Political leaders in the UK are enthusiasts for Neo-Liberalism they are committed public services to the out sourcing of public service provision to the private sector. The latest folly is the desire to privatise much of the state run and funded National Health Service. Our political predecessors who nationalised health care in 1948 had a shrewder grasp of the economics of health care than do today’s politicians. What I will argue is that the politicians of 1948 were correct in their understanding that the free market mechanism was ineffective in providing universal health care.
At the heart of free market economics is the belief that society is best served if individuals freely enter into exchanges of goods and services. They, the people know what they want, it is wrong for the state to second guess the consumer. Certainly the free market is an unrivalled mechanism for the buying and selling of cars; but just because the free market works well in the consumer goods market does not mean it will work elsewhere. What makes the car market work is the approximate equality of knowledge, the customer knows how a car functions and what they want from that particular car. The salesman understands the customers needs and can supply a car that meets the customers specifications. Obviously this is an over simplification as the seller is usually better informed that the buyer, but any fraudulent action by the seller is subject to severe legal sanction. This market is completely unlike the market for health care, which is characterised by ignorance rather than knowledge. There can be no equal exchange when cash is exchanged for a service of which the buyer is almost totally ignorant of the product (Pharmaceutical drugs) that they are buying. This relative inequality in which all knowledge resides with the seller (medical practitioner) means that the buyer is totally dependent on the seller’s knowledge and good intent, which means that the free and equal exchange of goods and services that is experienced in car market is impossible.
Blame must also be apportioned to economists who believe that any free universal service will be misused, if it’s free people will over use it, as it costs them nothing. They believe in some principle of charging as it would compel people to make a rational decision about whether or not they really need medical care. What they ignore is that the NHS devised a much fairer system of rationing health care, in which front line practitioners, general practitioners acted as gatekeepers, only allowing those who needed intensive medical care access to hospital services. It did mean queues developed for some services, but better that than cash be the criteria by which access to health care was decided.
What else is unique in the health care market is that it is contracts are based on a mixture of desperation and hope. Illness makes the customer (patient) so desperate that they want a cure at almost any cost. This gives the medical practitioner the opportunity to exploit that person’s desperation or to use an economist’s term they charge what the market can bear. Therefore in a free market the poor are priced out of medical care. Prior to 1948 doctors could get a good income from treating the relatively few well off who paid well for their services. Medicine then was an occupation for gentleman, a well brought up young man would not have to sully his hands dealing with the poor. People such as my grandmother depended on charity, when my mother was being born it meant a call on the services of ‘The Sisters of Mercy’.
There can be no equality in the bargaining process when the client is largely ignorant of the product or service they are buying. People of my grandmother’s generation believed that Beecham’s pills taken once a day, were essential to maintaining good health. Not realising that none of the pill’s ingredients helped maintain good health. One ingredient was detergent. Pharmaceutical companies and ‘medical practitioners’ have always been able to exploit the gullibility of people. Health care is perhaps the only market in which the characteristic feature is ignorance.
Health care is the one market that needs regulation and in the UK there is an effective system of self regulation. If a medical practitioner wishes to be recognised as an M.D. they must undergo training at a college recognised by the British Medical Association and then be accepted as a doctor by the same body. This means the sick person can get treatment from a health professional, who will not administer ineffective or harmful treatment. However that leaves plenty of scope for practitioners of alternative medicines to sell treatments to the desperate. The BMA’s self regulation is only effective because it has the support of the government. A truly free market in health would mean that the market would be free to any new entrant who claimed to be a doctor, which would be harmful to the nation’s health. At least the present system excludes dangerous practitioners from the market.
However ignorance of the means and the effectiveness of treatments is not confined to the patient. Unfortunately the doctor also displays a degree of ignorance about his trade which you would not find with the car dealer. One estimate is that there are 10^34 pathologies than can affect modern man, while the GP will have a good knowledge of the more common pathologies there are many of which they will be ignorant. One recent study of post mortems revealed that 40% of the deceased had been misdiagnosed. A market in which relative ignorance of the practitioners is prevalent needs to be regulated. Consider this, arsenic was used in treating syphilis until the 1950’s and earlier in the twentieth century it had been used to treat arthritis. Unlike in the car market where the bad dealer loses out to better performing rivals, the ill informed medical practitioner has little to fear because of the ignorance of his patients (customers) because they have now way of judging his competence.
Good medical practice has been ensured in the UK through the following government funding for a system of universal health care and the high quality of care being maintained through a combination of the public service ethos and the Hippocratic oath. Now there will be with the proposed privatisation of the NHS there will be added a new commercial ethos, profit maximisation. Adding the profit maximisation imperative into the medical practitioner ethos will do little for patient care, as reducing costs to maximise profits does the reverse.
Politicians have assured us that it does not matter who Is the service provider whether it be the state managed NHS or a private health care corporation as the same service will be delivered to the patient. Naively this is what politicians believe despite evidence to the contrary. A private health care corporation has an incentive to perform those medical treatments that are straight forward and involve short term stays in hospital, as this will increase turnover and profits. The long term and difficult treatments will receive a much lower priority as they involve long and expensive treatments that reduce the profitability of the business. If cancer treatment is for instance delayed more people will be entering hospital at an advanced stage of cancer with the likelihood of a reduced life span and a shorter period of expensive treatment. The private health care corporations that are poised to take over large parts of the health service will inevitably prioritise profit making over health care.
In countries such as the USA where health care is in the hands of private corporations there is an incentive for over treatment, that is advising surgery where treatment is straight forward and recovery certain, whether or not the patient needs it. Once such procedure is hysterectomy and health economists can always get a laugh at conferences by trotting the old joke about no woman in America over forty still possessed her own womb. Treatments that maximise profits will get priority over those that are costly and which yield little profit.
What our political leaders fail to realise that in a free market an approximation to equal power in the buyer and seller is needed to make the market work well for both buyers and sellers. When as in the example of the health care market the is an asymmetrical power relationship between the doctor and desperate patient the market cannot work well. In 1948 it was decided for that reason most people should be removed from the free market in health care, as they would never be able to get fair treatment in a market where the odds where stacked against them. The only exceptions were to be the rich and powerful, as they were not at a disadvantage when bargaining for health care, doctors desperate for money would ensure that they received the best possible treatment. Unfortunately the low income majority did not have that power, they were liable to exclusion from the health care market. Having known of the evidence of market abuse when doctors worked in practice with one or two partners now having GP’s contracted to a large private corporation can only lead to greater market abuse. The post code lottery will work with a vengeance in health care, there will be excellent health care for the rich citizens of Mayfair and poor health care for the Inhabitants of Newham in East London (England’s poorest borough).
While the National Health Service has been subject to unfair criticisms in parliament and the media, in which all blame for failure is attached to health care professionals and none to political mismanagement, commercial confidentiality will protect the new worse and privatised health care service from proper scrutiny. It must also be added that politicians knowledge of medical care is little better than that of the average citizen, which means they are not qualified to oversee these changes in health care.
Blame must also be apportioned to economists who believe that any free universal service will be misused, as if it’s free they will over use it, as it costs them nothing. They believe in some principle of charging as it would compel people to make a rational decision about whether or not they really need medical care. What they ignore is that the NHS devised a much fairer system of rationing health care, in which front line practitioners, general practitioners acted as gatekeepers, only allowing those who needed intensive medical care access to hospital services. It did mean queues developed for some services, but better that than cash be the criteria by which access to health care is decided.
1 thought on “Why the privatisation of health care is wrong”