Can ‘we’ be trusted on healthcare?

Advocates of a denationalisation of healthcare frequently come across the objection that healthcare is not amenable to individual choice. People may be trusted to make sensible decisions when it comes to choosing everyday consumer goods, the argument goes. But picking the right insurance policy, medicinal product or hospital is not as simple as picking a brand of beer or shoes. Healthcare, it is argued, is just ‘too complex’.

What the proponents of the complexity-argument fail to appreciate is that we cannot escape making decisions on healthcare issues anyway. When we nationalise healthcare, we merely transfer decision-making from the private sphere to the political arena. We largely cease to make decisions in our roles as patients, medicine consumers and policyholders, but we now make decisions in our roles as voters, protesters, survey respondents or members of a patient group instead. In these latter roles, we are still the same people – rational or irrational, foresighted or myopic, cool-headed or emotional.

Anyone believing in the general superiority of public over private decision-making in healthcare should take a good look at how the Liberal-Conservative coalition’s recent NHS reform project has failed. Originally, the idea was that GP-led consortia would purchase healthcare services from the most cost-effective providers, which could potentially include private companies. Underperformers would lose funding and could even face closure.

But then a series of protests by NHS staff raised public suspicions about the intent of the reforms. The coalition got nervous and put its plans on hold. The reform debate was no longer about the actual content of the reform. Rather, opponents tried to label the plans as creeping privatisation, and reeled off the conventional anti-market phrases. Meanwhile, the prime minister tried to convince the public that his oft-professed love for the NHS really was heart-felt.

When the smaller coalition partner then lost a referendum on a totally unrelated topic (electoral reform), they suddenly U-turned on the reform which they had co-authored themselves. They were, to use John Redwood’s words, ‘trying to stop their own manifesto being implemented’, and sold this to the electorate as proof of their integrity. Subsequently, the larger coalition partner agreed to strip the bill of its controversial elements. One need not be especially critical of the government to suspect that this manoeuvre has more to do with the internal dynamics of the coalition than with spectacular ‘new insights’ that have become available in the meantime.

In this reform story, we have a neat summary of nearly everything that can go wrong with public decision-making. Decisions on an important topic like health are being dictated by the rules of the coalition poker game. Vested interests successfully portray their aversion to competition as concern for the public good. Entrenched opinions are being formed on the basis of a low level of knowledge: a YouGov poll shows that only 20% of respondents express support for the reform package – but when asked about its individual components (without being told that these are components of the reform plan), support is considerably higher. (The YouGov poll is not explicitly a poll about the level of public awareness. However, if somebody told me they enjoyed pizza, pasta, pesto and Chianti, but strongly disliked Italian cuisine, my interpretation would be that they don’t know what ‘Italian cuisine’ is.)

Healthcare is a complex issue indeed. But there is no escape from that. If we are really unable to make sensible decisions concerning our own healthcare, then how on earth are we supposed to make sensible decisions concerning everybody else’s healthcare?

Good point, Kristian. There was a nice piece by Matthew Parris in the Times the other day showing how irrational debate can be. By putting doctors' leaders ' words in the mouth of fictional defenders of state agriculture he showed how self-interested they were.
Indeed! This is a consistent problem that advocates of nationalisation of anything face, but yet rarely recognised. Namely, if a decision is not amenable to individual decision-making, just exactly who's decision-making is it amenable to, given that the government is not an omniscient, objective god, but a collection of...individuals? As Mark Pennington has recently reminded us, these individuals (in government) must also face the knowledge and incentive problems (however, they face a different, worse set of both as they lack a proper mechanism for allocating scarce resources and have a more problematic set of incentives). This knowledge/incentive point must be made clearly every time we face calls for socialisation or opposition to privatisation. On the other hand, the coalition's reforms were, as you pointed out, far from privatisation. They may well have been an improvement on the status quo (almost anything would be!!) but no doubt they would have created a pseudo-market with many problems of its own. I often wonder whether pseudo-markets aren't actually worse than complete socialisation for two reasons (i) they often allow private companies to exploit the taxpayer, creating perhaps greater inefficiencies than previously existed - the failure of PPI/PPP is indicitative. These psuedo-markets are insulated from real competition because of the various absurd barriers to entry that the state creates (e.g. a small business owner I know who provides services to local government was recently forced to spend a large amout of time filling out forms about whether his staff were sufficiently 'diverse' - this was none of their business, but cost him a great deal of effort) (ii) the failures of such pseudo-markets allow socialists to claim that markets are doomed to inevitable failure and we should return to a socialised system (Railtrack is one good example), even though they were not in any way free markets - no such thing is close to existing in the UK - in the first place! Given the resistance by producer/political interests and the appalling level of public ignorance regarding any sort of NHS reform it is unlikely that a gradualist process of privatisation would be any more likely to succeed than a sudden one - although perhaps I'm being too negative. Personally, I doubt that the proposals were an attempt to move towards privatisation anyway, that would be too much to hope for.
Whig's point re. the barriers placed to firms seeking contracts with government at national and (worse) local level is well worth amplifying. Government procurement is being used as a way of forcing any number of irrelevant requirements on contractors - diversity, environmental policies, trade union recognition, pay structures and so on. For many small firms, often headed by people with good technical skills and entrepreneurial energy, but limited educational qualifications and/or English as a second language, this means they may effectively be excluded from competing. It also arguably gives an unfair advantage to ex-insiders who previously worked for the relevant government department, hospital, university or local authority. The IEA should explore this further - if anybody has personal experience of this, let's hear about it.
Whig's point re. the barriers placed to firms seeking contracts with government at national and (worse) local level is well worth amplifying. Government procurement is being used as a way of forcing any number of irrelevant requirements on contractors - diversity, environmental policies, trade union recognition, pay structures and so on. For many small firms, often headed by people with good technical skills and entrepreneurial energy, but limited educational qualifications and/or English as a second language, this means they may effectively be excluded from competing. It also arguably gives an unfair advantage to ex-insiders who previously worked for the relevant government department, hospital, university or local authority. The IEA should explore this further - if anybody has personal experience of this, let's hear about it.
Thanks Len - I think this is a crucially important issue, and under-researched. It helps explain why reforming government via the introduction of 'internal' markets is doomed to failure and is quite probably as harmful as simple nationalisation (see the most recent blog post by GR Steele on PFI). For starters, there is a major monopsony - as prophets of market failure love to tell us, monopsony leads to great inefficiencies. Further, by pursuing overtly political agendas, government will form a worse monopsony than any possible private one! Examples can't be hard to find - I'm the IoD and the small business groups have many. The sole merit I can see in creating internal markets is that they may form a progression towards a real market - unfortunately there are considerable risks in doing so, as I stated above. There has been much criticism from the 'left' and producers like the BMA against introducing more competition into government service provision, but it's important to distinguish that the failures of such markets are not an indication of the failure of a real market! There is simply no substitute for eliminating the direct state supply of services such as health, housing and education and doing away with these 'markets' and the corporatism that comes with them, even if for the time being we might accept voucher-type systems. I see it as something of a diversion from the main effort towards liberalisation to advocate reform via the creation of such pseudo-markets. There are either free markets, or there is inefficient collectivisation.

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