Sunday, January 15, 2006

The Orange Booker Slur, part 6

Chapter 7: UK Health Services: a Liberal agenda for reform and renewal by David Laws.

So far I have been more or less defending the Orange Book, chapter by chapter. Not so with chapter 7. I find it quite indefensible. Laws starts out with a reasonable enough analysis of the problems and challenges faced by the NHS. He then seems to pull out of a hat, the rabbit of a National Health Insurance Scheme. One with defects not seen on the continent.

The scheme works as follows:
  • Insurers include the NHS and may be private or non-profit, and may supply clinical services or buy them in.
  • All insurers charge the same fee, paid by the state.
  • All insurers provide the same range of clinical services.
  • Citizens are entitled to change insurers not more than once per year.

The private sector is made efficient by competition. But what competition do we see here? Price? No. Range of treatments? No - this is even more uniform and uncompetitive than at present. The quality of clinical services? Perhaps. But in what sense is this 'insurance' if it doesn't compete on price or assess risk?

With no price variation, the fiercest competition would be for fit young customers who would incur below average health costs. An insurer recruiting more than its share of such people through clever marketing (free iPods) will make a huge windfall profit on the year, leaving the rest of the population's health care underfunded and struggling worse than ever. Sure, at the year end, they can all switch to the overfunded insurer which will then have to cut quality and increase waiting times in turn.

If the insurers were all non-profit, at least the windfall would be reinvested. But that isn't the proposal. If private sector dynamism were really in operation we would expect new treatments to be promoted all the time, but this scheme virtually prohibits them.

This is a mockery of free enterprise and a mockery of public service. Not socially liberal or economically liberal. And it promises a huge diversion of funds from healthcare to pay for rolexes for insurance salesmen and cocaine for marketing droids. At best there will be a new army of doorstep pests offering discounts on electricity if you buy healthcare from the gas board.

Market based reforms in healthcare have had mixed results because they are very difficult to achieve. Markets are most efficient when dealing in commodities because a commodity has a known quality, and comparisons between suppliers are clear and brutal. Healthcare is at the furthest remove from this. Measuring quality is very difficult. A true market would communicate comsumer preferences on quality to suppliers. But the problem here is not so much communicating the preferences, but measuring the quality in the first place. And focussing on a few marketable quality indicators would be as damaging as the present target culture.

Maybe there are responses to some of these concerns, but if so, why weren't they put? Perhaps there are figures which demonstrate the benefits of an insurance based system, but where are they? Weighing up the costs and benefits of a policy is always appropriate, but Laws doesn't even seem to recognise the costs. No mention is made of the effect on the morale and motivation of the many public sector workers who believe in public service and would rather their work contributed to the common good than a profit margin.

Healthcare is a field of insatiable demand and inevitable rationing. Perhaps it is time somebody admitted this fact. Standards will slip if you cut corners trying to do too much. And if you do too little you will be damned for refusing people life-saving treatment. This is not an argument against reform. Reforms may bring us more healthcare, but cannot end rationing. To highlight problems around rationing and claim a particular reform, market-based or otherwise, will solve them is disingenuous.

I think Laws has made a big mistake here, the reasons for which I hope to explore in the conclusion to this series. But he hardly seems to have put a case for his healthcare proposals; they appear to be more based on dogma. Verdict: Guilty.


James Graham (Quaequam Blog!) said...

You've finally got to the nub of the matter. The problem with the Orange Book is not so much the content, but this single chapter, the fact that it is written by one of the co-editors and the fact that it was launched to the media with this single article singled out. Laws hit the newspapers writing op-ed pieces about it, briefed journalists about is, promised the earth about it.

It was politically stupid, arrogant, and given Laws' deserved reputation as a great brain, poorly argued. And the damage is still being done, as we see now with the Simon Hughes leadership machine going around telling everyone who'll listen that he is the only candidate who will oppose this measure (when in fact none of them would want it).

Anonymous said...

The benefits of a private health care system were discussed at length in the Liberal Views forum, see