The trouble with the NHS

Two years ago the American author David Goldhill caused quite a stir in the US media with his book 'Catastrophic Care'. At the time, Obamacare was being implemented yet Goldhill argued that the extension of coverage to millions of Americans was a sideshow. His critique of the health care system focused instead on the conundrum of rising costs at times of increasing competition (which should drive down costs).

To any observer from the UK, this may appear a worry too far. Since 1948, the UK operates a monopolistic tax funded health care system without insurance intermediaries. Competition is a dirty word here, with politicians of all colour consistently arguing that it's the strong monopolistic position of the NHS that allows it to negotiate low prices with all health economy providers (we will return to this point in a moment).

Yet, Goldhill also showed clearly that all modern health systems suffered the same ills. Profits in health care provision did not amount to anything resembling the mountains of gold presumed by defenders of socialist health care. In fact, 'all the profits of the famously greedy health insurance companies ... would pay for four days of health care for all Americans. Add in the profits of the ten biggest 'rapacious' drug companies: another thirteen days. Indeed, confiscating all the profits of all American companies, in every industry, would cover only seven months of our health care expenses.' (Goldhill, p.53)

In other words, profiteering in health care provision is a red herring when it comes to the magnitude of the cost explosion.

British and European health care systems don't fare much better. Whilst productivity is slowly rising in all UK industries, the NHS is notoriously the only industry where productivity has steadily been falling. The argument has always been that medical care is a labour intensive industry. But does that mean that it is an industry like no other, exempt from the conventional laws of efficiency?

Productivity down, costs up - and still no happy Unions - NHS unions in 2007

Health care appears to be the only part in society that we positively excuse when it operates at a loss to us as taxpayers. As technology has made things easier for everyone from the local plumber to the car mechanic, health care providers appear to be saying that the more technology they introduce, the more expensive things will become for us as consumers. In fact, we are so used to this argument that, reading this, you may not even have spotted the flawed logic in this sentence. It is only in health care that technology makes things MORE expensive, when, in all other contexts, the aim of introducing technology is the opposite: to make things cheaper by increasing productivity.

So, what's going wrong? What's at the heart of the cost explosion of the NHS? The first issue is that the NHS, as any modern health care in the Western world, deliberately severed the link between patient behaviour and costs. People are not rewarded if they visit their GP less. On the contrary, the more a patient turns up at the local GP practice, the more tests (most of them often useless or positively harmful, as Atul Gawande argued) and clinical interventions are showered on her or him. The system also rewards the absence of self-management of illnesses and almost expects a lack of responsibility for our own well being.

Yet, even more important, what was supposed to be a risk sharing model for acute care needs has become a model of comprehensive health care. Once, illness was narrowly defined as urgent medical attention in cases of life threatening diseases. The NHS was founded as a response to large scale epidemics such as TB. Fast forward to the 21st century and the NHS has become the nanny for all  discomforts in life, for free!

The original model of sharing risks at times of acute medical needs, many of those very expensive, has given way to a model of comprehensive care for everything from a brain tumors to blisters on the feet. The health care systems are thus not risk sharing mechanisms anymore, helping the poorest to spread the costs of acute care needs, but a dispensary of all round care for free.

The fact that we don't share risks anymore but appear happy to pay for everything for everybody has important consequences to health care costs. It distorts positive health orientated behaviour (hence the discussion about obesity and gastroband surgery on the NHS), but it also undermines the possibility of establishing truly risk spreading mechanisms that would help share the costs in adjacent fields such as social care. Social care insurance will remain unviable in the UK, as long as much of what goes for care needs is met by the NHS or local authorities (soon helping themselves to NHS budgets in devolved areas).

The advantages of having a strong negotiating position vis-a-vis pharmaceutical industries are puny in comparison to the costs of health care in a dis-incentivised context. Not least because allegedly lower prices of medicines are likely to be cancelled out by the expansive prescribing of low or non-effective pharmaceuticals. As long as we think we have a right to free all round care, we won't be restoring the link between what we do to keep ourselves healthy and what we spend on our health.