The UK's private healthcare sector is a boutique - small, costly and not accessible to most people.

I'm making a distinction between health (gyms, diet crazes, healthy eating, vitamin supplements are all still going great guns) and healthcare. The recent topping-up / co-payments debate ( and also throws into sharp relief the idea of defining a 'core' NHS offer, on top of which people would be expected to insure or co-pay.

Administratively, you can only see that being a nightmare. Likewise, defined packages of entitlement don't have a great record in healthcare, particularly given that the NHS's core business is people with long-term conditions.

Sheila Leatherman's work finds that there is no proof that competition improves quality in healthcare. I'm not aware of anyone having refuted her thesis.

TS: There is certainly no evidence to warrant blind faith that markets will improve public services. In fact, there is very little evidence. And maybe that is because the question being asked is too broad and incapable of empirical evaluation.

A lot of the problem is the unit of analysis. The question, ‘are markets positive in healthcare?’ is impossible to answer. At the macro level, it is principally a political question and the lack of more focused research on different segments of healthcare – in different specialities and areas -means that the debate is sustained in political form.

I can see what you are saying about greater challenge to the use of markets. This will definitely increase as they take hold, and there are implications for NHS facilities - the merging of GP practices, for example, or a hospital withdrawing from the provision of a particular service. But even before then there is going to be a political challenge. Alex Salmond describes the coming by-election in Glasgow East as “a political earthquake”. Imagine if Labour lose? In that scenario, Gordon Brown’s position will become untenable. Labour can still win and GB’s position will be shaky, depending on how much is eaten out of a 13,000 majority.

In the midst of a political battle within the Labour Party there will be some who wish to return to clear Blairite agenda, which will raise the issue further of how far market mechanisms will be employed in health care. There will be others who want to take actions that suggest a retreat from market forces in the NHS.

This brings me to the second most interesting thing I’ve read this week (I’ll come to back to the first, later). It is an essay by Peter Taylor-Gooby (PTG), a respected professor of social policy, at the University of Kent, and based of analyses of the most recent Social Attitudes Survey and its comparison with earlier results.

PTG argues that there are visible signs of an increasing “discontinuity” between people’s concern for social issues (which is stable) and a view that the government should intervene in these areas (which is decreasing). This has huge financial and social implications. People don’t feel any less worried about inequalities between people but are less sure that government should be.

Here is a quote: ‘Across Europe and particularly in the UK, governments are adopting policies that give a stronger role to markets and which emphasise competitiveness, opportunity and individual responsibility. Our recent research in the British Social Attitudes survey indicates that the move away from the provider to the opportunity state is endorsed by most British citizens. At the same time, there are indications that social liberalism is spilling over from support for greater opportunity, within a framework of common social provision, to support for an individualism that undermines support for redistribution to help poorer groups and permits the better off to use their money to buy privilege in areas like health care and education.’

Do you know who published the essay? The Fabian Society – in their own words, ‘the oldest think tank in the world’. It is well worth a read:

AC: I find that worrying – Dude: where’s my social contract unpinning the collective pooling of risk in order that care is delivered free at the point of use? Seriously, this shift is social attitudes is understandable, but are the implications clear – when do we, as a society, get to discuss these?

I’m reminded of Barry Schwartz’s The Paradox of Choice, the so-called empowerment offered by ‘choice’ is illusory. Sometimes markets deliver choice (telecoms), but sometimes they clearly don't (trains, on almost every line save a few inter-city routes). Don’t you have to have some basic conditions for choice to exist – i.e. a range of equally attractive alternatives?

And uniformity is a problem in itself. Look at consumer banking - you have a range of providers, but all offering almost identical products that are usually offer almost identical poor value for money. The competition commission should get interested.

TS: I think choice is a good thing in the NHS where it is a mechanism for patients to express preferences about how they are cared, which, of course, includes where they are treated. But I think that the NHS is a series of markets, in a sense, and that these need to be managed and set up differently. Competition, for example, can be employed in very different ways. I’m not sure, for example, that having a fully tariff based system of primary care, without registration would represent good value for money or be conducive to high standards of care. Of course, we need to shape market mechanisms. We need incentives that reinforce good patient care.

People are not always clear about why they want competition, what they hope it will achieve. Is the aim to increase allocative efficiency within the system? Is it to empower patients, meaning their choices are directly related to provider income? You see, I understand the theory, but it is difficult to place this framework around healthcare without careful construction.

Competition is said to make providers responsive - and in a more commercial environment, firms have to respond to dwindling sales and examine the reasons. They also need to talk to their customers and understand their needs. It will be difficult to shape competition effectively in the NHS unless there are ways for providers to do this more effectively.
The policy discourse emphasises individuals as frustrated consumers whose empowerment is blocked by the lack of information on mortality in UK hospitals. Okay, I’m exaggerating, and I do think that more information is a good thing. But my point is that not all people (in fact a minority) make choices in healthcare on the basis of published information about quality.

Better information is needed for patients and clinicians. But there is going to be a lot of work and negotiation needed about what I call the currency of improvement. For patients, commissioners, professionals, what will be the metrics of quality that really matter? And crucially, will they be shared?

At the same time as working on the kind of information that will lead us to see quality when we see it, we also need to explore what kinds of competition work most effectively. We need evidence.

In this week’s HSJ, Richard Lewis and David Colin-Thome cite evidence (though without referencing it) that competition improves the performance of integrated health systems. Maybe Chris Ham is right: what they demonstrate is that we have the wrong kind of competition. It is a hypothesis worth exploring.

AC: So are you saying you’re positive about markets? Aren’t you making the same mistake you accuse others of, starting from a predisposed position?

TS: I’m saying that we don’t know very much about ‘markets’ in healthcare and as a result, discussion remains political. To depoliticise this discussion, we should know more about their impact. I’m saying that I’m open to the idea that market mechanisms can be beneficial, if controlled, while also being fully away of how they could impact negatively.

We have an opportunity to learn from a range of experimentation across SHAs and PCTs. I see a turn towards greater localism in the NHS; at least the development of regional services with different rules, based around different SHAs. We need to take the opportunity to learn from this natural experiment in service delivery and learn from them. But we need to be clear about what our metrics would be.

AC: Market ideologues are often strangely silent about producer capture, such as supermarkets enjoy over their suppliers.

They are also often silent about the fact that when one company assumes dominant market position (such as Microsoft or Tesco), they often begin to behave with arrogance towards not only consumers but national and international law, as proven against Microsoft and currently alleged against Tesco by The Guardian and Private Eye for tax avoidance. When you talk about integrated models and expanding primary care, won’t this just solidify their position rather than lead to ‘a different kind of competition’ that is better?

The irony in all this is that in the NHS, choice of GP was outlined in the 1948 'what is the NHS' document and yet it has never been a reality, for various reasons.

TS: Now there I agree with you, and I do think that competition – in any form – can only work if there is a real choice for patients, if they can go and join another practice or another multi-speciality provider. Integrated services, especially, could be prone to the capture you describe, unless there is an alternative.

AC: When Alain Enthoven was in the UK a few weeks ago I heard him speak at a lunchtime seminar. Well known as a king of competition, the way he talked made me think more about what competition is put into the system to produce. Enthoven admitted that the conditions for competition don’t exist everywhere; and that without this, providers face no incentive to change. He said that where this was the case, providers should be faced against their communities.

TS: I heard him say the same thing at a Nuffield breakfast seminar the same day. It was something I thought of last Wednesday (9 July) when I read the new White Paper: Communities in control: real people, real power. It says that a new duty will be introduced for councils to respond to petitions and in a short throwaway line adds, ‘Councils will also act as community advocates for petitions related to the Primary Care Trust’.

I think that’s a very interesting and positive move. In areas where the conditions for competition do not exist then it will help ensure some responsiveness.

But in areas where there is more competition, this duty will still apply. The difficulty is ensuring balance between being responsive to choice and to petitions in the local areas. The question is, are either fully representative of local views? Will PCTs give most weight to choice or voice?