New Internationalist

Bad Medicine

Issue 355

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Privatization / HEALTHCARE

Bad medicine
It’s death by a thousand cuts: privatization is slowly killing the British National Health Service.
Allyson Pollock
argues that the basic principles of the NHS are worth protecting.

Since its birth in 1948 Britain's National Health Service (NHS) has been a model for the rest of the world. It's been a national system of publicly owned and accountable hospital and community services funded from central taxation - where hospital doctors and nurses are salaried, under national terms and conditions of service.

Universal healthcare, provided free and fairly, released the population from fear of the risks and costs of care. Before the NHS more than half the population - mainly women, children and the elderly - had no health coverage.

However, a relentless concern with cost-cutting and market-defined 'efficiencies' over the last two decades has drastically eroded the central premises of universal healthcare in Britain. The undermining of central taxation as the funding base has been accompanied by governments shifting the costs and risks to patients and their families. The internal market introduced by Margaret Thatcher in the 1980s was the most visible aspect of these changes, but Tony Blair's Labour Government has followed the same privatizing path. The 1948 contract with the people is slowly being shredded.

In 2000 the Government launched a 10-year 'reform' programme called the NHS Plan which continued the market-oriented, pro-business policies begun under the Tories. The Blair administration maintains that it doesn't matter who provides care - so long as it is publicly funded. And the extra costs of private profits? They're to be offset by increased efficiency and access, a claim which has been neither tested nor subject to scrutiny. The reality is that under the new plan people will pay more tax for fewer services and be hit with extra patient charges, plus the cost of private insurance. The NHS will be funder and regulator - but business will run the show.

The costs and risks of continued care will pass to the individual, especially the elderly

Choice and competition: that's the promise. With 'money following the patient', competition between providers is intended to improve both efficiency and quality of care. Doctors, nurses, hospital and community services will be more responsive to patient needs.

The Government claims that the NHS is centralized, bureaucratic and inflexible - a claim which has little evidence other than popular myth to support it. The Health Secretary, Alan Milburn, talks about 'redefining' the National Health Service: 'Changing it from a monolithic, centrally run, monopoly provider to a system where different healthcare providers - public, private, voluntary and not-for-profit - work to a common ethos, common standards and a common system of inspection. This is the modern definition of the NHS.'

In 1992 the Conservatives created the Private Finance Initiative (PFI) as a scheme for luring private capital into new hospitals, instead of using tax money. It seems simple. Bankers, builders and service operators (like cleaning, catering and laundry firms) produce the cash and in return they get to lease the building back to the Government or to sell their services to the hospital. The contract is ring-fenced and guaranteed, usually for 30 years. Predictably these public-private partnerships have turned out to be a boon for investors but not so good for the public. Shareholder returns in the range of 15-25 per cent and the need for profits increase the costs to local communities. And the private sector's view of 'efficiency' has meant reduced services and job redundancies. Because the cost of PFI is met from the annual operating budgets of the hospital, less is available for direct patient care. The high costs of the first wave of PFI hospital schemes resulted in a 30-per-cent reduction in beds and a 25-per-cent reduction in budgets for clinical staff. More than 12,000 NHS beds have closed since 1997.


Low-paid, non-union jobs
Britain has also been exporting this model abroad to Canada, Australia, Aotearoa/New Zealand and Europe - with similar results. In Abbotsford, British Columbia, a plan to rebuild the local hospital with private funding has run into stiff opposition from the Hospital Employees Union. A report on the scheme by PricewaterhouseCoopers assumed that collective bargaining rights would be destroyed and that cost-savings would be based on low-paid, non-union jobs.

Healthcare USA: don't get sick
US healthcare is the most privatized system in the West. Corporations are its backbone. They sell insurance, run hospitals, employ doctors, sell drugs and operate long-term care facilities. It's the model held up by those who challenge publicly funded medicare - the rest of the world is urged to adopt the US model. For those who are tempted here's what it looks like.

. With 4% of the world's population the US spends more than $1 trillion yearly on healthcare, 35-40% of global expenditures.

. One in six Americans has no medical insurance, more than 40 million people. Millions of others are under-insured. More than a third of Hispanics and 20% of Blacks have no insurance.

. Healthcare accounts for 16% of US GDP and 19% of total public spending; it is the largest sector of the US economy. By contrast the Canadian medicare system covers the whole population and accounts for 9% of GDP and 15% of government spending. The WHO ranks the US 15th in global health standards and Canada second.

. A fifth of US healthcare spending is on administration.

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Back in Britain in 2000 the Secretary of State signed a new 'concordat' with the private sector, describing it as 'a permanent feature of the new NHS landscape'. The agreement allows private clinics and hospitals to provide the public with up to 150,000 'procedures' a year - things like cataract surgery, hip replacements or hernia operations. It also allows business to run NHS hospitals, form joint ventures with NHS organizations and to recruit overseas clinical teams for existing hospitals.

Alan Milburn has allowed eight private corporations to bid for public hospitals which don't meet the Government's draconian performance targets. These are BUPA and BMI (which together control 70 per cent of the British private health-insurance market), the Swedish-owned Capio, Interhealth Canada, Hospitalia Active Health from Germany and the British-owned Serco, Secta Group and Quo Health. Some of these outfits have never run hospitals before. The others have never run hospitals like those of the NHS which are at least 10 times the size of a typical private hospital.

The most controversial element is the creation of independent public-interest corporations with 'Foundation status'. These organizations will have NHS assets transferred to their ownership and be granted a licence to operate by an independent regulator. The proposals were drawn up in consultation with the private operators, including the chief executive of Kaiser Permanente, the giant Californian healthcare company.

The Foundation Trusts will be freed from NHS controls - they'll no longer be accountable to the Health Secretary but to a locally elected board. They are prohibited from selling their core assets. But they are allowed to raise funds for new building from capital markets and to set up joint ventures with the private sector. All public hospitals are now to be run along business lines - although there will be no shareholders initially.

Free from NHS control, hospitals will be able to break with national bargaining arrangements and negotiate or impose their own pay scales and conditions of service. The end result will be widening gaps in pay and working conditions.


Creeping commercialization
There will be increasing pressure to generate new sources of income. NHS hospitals already do this by opening private beds, leasing out parts of their land or allowing companies to run on-site services. For example, National Car Parks runs hospital car parking. Capita and Serco provide visitor and staff catering. McDonalds and WH Smith operate in hospital lobbies. Patient Line supplies telephones and televisions at astronomical rates. This will now be expanded.

New legislation allows hospitals to create companies which can exploit for research tissue samples taken during surgery. With ownership of human tissue unclear under British law, genetic data is a valuable commodity that many biotech companies would love to own.

At the same time the Government has introduced legislation to 'redefine' some NHS care. For example, an elderly or infirm patient may be fit for discharge but still have health and care needs - washing, dressing or feeding. This used to be called 'nursing' - but it can now be redefined as 'personal care' and is no longer covered by state funding. If local authorities don't pick up the tab then patients can be billed. The costs and risks of continued care will pass to the individual, especially the elderly, who account for around 50 per cent of all hospital admissions. The fundamental principle of universal services, free at the point of delivery, will be undermined.

The Government has also established new regulatory bodies to smooth the way for privatization. The Independent Regulator has the power to determine the range of services and treatments to be provided by the NHS, which assets it can retain and which can be sold. The Commission for Healthcare Audit and Inspection (CHAI) polices performance standards. CHAI is the direct route to private-sector control. It undertakes reports on quality in hospitals, success in which can lead to the 'earned autonomies' of a Foundation Trust - basically entrepreneurial freedoms which uncouple the hospital from the NHS. The next step is to be forcibly subjected to new management and franchised to the private sector. With this new regulatory regime the future of the NHS will no longer be a state responsibility.

The Government says its doesn't matter who provides healthcare services as long as they're state-funded. 'Reforms' are sold to the public as improving efficiency and choice and 'changing the delivery system'. The system will continue to be funded through taxation.

But a delivery system based on profits and returns to shareholders fragments the ability to pool the risks and costs of care from healthy to sick and from wealthy to poor. It introduces new inefficiencies and transaction costs making universal healthcare unsustainable.

The inherent but unstated logic of the NHS Plan is that the private-sector 'partners' will take over the running of hospitals in all but name. There will be a gradual reduction in free, tax-paid services at the point of use. Profits will compete with needs and, as the British experience with railway privatization and long-term care shows, access to services and quality is sacrificed.

There is no country in the world that delivers comprehensive, equitable healthcare through the market and on the back of for-profit providers. Yet governments across the world are rushing to follow the British path and are dismantling their healthcare systems. They and their citizens are in for a shock. When the market comes to health, access to care will be a lottery decided at the local level. The fear and uncertainty of the past are set to reappear.

Allyson Pollock [image, unknown] Allyson Pollock is Head of the Public Health Policy Unit at University College London and Director of Research & Development at UCL Hospitals NHS Trust. She is also Chair of the Society for Social Medicine. For her recent work see: www.ucl.ac.uk/spp/about/health_policy/index.php

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