The NHS - another bad idea

(In a nutshell: Britain's National Health Service has been hailed as "'one of the greatest achievements in history". I disagree. It has been an expensive example of the failings of centralised command and control)

On July 1st 1998 the BBC celebrated 50 years of the NHS by screening a special report entitled The NHS: 'One of the greatest achievements in history'. You can read about it here. The central idea of the NHS is that health care is free at the point of delivery and is available to all. It is so seductive that no political party has dared to privatise health and each election campaign includes extravagant promises about how this party or that will defend the NHS against the others who are certain to destroy it.

The NHS is definitely one of those ideas where I have done the 180 degree thing. When I first went to the UK as a postgraduate student in 1970 I was very taken with it. Now I am quite sure the concept is deeply flawed.

Actually, it's not complicated. Nothing is free, including the NHS. The government taxes citizens to pay for it. That tax is simply a proxy for health insurance. In effect the government is saying "We don't trust you to look after your own health provision, so we will make you do so on a compulsory basis". OK, so far, so good. Just two problems (a) there are specialised and efficient insurance companies who would be happy to do this - and do it better and more cheaply than the government, so why is the government doing it? and (b) for some completely unfathomable reason the government also decided to become the actual provider of health care.

This last is really bizarre. Take a different example to understand why. Road tax goes towards improving existing roads and building new ones. The government collects the taxes, puts the work out to tender and then issues contracts. Firms who specialise in civil engineering then do the work. Civil servants check that the work is done satisfactorily, then pay the bills. Now imagine we have the NRS (read National Road Service). All the road builders, everywhere in the country, would be on the government payroll; it would be administering their index-linked pensions; it would own all the equipment, suitably enlivened with NRS logos; it would similarly have depots everywhere for stockpiling materials which it would have sourced and bought; and all the above would be looked after by a large number of civil service managers.

So why is the NHS entrusted to government - which experience shows is notoriously profligate and incompetent?

How good is the NHS?

OK. The NHS may not be perfect, but it's surely benefited many, many people in the last 60 years? Well, let's find out.

A place to start is by looking at this graph (National Statistics Online). Can you tell when the NHS was established? I can't; not from the graph. I would be looking for a reduction in mortality rate (which here would mean a steeper line), and sustained thereafter.

The big wobbles are the influenza pandemic of 1918. The NHS was actually founded in 1948 but I can see no evidence of that in the graph. In fact female mortality was falling more steeply before the NHS than after it.

People use statistics misleadingly, often without knowing it. For example, the BBC report referred to earlier asked "Has the NHS been a success?" and went on to answer "In purely medical terms the argument seems overwhelming. Men and women are living about 10 years longer on average than they did in 1948 - men to 74 and women to 79".

So that's a gain of 10 years in the 50 years since the NHS was established. But this trend, see second graph, has been in place for a century and probably owes nothing to the NHS. For example there was a 7 year gain in life expectancy from 1912 to 1932 followed by a 9 year gain between 1932 and 1948. From the graph it looks like the increase in life expectancy slowed down after the NHS (but this could just be a "ceiling effect").

But the NHS is world famous, surely? OK, try this. Name some world-famous UK hospitals. Chances are you came up with St Thomas's, Guys, Great Ormand Street, Barts, maybe Papworth. Every one established before the NHS. Apparently not one hospital, created since the NHS, has achieved similar status.

How big is the NHS?

The NHS has 1,300,000 employees. In fact it is the 4th largest employer in the world! Now how many GPs do we find amid the 1.3 million? The number is just 33,000. And 32,000 consultants. And, yes, you guessed it, 40,000 managers. BTW spending on management consultants increased 15-fold from £31m to more than £500m in just two years (and that was back in 2006).

Apparently, on a typical day, 700,000 people see their GP. So that means that every 90 working days the entire country has visited their GP at least once. Each year 700 million prescriptions are issued and cashed - more than 10 prescriptions for every man, woman and child. I mean, what planet is this? No wonder people have taken to calling it the National Sickness Service.

But at least it's free at the point of delivery, right?

Yes, that much is true. But only that. No such thing as a free lunch, not even in the NHS. The NHS is stunningly expensive, heading for £100 billion and 10% of the GDP.

Let's translate this into terms one can grasp. The cost to every man, woman and child in the country is £1,800 a year. So it cost my family of four £7,200 a year. From the birth of my daughters to their leaving home some 25 years later, the cost to my family has been £180,000.

Maybe we're a healthy lot: I doubt if each of us went to the doctor twice a year. But say we went five times. That's 500 visits at £10 a time, £5,000. Let's say we picked up £10 worth of drugs on every visit, that's another £5,000. By my recollection we had, between us, five operations, some trivial. But let's say they averaged £1,000 each. That's another £5,000. Up to £15,000 so far. Now let's double that, because maybe I was unrealistic, so that's £30,000.

So we received £30k benefit at a cost of £180k. That doesn't feel like value for money. By way of comparison, Tesco's top private health plan costs under £400 a year. Across the same time scale that would have cost £40,000.

Why is the NHS so expensive? Good question. I suppose it is like a huge middleman sitting between you and your doctor. For a start, your money is taken off you, not by the doctor, but by an army of civil servants administering the tax system. And after a long chain of apparently expensive events, some civil servant will pay your doctor.

Compare this will turning up at the consulting rooms, seeing the doctor, paying him or her x dollars, pounds or euros and then departing. Eeek, yes this scenario does have you dipping into your wallet, but trust me, you're doing that anyway, and having to go deeper. You just don't know it.

But the real problem is Central Planning systems don't work

We already know this from the failed Soviet experiment. In principle we've known it since Adam Smith's book "The Wealth of Nations" was published in 1776. In this he introduced the idea of the "invisible hand" that guides production so that what is needed is produced - and that, though this be through the profit motive and individual selfishness and greed, society benefits.

Just as the Soviets would have a wild stab in the dark about how many nails they would need in five years time (and therefore how much ore would have to be smelted and therefore how many foundries they would need and therefore how much coal would need to be mined and - well, I think you get the point) so our Department of Health tries to do the same. They set out to train or recruit x doctors, y nurses, z ambulance drivers, make this many beds to be available, this many wards to be shut, this length of time for waiting lists and so on. Given the scale and complexity of the NHS the issue is not that they will be in error, but by how much.

A report by Warwick University said "The use of market mechanism to allocate resources and deal with imbalances has yet to be fully exploited (read: doesn't happen). Markets are a very efficient mechanism for bringing supply and demand into balance and for providing signals which guide decision makers in the right direction, but the Department of Health and managers have so far shied away from (this) preferring to intervene and attempt to manage the system."

Conclusions

It's not hard to like the idea of the NHS. Unfortunately it is intrinsically flawed because centralised planning and control is too. What keeps it going is that (a) it can't go broke because the government will tax, print money or borrow to meet shortfalls and (b) no politician dares speak against it. The result is a health system that is inferior to and more expensive than a system which is exposed to the discipline of market forces.

Postscript

What follows is my experience with the French health system. In 2000 the World Health Organisation ranked France number 1 out of 191 member countries (UK was rank 18). The French system takes of bigger slice of GDP than the UK, but not much; perhaps 11% rather than 10%. But there is also a cash top-up element on an as-used basis, see below.

Why does it work so well? I don't pretend to know the details, but all consultations and treatments have a paying element to them. The state pays 70%, you pay 30% directly. At your option you can take out insurance to cover some of this, but you are liable for the premiums. I think this paying element provides market information to the system and allows it to be responsive.

About 6 weeks ago I went to my GP with a suspected urinary infection. He detected a heart arrhythmia during the consultation. Within five days I had seen a cardiologist who recommended intervention. Five days after that (ten days after my first visit to the GP) I was driving home, having had a catheter ablation operation at a top heart clinic. It just happened. I didn't have to push or shove.