Monday, July 12, 2010

Dr Croesus I Presume


Andrew Lansley might be about to make our family doctors rich. Very rich indeed.

Because according to this morning's reports he's going to hand over control of £70-80bn pa of NHS cash to them. He's going to abolish the Primary Care Trusts and give their responsibilities for commissioning hospital treatment to our GPs.

What massive spending power they'll have. What huge potential for boosting their own modest stipends. Even the riches they got from Labour's bonkers new GPs' contract (up the £380 grand pa - see here) will seem like small potatoes in comparison. Out-of-work investment bankers (and we know a few) will be queuing outside Guys to retrain as GPs.

To be clear, we agree with Lansley that the NHS is in urgent need of reform. Bloated quangos like the primary care trusts (PCTs) certainly need to go. And the NHS certainly needs to become far more efficient.

For example, according to recent research at the OECD, despite Labour's spending splurge, Britain still has the 8th worst record for preventable deaths among all its members - right down there with Mexico, Poland, and the Czech Republic. And we have the 7th highest potential for efficiency gains in our healthcare system - ie the potential for improving health outcomes without spending any more money. Here's their key chart (the higher the bar, the greater the scope for increasing life expectancy from improving system efficiency):


So yes, the scope for big efficiency gains is definitely there. The burning question is how do you achieve them?

As regular readers will know, we have long favoured putting the customer in charge - just like he/she is when it comes to buying car insurance. Choice and competition to drive efficiency just like it does in other areas.

True, we don't want the US private insurance system, where many have no insurance, and costs are very high (largely driven by so-called information asymmetries and moral hazard - standard problems in private insurance markets everywhere). Which is why we favour a system of compulsory social insurance of the kind they have in most European countries. Everyone has to have cover for a mandated minimum bundle of risks and treatments (premia for the poor being subsidised by the state), and the competing licensed providers cannot refuse to accept customers on the basis of medical screening. The new Dutch system looks like an admirable model (see this TPA blog).

Unfortunately Lansley's reforms do not achieve this. Although he talks about greater patient freedom to choose consultants, in reality few of us are equipped to do that. We will rely on, yes, our family doctor to guide us. The same family doctor who may well in future have a direct financial interest in steering us one way or another.

Fine, OK, you could always switch your family doctor. But have you ever tried it? Not that easy. And what's to stop rascally GPs selecting patients on the basis of medical history/lifestyle/address?

Bottom line?

In breaking up Labour's centralised command and control system, Lansley is definitely moving in the right direction. But putting this vast amount of commissioning authority with GPs will bring problems of its own. And we very much doubt that the customers will get much of a look-in.

PS Cards on the table, Tyler has private health insurance. Why? Because he suffers from not one but two potentially serious conditions that require regular hospital monitoring (no flowers please), and frankly he doesn't trust the NHS to provide either the monitoring or the immediate knife action if required (yes, he's very lucky he can afford it - fair comment). Anyway, just recently there has been a somewhat unwelcome development. The local anesthetists have got together and refused to do the biz for the price laid down by the health insurer. Which means Tyler now has to pay an excess direct to the anesthetist - either that, or opt to undergo the procedure biting on a stick. So what to do? One option might be to switch insurer. Bad idea. With Tyler's pre-existing conditions no other private insurer would touch him (or they'd quote a preposterous premium). Another option would be to can the private insurance altogether and self-insure (ie pay the fees out of his own pocket directly). But although right now, in terms of annual costs, Tyler would roughly break even, who knows what might be required in the future. So that's not appealing either. Of course, if we had a system of social insurance, both of those problems would be resolved. Tyler could shop around for another insurer who had managed to agree rates with the local anesthetists, and who would have to take his biz. And he simply wouldn't have the option of self-insuring - ie if he was lucky enough to have A1 health, he could not self-select himself out of the system. He'd be an active participant in the health insurance market, switching his biz around and driving efficiency.

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