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Market Forces in NHS


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Wendy Savage

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Market Forces in NHS

  1. 1. Can market forces makethe NHS more efficient? SHA conference 30.11.10 Wendy Savage MBBCh FRCOG MSc (Public Health) Hon DSc Co-Chair Keep Our NHS Public
  2. 2. The definition of efficientEffective, producing the desired result with the minimum wasted effort (OED)In health efficiency is „the most effective use of available resources to meet health needs‟ Creeze & Curzin 1995Now used to mean „cost efficiency‟
  3. 3. What are market forces? The essence of a market system is that “free agents” try to maximise their own “utility” or wellbeing by comparing market prices for goods and services with what they are worth to them. Provided prices are free to move, they will adjust to the forces of supply and demand. Price signals enable the market to wring out the most of an economic situation Driven by self-interest and competition, and relies on information symmetry between buyers and sellers
  4. 4. How efficient is the NHS? Still spend less of our GDP than many OECD countries Universal coverage Recent Commonwealth Fund (US) rated UK as highest on equitable access UK public think their health care system needs changing less than any of the other countries surveyed
  5. 5. How is efficiency measured? Many studies compare the number of staff employed and the volume of patients treated This is a very crude approach to medical practice It may take much longer to explore the reasons for not performing a surgical operation for example than immediately doing one Quick throughput which does not uncover the real disease issue may be less efficient eventually
  6. 6. Wanless Report 2006 Compared „productivity‟ 5 years after looking at the NHS in 2001 after the NHS reforms of 2000 Lamented the fact that Agenda for Change had consumed about 70% of the increased money put into the NHS. Considered that „productivity‟ had not increased commensurately with increased investment. Quality of care was not measured
  7. 7. Management costs 2003Government funded study showed, by analysingpublished figures of workforce that :France spent 10% of health budget onadministrative costsCanada spent 10% but possibly 17%UK spent 14% (was 5% before 1984 Griffiths)USA spent 17% but possibly 31% depending onhow you interpreted the figures.
  8. 8. Global experience Structural adjustment programmes forced on countries as part of IMF loans have used market mechanisms which have: Used user fees which have Increased inequitable provision of care Forced people to avoid using health care Increased mortalityEastern Europe including Russia, Sub Saharan Africa, Latin America and Asia affected
  9. 9. Health care unsuitable for a market There is assymmetry of information between patient (consumer) and provider (seller) of services. Economic theory predicts that price competition is likely to lead to declining quality where (as in healthcare) quality is harder to measure than price. Evidence from the 1990s internal market and cost- constrained markets in the US confirms this with falling prices and reduced quality…… NHS Confederation
  10. 10. Higher cost of private care in US Medicare HMOs admin costs 15% compared with 3% in traditional Medicare Medicare dialysis centres cost 9% more than non-profit centres. Mortality is 2% higher and costs 19% higher in investor-owned hospitals compared to private hospitals (Woolhandler and Himmelstein 2007) Veteran‟s administration hospitals less expensnve but have higher quality than other hospitals
  11. 11. Market failure in healthcareMarket failure in healthcare is a well recognised problem in theory and practice (Arrow, Brown) 1. “Information asymmetry”. Patients are not well enough informed to make choices. Patient vulnerability. Need for “Choice advisors”. Also primary and secondary care 2. Healthcare is difficult to commodify. Contracts are complex. Contracts are based on mistrust 3. Risk of supplier induced demand 4. Excess capacity is needed for market choice to work i.e a plurality of providers 5. Exit is very difficult ie Hospital closures are a political hot potato 6. Expensive to enter market – e.g ISTCs (given 11% extra tariff)
  12. 12. Market failure7. Insurance systems will give the cheapest and best coverage to the well, and the most expensive and least coverage to the sick 8. Doctors control access to the healthcare market. Professionalism is a problem 9. Markets provide for wants rather than needs. 10. Price signals dont work. Payment occurs after care. Healthcare costs are prohibitive. Pooling of risks 11. Need for specialty clusters and high volume workload 12. First duty of investor owned firms is to their shareholders, not patients – “cream skimming” 13. The market is a blind power without any social orientation: it cannot solve social problems 14. Need to plan for local population needs
  13. 13. Can market forces makethe NHS more efficient?The answer is NO
  14. 14. Further Reading Colin Leys Market-driven politics (2001) Verso Allyson Pollock NHS-plc (2005) Verso John Lister Health Policy Reform (2005) The NHS after 60:for patients or profits? (2008) Stewart Player & Colin Leys Confuse and Conceal Merlin Press 2008 House of Commons Health Committee (2010) Commissioning. Fourth Report of session 2009-10 An alternative to the market: report of a roundtable discusssion July 2010 available free from BMA website