12th March: Ljubljana

Slovenia will have a general election in September. Health care is rising rapidly on the political agenda, largely because of the high share (about a third) of health expenditure now being paid directly. The Slovenian health financing system has a large co-payment element, which many people cover through complementary insurance but others pay out of pocket (See HiT profile).

I was invited to talk about the roles of planning and markets in health care, with particular reference to the UK. My host was the Friedrich Ebert Stiftung, a German foundation that supports dialogue on public policy issues.

The starting point was that markets have clearly delivered many benefits. No-one now would want to go back to the centrally planned system for distributing food in the Soviet Union. The question is whether the conditions for markets to operate apply in health care? Another issue to consider is the differing goals of the various actors. Governments seek to improve the health of their populations, to respond to their legitimate needs, and to do so fairly (or at least they should – this is the WHO definition). Private companies are legally obliged to maximise the returns to their shareholders. These goals may overlap, but it is unlikely that they will overlap completely.

Health care is not a commodity like baked beans, apples, or widgets. It has certain features that make it special. Many people who need care don’t realise it. Even if they know they need something, they may not know what. They are easy prey for unscrupulous providers. This is what we call information asymmetry. It is not only people who are ill who have an interest in being treated. The rest of us also have an interest. This is obvious where they are suffering from infectious diseases, which may infect us, or mental health problems that may lead them to harm us. But simple concern for others also leads us to want to see their suffering relieved – what we call externalities.

Then there is the changing nature of disease. Markets are fine where the transactions are simple, as was once the case in medicine, where an individual patient would go for a single visit to a doctor, who would make a diagnosis (often wrong) and prescribe treatment (often ineffective). The patient either got better or died. The situation now is quite different. A typical older patient may have arthritis, Parkinsons Disease, heart failure, bronchitis, diabetes, and depression. They go to their family doctor. They are then referred to a series of medical specialists, nurses, other health professionals, all working together in a network, collaborating with each other. They receive multiple powerful and effective medicines, all of which are affected by their organ function and by the other drugs they are taking (which will never have been evaluated in combination). They remain under continuing review for the remainder of their now active and fully engaged life. This is seriously complex and someone has to manage it. Unsurprisingly, private providers will run a mile from patients like this. Instead they concentrate on straightforward non-urgent surgery, where the costs are largely predictable, and if they do venture into chronic disease management, they select those people who only have one disease and are otherwise healthy. The public sector picks up the rest – what we call cream-skimming.

But does this matter, as long as everyone can get treatment somewhere? It can do. Think of situation where a family is injured in a high speed car crash. They arrive at an emergency department. There is no paediatric service – it has been moved into the community. Their eye injuries cannot be treated as the ophthalmologists have been relocated to an independent treatment centre to concentrate on waiting lists for cataracts. The complex hip fracture cannot be treated, because the orthopaedic surgeons have been relocated to an independent treatment centre to concentrate on waiting lists for knee replacements. There is no microbiologist to speak to about the wound infection because the service has been privatised and moved 200 km away.
However, perhaps the greatest challenge relates to preparing for the future. As Donald Rumsfeld famously said “there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns, the ones we don’t know we don’t know. And … it is the latter category that tend to be the difficult ones.” So when we are thinking about the competing strengths of public and private provision, a key issue must be which allows more flexibility to adapt to future challenges. Then there are the things that we can predict, such as the need to train the next generation of health professionals and the need to engage in research and development to generate new knowledge. Again, we need to ask which is better at investing in these future needs.

Taken with the conventional questions such as value for money, this then gives us a framework for looking at two of the developments that have taken place in the UK, the Private Financing Initiative (PFI) (as a means of funding new hospitals) and Independent Sector Treatment Centres.

It is now apparent to all but the most ideologically driven commentators that the UK PFI scheme has been a failure. Allyson Pollock has provided most of the evidence in a series of papers, in the process exposing herself to vicious personal attacks from the supporters of PFI (or in some cases from backbench Members of Parliament who probably never understood the issues but were doing what they thought might be appreciated as they sought to advance their careers). She has shown how the procurement process is expensive, complicated, and prolonged. One result is that several projects have been abandoned at an advanced stage, wasting millions of pounds. Several of the hospitals that have been completed have suffered major quality problems. However, for us the real problem is the inflexibility (see our paper in the Bulletin of the WHO). Because the contracts are negotiated in so much detail, it is virtually impossible to change the specifications, even though we know that the nature of health care is changing rapidly. One example is the ratio of operating theatres to beds. With short acting anaesthetics and minimally invasive surgery we need more of the former and less of the latter. Yet some recently completed hospitals (including one close to where I work) are already obsolete in his respect by the time they open. The accompanying picture illustrates the problem. Given the declining need for beds, a newly built hospital now may have too few (an example is the now notorious Norfolk and Norwich hospital PFI scheme). However, in 30 years time it will have too many. The situation is worse for schools. There are now quite a few examples of schools built under the PFI scheme that are now surplus because of falling birth rates (see article in the Guardian). Yet the local governments still have to pay for them to be maintained for the next 30 years, at a cost of millions of pounds each.

The Independent Sector Treatment Centres raise different issues. Here the evidence is rather less, largely because they have consistently failed to supply the data that were required from them. Consequently, a cartoon accompanying one of Allyson Pollock’s paper in a recent issue of the BMJ compared them to a black hole, with money and patients being swept into them but no idea what happened afterwards. One problem is cream-skimming. They only take the straightforward cases, leaving the NHS to look after the rest. Yet bizarrely, give the lower costs that result, the government pays them 11% more per case! (and this is on top of various other subsidies plus a guarantee to buy back the premises at the end of the contract). It then doesn’t even check whether they have performed all the procedures they have been paid for – a reasonable estimate is that they have performed about 70% of the contracted work but of course they received 100% of the payment.

Now I am not saying that markets have no place in health care. Of course they do. All that we have to do is ask whether, in a particular set of circumstances, the prerequisites for a market exist and then whether it will actually deliver what it promises. Fortunately, I don’t have to answer that question for the Slovenian population!

Footnote 1: Credit where credit is due. On Tuesday evening I passed through Terminal 2 at Heathrow. This is normally a deeply unpleasant experience, reminiscent of Douglas Adams’ comment about being drunk, as experienced by a glass of water. Amazingly, I got through security in only a few minutes because there was a security supervisor who was actually managing the process. No-one should underestimate the importance of this development. Could it be that the executives of the British Airports Authority have finally realised that they are meant to be managing an airport, rather than a shopping mall? Somehow I doubt it. Terminal 5 opens in a few weeks and we already know there will only be enough seats for about two jumbo jets’ worth of passengers, presumably with the intention of forcing people wanting a seat to buy food and drink from the many commercial outlets. No. I suspect that this was just an individual who takes pride in his job. I fear he won’t last long.

Footnote 2: I returned through Terminal 2 at Frankfurt. A 20 minute queue to get through security, having been screened only 90 minutes earlier at Ljubljana. It’s close, but in the competition to become the most incompetent airport operator, Frankfurt seems to be drawing ahead.