Kill the Bill, volume two

Review of The Plot Against the NHS

By Colin Leys and Stewart Player

A correction. Scotland and Wales don’t “commission” healthcare, contrary to the BBC’s inept description. This is the heart of the difference with England. While England buys health services from private and public “suppliers”, post-devolution Scotland and Wales plan and fund the NHS through health boards.

It might seem a soporific distinction but, in it, lies the choice between preserving a “national health service” and changing into a taxpayer-funded health market.

Leys and Player acknowledge a Scottish and Welsh commitment to social democracy “which politicians of all parties have to respect”. But there is another, more prosaic reason – the financial cost of introducing a market.

“Even before the financial crisis politicians of all parties in Scotland and Wales realised that if they followed the English route, and allowed the costs of operating a market to start soaking up ten per cent or more of the health budget, health services would be liable to deteriorate, with dire political consequences for themselves,” the authors say.

A healthcare market leads to a hike in cost - which will be funded by the weirdly uncomplaining taxpayer -and a growth in bureaucracy.

The authors are specific. “Each consortium [now clinical commissioning group] will have to employ a team of commissioners to negotiate contracts, monitor their performance, accountants to pay all the bills, lawyers to vet contracts and conduct court cases over disputes, team to vet drugs prescribed by GPs, and check their referrals to specialists and the treatments proposed by specialists. It will also need an advertising and PR department. Every hospital and chain of clinics will need the same.”

Public health researcher Allyson Pollock has estimated the cost of maintaining a market is £20 billion a year, which coincidentally, is exactly the amount in cuts the English NHS has to make by 2014.

As Pollock shows in her book NHS plc, the old NHS was so economical to run precisely because it had so radically eliminated market mechanisms. There was no invoicing and payment of bills within the system.

As Pollock has said recently the question is not whether we can afford to have the NHS, but whether we can afford not to have it.

In contrast, in the US market health system, one dollar in every three in absorbed in administration costs. Or to use another word, bureaucracy.

To quote a GP, Julian Tudor Hart, the old NHS was a system “in which wealth was distributed according to need, and nobody knew the cost of anything”.

But that system proves vastly cheaper than a market where the cost of everything has to be measured. Because the act of constantly measuring costs, and demanding payment, eats up money.

The meaning of “nobody knew the cost of anything” is not that costs were not estimated. The old NHS was not a wonderland where nothing cost anything. Not every drug was available. But doctors paid no attention to cost when they treated patients. It was all about medical need.

If you move to a market system that firewall crumbles. If independent businesses in the NHS, such as foundation trusts, have to compete and be financially self-sustaining, it becomes extremely relevant how much a patient will cost. Whether they are old, their treatment is complicated and they will need to spend more time in hospital. Or whether they are young and healthy and their treatment will be swift.

It’s here that the deception of being not for profit and therefore different, should be exposed. The UK government is doing its level best to get public sector workers to form non-profit mutuals and social enterprises. There are no shareholders demanding profit in these enterprises. How could anyone be so petty to object to a mutual or social enterprise?

But the most important factor in determining behaviour is not for profit or not for profit. The most relevant question is whether these enterprises work in a market system or not. Foundation hospitals are constitutionally non-profit but they have to make a surplus and will soon compete for patients with private companies.

As Leys and Player say, if the Health and Social Care Bill becomes law, all NHS hospital trusts, mental health trusts and ambulance trusts will be converted into independent businesses.

“They will be competing in a market, in which the penalty for financial failure will either be closing or being taken over by a private company”

In a market, financial considerations are paramount, even without “rapacious” shareholders. The beauty of the old NHS and the reason why for neoliberals, it has always had a target painted on its back, is that it removed a need everyone has – healthcare - from the market. It wasn’t only non-profit, it was, more importantly, non-market.

Leys and Player give an illustration in their book. They talk about a US Health Maintenance Organisation (HMO) settling “criminal charges for discharging a 63-year old patient and then dumping her on the street in a hospital gown in a run-down area of Los Angeles”.

The HMO in question was Kaiser Permanente, a non-profit organisation.

The absence of shareholders did not, according to the authors, stop this particular organisation avoid taking on high risk, costly patients. It was reported, they say, “cherry-picking whole communities by closing down facilities in areas of high deprivation to avoid the cost of having to provide services to uninsured victims of accidents or gunshots and other emergencies that are more common in deprived areas.”

It’s not as if the UK government is unaware of the results of what it is doing. In 2003, the UK Treasury published a document on why a market in health was not a good idea.

Price signals don’t work, the consumer doesn’t have the necessary knowledge, there is a risk of over-treatment, a potential abuse of monopoly power and it’s hard to let hospitals go bust.

Actually the risk of over-treatment, or over-selling is present in any market. It’s just in health the consumer is in less of a position to argue (‘no I don’t need that craniotomy’).

In markets, especially markets populated by profit-maximising corporations, over-selling is inherent. As the economist Harry Shutt has pointed out, the customer is not always King, but there to buy as much as h/she can be persuaded to buy. It’s why markets are unavoidably anti-ecological. There are inherently unlimited.

But genuine markets are also risky. If you don’t succeed you go under. Leys and Player say that the NHS is being privatised. But it is a specific kind of privatisation. The companies involved don’t covet real risk. What they want – and are getting – is low risk procedures (the difficult things like intensive care are someone else’s problem) coupled with a guaranteed inflow of tax, from the every-suffering, though thus far, compliant, UK taxpayer. The English NHS is, in American parlance, a single payer system.

“The private health industry is not interested in a purely private market,” said Allyson Pollock in NHS plc. “Its interests lie in becoming for-profit providers in a basic health system funded out of taxation, while also providing, for additional fees or co-payments, a much higher quality of service for those who can pay for it.”

The most apt comparison – and the original Health and Social Care Bill makes this explicit – is with the UK railway system. The railways aren’t privatised, they are contracted out by the state to profit-making private companies. The result has been that the service has declined, the price of tickets has shot up and the cost to the taxpayer of funding the system has risen by five times. But the East Coast Mainline is not going to close if passenger numbers drop and if numbers do decline the government will step with a handy top-up from guess who?

Scotland and Wales have shown, Leys and Player would argue, the NHS doesn’t have to turn into a “low risk playground” healthcare corporations. It’s not inevitable and it can be resisted.

But is the only alternative fighting a defensive battle? The corporations in question – mostly American – are only doing what, from their inevitably self-interested perspective, is only possible course of action. Find new sources of revenue. They aren’t going to stop.

Maybe the problem needs to be addressed at its source.

Kill the Bill, volume one

Review of The Plot Against the NHS
By Colin Leys and Stewart Player

“It’s been twenty years in the planning. I think they’ll do it.”

The words are those of Eamonn Butler, director of the free market think tank, The Adam Smith Institute.

The question he was answering was whether, after the UK coalition government’s Health and Social Care Bill, the NHS would become a franchise. Not a public health service anymore, but a badge denoting that competing providers had met minimum care standards.

Butler’s words provide inadvertent confirmation of the authors’ contention of a plot against the NHS. Conservative and Labour governments have through step by step measures brought it closer and closer to privatisation, to a collection of competing, separate businesses.

Now the wrapping has been peeled away.

Privatisation itself is not a plot. What constitutes a plot is the attempt to achieve under the cover of lulling phrases like “modernisation” and “a patient-led NHS”.

“Since 2000, if not earlier, successive governments have been pursuing a policy for the NHS that the electorate hasn’t voted for and doesn’t want,” the authors say.

Here is one of the authors speaking:

Now with the government’s promised changes to their health bill, the Adam Smith Institute doesn’t want it either. It has disowned the changes The government has also been attacked from the Right by the former Labour Health minister, Alan Milburn, who claims their plans mean the largest nationalisation since the NHS was created in 1948 

In such circumstances, it’s advisable to take a step back and look at what is happening in a historical perspective. Here, very roughly, is the story of the last 20 years.

Before 1991 the NHS was funded through block of funding through district health authorities. Hospitals received an annual lump sum on the basis of an assessment of their residents’ health needs. GPs referred patients to the NHS hospitals and consultants they judged medically appropriate.

This, significantly, is the system that, post-devolution, Scotland and Wales have reverted to. They are like ghosts from the past and create an fascinating, real-life controlled experiment. But more on that later.

In 1991, under John Major’s Conservative government, came the internal market. For the first time health care was “bought” by purchasers (health authorities at that time) from suppliers (such as hospitals). Although the private sector wasn’t involved yet, theoretically, contracts could be placed with anybody.

But it wasn’t yet a real market. Contracts were not legally binding and hospitals would not be allowed to go bust. “The needs of patients could still be seen as more important than the bottom line,” Leys and Player say. “This had to change.”

In 1997 Labour was elected. After 2000 there was a huge, one third, increase in NHS funding. There were large salary rises for GPs and consultants. But alongside all that, was a deliberate, concerted effort to get private companies to deliver NHS treatment. Regardless of the results on patients, which were not assessed, or the cost, which was a lot more expensive.

A “Commercial Directorate” was established in the Department of Health, under a Texan businessman, to get private companies to do NHS work. Prices were established for every treatment.

Private surgical centres, called Independent Sector Treatment Centres, were established for low risk operations like cataract surgery. They were paid significantly higher prices than NHS treatment centres received, and paid for the number of treatments contracted for, not whether they were carried out or not.  Conveniently, the Department of Health did not collect data on the result of their operations on NHS patients.

The justification was the private centres provided additional capacity for a stretched NHS. But after a while they were allowed to use NHS staff, which made nonsense of the original reason.

Hospitals had to become Foundation Trusts. This meant they could go bust. Their contracts became legally enforceable. Although non-profit, they resembled private corporations under a chief executive and board. They had to be financially self-sustaining and make a surplus.

Under a new type of contract, corporations employing doctors on a salary took over some GP practices. For example Atlos Origin Healthcare, which is employed by the government to tell the sick they are fit for work, took over a GP practice in East London. Though running it proved too much of a strain.

“Polyclinics”, aimed at bringing together GPs and non-life threatening work from A&E, were created. Of the first 140, one third were run by private companies or joint ventures with private companies.

By 2009 there were 149 private hospitals, ‘treatment centres’ and clinics treating NHS patients and using the NHS logo.

This was the state of play when the Tory/Lib Dem health and social care bill, was published. At that point, the authors say, the plan to privatise the NHS no longer had to be concealed.

The result will be a market for specialist, hospital care, with public-funded foundation trust hospitals competing for patients with private companies.

                      

Commissioners, now clinical commissioning groups, will have to offer patients a choice of providers, and fix a price at a level large enough for companies can make a profit.

Even if price competition is ruled out, hospitals will close because they will be financially undermined by private companies.

Private providers cannot do anything but “cherry pick” the easiest and cheapest to perform services because they don’t have the infrastructure to provide expensive but essential services like A&E.

As the authors show, under the price system introduced by the last government, hospitals cross-subsidise difficult and expensive services, such as intensive care, with the money they make from easier and cheaper procedures.

If private companies take the easier services, like knee replacements, because they are the only procedures they are able to do, public hospitals will be financially crippled as a vital source of income is taken away. But it will be tragic and predictable consequence of the twenty year plan to introduce a market into health care.

English NHS hospitals now – foundation trusts – have to be financially self-sustaining. If they can’t make a surplus, they will have to close. Or be taken over, very possibly by a private company.

The NHS will become a “low-risk playground for healthcare corporations”.

What is almost comically ironic is when the coalition government insists they have no choice but to cut £200 billion from public spending in four years they are pursuing a health policy that will vastly increase costs to the taxpayer.

As the Adam Smith Institute says every pound spent on bureaucracy is a pound less for patient care. But, contrary to propaganda, the private sector is the greatest creator of bureaucracy.

The paradox we will look at in part two, is that the NHS, a system where nobody knew the cost of anything, is far less expensive than a market system where the price of everything is measured.

Adam Curtis on BP - first as tragedy?

Adam Curtis’ latest documentary, All Watched Over By Machines of Loving Grace, concludes on BBC 2 on Monday. It merits a review but I’m not going to venture one yet.

But in between the documentaries, Curtis’ mind-expanding blog is always worth a visit.  An article he wrote last year about BP and the British government illustrates current misconceptions about what nationalisation is and has been. You can read the piece here 

Curtis goes through the turbulent history of BP and the British government. They conspired to persuade the CIA to mount a coup and overthrow the democratically elected Iranian government of Mohamed Mossadegh in 1953. Mossadegh had nationalised the Anglo Iranian Oil Company (the company was renamed BP in 1954) which was itself nationalised  in Britain – the British government owned 51 per cent of the shares.

The British/American action resulted in the return to power of the pro-Western dictator, the Shah of Iran and decades of repression.

In that case, the interests of BP, a state-owned company, and the British government, converged. But they also clashed. In Curtis’ words, “British Petroleum didn't give up on trying to subvert and avoid the decisions of democratic governments. In particular its own, British, government.”

In 1965 the racist government of Rhodesia (now Zimbabwe) declared independence to avoid majority rule. The British government of Harold Wilson imposed economic sanctions to try and depose the government. Rhodesia was blockaded by 27 Royal Navy warships.

But the policy of the British government was successfully undermined by BP, a company owned by the British state! They, and Shell, secretly busted the sanctions by selling oil to Rhodesia.

You can see a 1978 film, on the Curtis blog, in which Frank Bough, who used to present Grandstand on the BBC, explains how they did it.

(In those days of the mixed economy in Britain, many companies were state-owned –  even the travel agents Thomas Cook was nationalised between 1948 and 1972. BP was eventually fully privatized in 1987. Another film from the ‘70s Curtis shows on the blog describes BP, then still state-owned, as “the largest industrial corporation in Britain”).

Now we are faced with a situation in which the British government has a dominant stake in large banks, like RBS, but refuses to use the power it has. The banks pay huge bonuses and pensions, and the government appears willingly impotent to do anything about it. But, perhaps, given the history of BP, the situation is not so novel.

The Keynesian economist, Ha-Joon Chang, has said the British government should tell the nationalised banks how to behave and serve the interests of the electorate. “That is what nationalisation should, and used to, mean,” he says.

But the history of BP shows that nationalisation, a very British nationalisation, often didn’t mean that.

There’s no reason why public ownership should mean that corporations do whatever they like, regardless of what the public knows or wants. In that case what is the point of public ownership? But common ownership can take many forms, and without a real shift in power, it is a token gesture. With nationalisation, content is as important as form.