Five steps to save what really matters in the NHS and lose what gets in the way

Like the great majority of British people, I am immensely proud of the NHS and instinctively defensive when it is attacked. And yet, I am not sure many of us are very clear what we think the NHS actually is. Sometimes people think that it’s all a public service, but up to a third of the NHS funded staff work in profit-making private businesses (GPs, dentists, opticians, etc). Sometimes people mistake the professionalism of medics for the ethos of the NHS, when there is no evidence that medics in other countries are any less professional, or indeed that the same NHS medics are any less professional in their own private practice (e.g. hospital consultants). Many people, who have never known any other provider than the NHS, associate medical innovation and progress with the NHS, marvelling at the improvements in, for example, cancer care over the last 30 years, but without realising that the same (amazing) improvements have been made in other countries, often, sadly, to a greater extent. Much of what we admire about the NHS is what people in other countries admire about their own health services, public or private. It’s just that for 93% of people in the UK, the NHS is the only health service that they consume, so their admiration goes to the NHS. However, I am very clear what I care most about in any debate about health and the future of the NHS. Any visit to the USA always reminds me of what is actually truly special about the NHS. And that is the wonderful principle that people in the UK do not have to worry about whether they can afford the health care they need when they need it and the costs of that health care are paid for through a progressive tax on everyone. A textbook case of “to each according to need, from each according to their means”. Of course to many Americans (and some on the right in the UK) this sounds like socialism. But it’s unthinkable that we would move away from this principle. It’s an important moral principle that healthcare should be provided through social solidarity, across generations (as it’s mostly consumed by the very old) and across income groups (as the better-off pick up most of the tab). However, there is also plenty of pragmatic economic justification for this approach. Effectively, we are pooling risk. None of us know who will have the greatest needs. Nor do we know when that need will occur. So it makes sense to create the biggest risk pool possible. For me, then, what I want to defend, protect and enhance is the NHS as a national health insurance scheme – keeping healthcare free at the point of access, paid for by those who can most afford it in a major act of social solidarity, the key obligation that we decide to have to each other. That’s the kind of principle worth going to war to defend. But that’s the end of my socialism in terms of the NHS. I don’t accept that in order to have social equity we need to mirror other aspects of the Soviet system. It’s pretty clear that the current NHS provision needs a revolutionary dose of both glasnost and perestroika. On the other hand, there has been a lot of good reform, especially in the creation of new types of institution. But this reform has been hobbled by a lack of clarity of about what is and isn’t the NHS and an overwhelming and negative culture of bureaucratic paternalism, which aims to plan out the lives of both medics and patients, rather than letting them find their relationships in a competitive market. So here’s my thoughts on how to build on the current direction of travel in the NHS but make a revolutionary leap forwards, saving what matters in the NHS and destroying what hinders progress.

I suggest a 5 step approach:

1. We could declare that the NHS is simply a health insurance scheme – no more, no less. It would not be an employer, a provider, a planner of health services, a trainer of staff, etc. It could be known as NHS Insurance (NHSI). Its mission would be to fund high quality healthcare, free at the point of use to everybody based on need and funded through the tax system. We would ,therefore, maintain what is best about the NHS – that no-one should worry about whether they can afford the healthcare which they need when they need it; that healthcare is given to those in need, funded by those who can afford it. NHSI would set out clear, national entitlements as to what was covered by the insurance scheme, removing local policy choice. There would be vigorous political debate about the scope of the entitlements and the levels of funding provided. There would be an independent watchdog (probably, the existing NAO) to see whether NHSI achieved value for money in the prices it paid for health services and the clinical outcomes. 

2. We could take the NHS out of general taxation. Instead, National Insurance (NI) taxes could be renamed “NHS Insurance”. The rates of the NHSI would be set by the Health Secretary, rather than the Treasury. The money raised by NI (just over £100 billion per year) is almost exactly the same as the cost of the NHS. NI already looks like a health insurance scheme – it is funded out of earned income, with contributions from both workers and employers. It is a progressive charge – nothing is paid on the first £8,000 of earned income and then it is charged to employers (13%) and employees (12%) up to £42,000. After that, it is charged at 2% of income. Clearly there is scope to increase the rate above £42,000 as and when more money is needed. There is also the opportunity to remove some of the current exemptions and lower rates – e.g. for the self-employed and high income older people. The progressive nature of the insurance scheme could be fixed in primary legislation, but the details subject to political decision-making by serving Health Secretaries. Parties could therefore campaign to raise or decrease, or vary NHSI charges, quite separate from the general approach to taxation. This would focus the debate on how much people want to pay for healthcare. The current cost of the NHS is £2,000 per person per year. But as NHSI (replacing NI) would come out of earned income, the cost to those in work will have to cover children, the retired and working age people not in employment. This means that an average working age household, with a combined income of around £40,000 per year, would pay about £4,000 out of their salary. Their employer(s) would pay the same again. Both could be shown on the payslip – showing the average household that £8,000 (or c£150 per week) was being paid for NHSI. This should focus everyone’s mind on the cost of NHSI and help the public connect more clearly with the debate about “more, or less, money for the NHS”. 

3. As the NHS would no longer be a provider, we could transfer the ownership of NHS services to the staff who provide them. The majority of NHS funded organisations are already privately owned by the people who provide them – dentists, pharmacists, GP practices, opticians, etc. We could complete that journey for the other 1m staff – those working in hospitals, ambulance services and community services. At the moment, the ownership of many of these NHS services sits in a twilight zone – who owns a foundation trust? We could set a deadline for all current services to be taken over by employee-owned organisations. This could be, for example, all of a large hospital being taken over by its staff. Or smaller groups of staff (e.g. a pathology lab or a clinical department or a community mental health service) could opt out on their own. It maybe that some hospitals will want to make the hospital facilities a separate business from the staff who work in it ( in the same way that most private hospitals work). The new organisations could be for profit (like GPs or dentists are now) or not-for-profit (as BUPA is now), as the staff wish. The new organisations would, in the future, be able to merge, acquire or be acquired in the future, but only if a majority of staff shareholders vote for it. This is to stop a few people profiting from selling out their colleagues. 

4. Like other health insurers, NHSI would accredit providers, i.e. those it is willing to fund. This would cover the prices for services and the quality standards to be met. Accreditation would be open to any providers to offer any service – former GP practices might want to offer diagnostic testing in competition with hospitals; hospitals might want to offer GP services; a mental health practice in the North might want to expand in the South West; pharmacists may decide to offer a wide range of GP services, or maybe just a minor ailments services; etc. This is similar to the current philosophy of “Any Qualified Provider”, but with much more incentive for these now private providers to compete for service. Quality would be judged by the Care Quality Commission, as now, but NHSI would also need monitor outcomes and costs, taking over the role of (and people in) local Clinical Commissioning Groups. Where providers with critical facilities got into financial trouble or where competition was ineffective in a local area, the existing regulator, Monitor, would step in to protect consumer interests. In fact, the current NHS organisational structure would work well in this new world – it was designed to go in just this direction. 

5. Clearly, there is a risk that if ownership is fully transferred to those who provide the services they will put their own interests first, rather than patients. An obvious risk is that where medics or facilities are in scarce supply, the staff owned businesses will put up prices and increase their incomes. The best medium term way to avoid this is to reduce scarcity. The key scarcity is staff. The UK has one of the lowest numbers of doctors per head of population in Europe. In fact, it comes 24th out of 27, only managing to beat Poland, Romania and Slovenia. Austria has nearly twice as many doctors per head of population as the UK. Germany, Italy, Spain and Sweden all have more than 40% more doctors. The situation in the UK has got better – there are now 138,000 employed doctors, compared to just 102,000 10 years ago. Supply has grown through a mix of more training places and immigration – a third of hospital doctors are now foreign born. The current planned economy of the NHS limits the numbers of doctors – by fixing national pay levels it limits the number of jobs. It also sets pay at a high level. For example, in the UK GP partners earn something 3.4 times the national average wage, whilst in Australia they earn 1.7 times. That’s twice as much, in comparative terms. Whilst much of the problem in the absurdly expensive US system is high pay for doctors (e.g. orthopaedic surgeons earn twice as much in the US as they do in the UK, where they are the highest paid of doctors), in some countries (e.g. in central Europe) doctors earn less than the national average. There is no shortage of people, with the necessary talent, wanting to be doctors. So, we should push for a major expansion in medical training (e.g. 100% more doctors being trained?). Partly, this cost will be absorbed by student loans, partly it will be overseas students paying their own way and partly by NHSI on the basis that it will reduce future costs by increasing supply. A major increase in supply should encourage more people to go into unfashionable medicine (which has shortages) and the demise of national pay rates (given that all provision is private in this new world) means that doctor pay will be set by the market and doctor income will vary according to what they deliver.

5. After these changes, then we could get really radical. We could make it a truly patient-driven NHS. This is the current mantra of NHS managers. But they then often want to do the opposite – to have a “driven-patient” approach, creating pathways down which they wish to herd their sheep. A good example is the current NHS focus on trying to stop patients turning up at hospitals at their own convenience and getting them access to 9-5 community services instead. A patient-led approach would follow people’s revealed preferences – they are happy to visit a major outlet that offers better convenience and the promise of immediate attention. They do it every week at supermarkets. The average person only has 6 miles to get to their A&E, which has lots of fixed costs to sweat and assets to offer. It would be possible to offer a wider range of services on those sites, instead of trying divert demand away. In the current old world, NHS managers (of various kinds) sit around trying to plan out their options. I am not suggesting that they now plan out a new set of services on hospital sites. The key to this is to eradicate the bureaucratic purchaser or planner of services, currently known as commissioners. Instead, we could let patients choose what they want, in response to what competitive providers offer. NHSI would pay for the service, as chosen by the patient. In effect, we would be offering everybody (poor, average income or better-off) what today only the rich can have. In a new world where all health organisations are privately owned (albeit mostly by the staff who work in them) and all organisations are free to offer any (accredited) services to anyone they wish, we could let rip with patient choice. There could be 4 ways to put patients in charge:

(a) Direct access immediate services – This could include all those services where the public just wants to be able to turn up, find out what’s wrong with them and get immediate treatment. This includes GP services, paramedics and Accident and Emergency. For these services, we could say that patients can go anywhere they like – to any accredited provider. Rather than having to register with (and stick with) a GP, they could book an appointment anywhere, as they would for almost any other professional service in the private sector (e.g. seeing a solicitor). This would allow those who just want to see a doctor to see one. It would not prevent people who want it from sticking to the same doctor. The choice would be theirs. This would mean replacing the annual capitation fee with a fee-for-service, allowing the GP service to bill NHSI for seeing the patient. It would prevent the rationing of healthcare by GPs by how many of their (average) 1,575 patients they choose to see in a week. Clearly, it relies on all accredited providers being able to see health records. This may take a few years, but it is getting rapidly easier to achieve. (There are lots of ways to achieve it, including encouraging people to own their records on a cloud-based system, giving access to providers as they wish). Similarly, patients could go to any accredited A&E service. And of course, hospitals would be free to develop their A&E services to offer 24-7 GP services, whilst GPs could reciprocate with services for minor injuries or crises for those with long-term conditions; accredited pharmacists could offer a range of GP services, as could accredited mental health therapists. In all cases, providers would need to attract patients to have any revenues at all. Patients would have unlimited access to these direct access services, as they do now, funded by NHSI.

(b) Specialist diagnostic services – The second category of services is where patients are referred (by the direct access providers, e.g. GPs or A&E) for specialist diagnostics. This might be direct referral for tests (e.g. MRI scans). Or it maybe to specialist consultants for their opinion. Just as in private health insurance, patient access to these services would have to be through accredited referral. But once referral is given, patients could be given the same choice as they would get now with private insurance. They would be able to go to any accredited doctor or provider. Competitive providers would directly market to individual patients, offering, for example, faster access to testing, if people are willing to use facilities at weekends or evenings. Alternatively, many patients may just take a recommended routes from their direct access medic doing the referral.

(c) Planned services – Once a patient knows that he or she needs a time-limited course of treatment or particular service they would then have a choice about who they got that from. This would include operations, oncology, maternity, mental health, etc. They would choose accredited doctors or providers in the same way that they would with private health insurance. Again, providers would market themselves to individuals and compete on quality and convenience.

(d ) Long term conditions – The largest part of NHS spending goes on people with long term conditions. These are chronic diseases which can’t be cured, but which can be managed. This includes, for example, heart disease, diabetes, MS, arthritis, dementia and respiratory conditions. Government estimates that this is 70% of NHS spending. There is strong evidence that what works here is giving patients access to integrated providers – e.g. to an integrated dementia service (which includes primary, community and hospital inputs). There is also a philosophical commitment to given patients control over the health service they receive and more ability to self-manage their conditions. However, this is too often just rhetoric. A simple way to move this forward would be for NHSI to give patients with a LTC control over the budget. They would have to choose an accredited integrated provider – a prime contractor. That might be a hospital or a GP practice or a new type of organisation (e.g. Acme Diabetes). That provider would be expected to provide a full range of services (from regular checks through to urgent care) and they would need to configure professionals, technology and drug treatments into packages of care that attracted patients. They would have to resolve all the fragmentation across current providers into a simple package of care. Again, providers would market directly to patients and NHSI would set per capita prices for the annual treatment of the individual.

I would emphasise that these 5 steps fit easily into the journey already underway in the NHS. But the way that they fit together would remove the bureaucratic paternalism which currently gets between intelligent patients making their own choices and responsive medics creating attractive solutions to win the business of those patients. These suggestions therefore could accelerate the pace of the journey underway, but without jeopardising what I care most about in the NHS, the principle of access according to needs, payments according to means.


One thought on “Five steps to save what really matters in the NHS and lose what gets in the way

  1. Pingback: The Left should watch itself over ideas around a “Health Tax” -

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