World Health Organization (WHO) definition of healthcare privatisation:
“A process in which non-governmental actors become increasingly involved in the financing and/or provision of healthcare services”.
The NHS is being increasingly privatised
The Conservatives and Liberal Democrats have repeatedly claimed that their NHS reforms would not lead to increasing NHS privatisation. In their response to the Future Forum report, the Government stated they would rule out “any question of privatisation”, and Nick Clegg is on record as saying “You told us you were worried about privatisation through the back door. So we have made that impossible”.
The Department of Health website even stated that “Health Minsters have said they will never privatise the NHS”.
Andrew Lansley went one step further by accusing critics of “ludicrous scaremongering”.
Yet according to the WHO definition of healthcare privatisation (above), they have clearly misled the public, or in common language - lied. The Health and Social Care Act clearly fulfils all the commonly accepted criteria for healthcare privatisation, as I have described in a recent article in the BMJ.
The legislation also fulfils the definition of privatisation proposed by Minister of State for Policy, Oliver Letwin, MP, as laid out in his book, “Privatising the World”:
“It typically takes one of three forms: contracting out of government, deregulation of activities previously dominated by the public sector, and sales of public assets to existent private sector companies…these are important and powerful tools, each of which is particularly suited to the privatisation of a particular aspect of the public sector: contracting out for public services, deregulation for statutory monopolies, and trade sales for companies in poor financial condition”
And as former Head of the Privatisation Unit at Rothschild’s in the 1980s, Letwin clearly knows a lot about privatisation of the public sector.
The business community also saw that the legislation meant increasing opportunities for them via NHS privatisation. Look at the results of this Questionnaire for Health Investor magazine, which concluded that:
“...the healthcare industry still wholeheartedly subscribes to the belief that the Tories will accelerate the expansion of the role of the private sector in the NHS...... our experts are almost unanimous in predicting that the looming real terms cut in the NHS budget will boost demand for private care provision for the next two years”
Mark Britnell, former head of Commissioning for the DH, and currently head of global health at KPMG, infamously said at a recent US private healthcare conference :
“In [the] future, the NHS will be a state insurance provider not a state deliverer. In [the] future ‘any willing provider’ from the private sector will be able to sell goods and services to the system. The NHS will be shown no mercy and the best time to take advantage of this will be in the next couple of years.”
Britnell and the respondents to the Health Investor barometer were spot on, of course. According to academic analysis published in the BMJ and the Lancet, the Government’s Health and Social Care Act legislates for the NHS system of public funding and mainly public provision and public administration, to be replaced with a competitive external market of corporate providers in which the government finances but does not provide healthcare.
This is all in keeping with the broader neoliberal policies of this Government. Of course, they realise that the majority of the public do not share its views on privatisation of public services, especially the NHS, so alternative narratives are constructed and the media have been largely compliant in maintaining them.
However, if the public knew the full implications of what this would actually mean for the NHS, potential support for private provision of NHS services would plummet.
Why does it matter who provides the service?
The NHS is a tax funded or “single payer” system, which means it has a fixed budget. It needs to use that budget efficiently and effectively to ensure the healthcare needs of the population are met. The proponents of increasing private sector provision in the NHS argue that this will increase efficiency, innovation and responsiveness to patients.
Privatisation needs a market, and the big secret of ‘markets’ is that they actually impose considerable costs and overheads which need to be recouped by efficiency savings and innovation.
Market systems drain billions of pounds from the NHS budget and away from frontline care, by the creation of a huge bureaucracy of commercial contracts, accounting, legal challenges, advertising and billing. The funding stream for health services becomes highly fragmented. A Health Select Committee report on Commissioning noted that the internal market brought in by Thatcher in 1991, increased the administration costs of the NHS from 5% of total budget, to 14% total budget by 2005. The current system is even more complex, bureaucratic and costly with three levels of bureaucracy replaced with seven.
The increasing complexity and bureaucracy of the system also increases opportunities for the private management consultancy industry to offer their expensive advice to the NHS. This forms the business model basis of Commissioning Support Units (CSUs), which offer their support to Clinical Commissioning Groups to help manage the new healthcare market. The classic McKinsey slogan “If you can measure it, you can manage it” is apt. That phrase should also end with the words “and then you can bill for it”.
Moreover, private companies could end up playing a major role in deciding how up to 60% of the NHS budget is spent, raising serious issues about conflicts of interests and greater risks of further privatisation.
Another problem is that private healthcare firms are by their nature profit maximisers, not cost minimisers. Strategies that bolster profitability often worsen efficiency in healthcare and also reduce the quality of care. Since staff costs represent at least 60% of health budgets, sacking staff, and reducing the levels of more experienced (and costly) staff, is often the first port of call to maximise profits for private companies.
The market system or ‘patient choice’ agenda also turns patients into consumers of health care, forced to “shop around” for their care, creating competitive forces between providers to increase the efficiency of the market. Andrew Lansley famously stated that competition was the number priority for his reforms:
“So the first guiding principle is this: maximise competition”
But consumers consume, which is not a good for systems with a fixed budget, like the NHS. In addition, competition requires a plurality of providers, which potentially creates excess capacity in the system and duplication of services, because choice is only possible where alternative options exist and are available. This is clearly inefficient.
Privatisation destabilises local health economies. Private firms cherry pick the most profitable services, taking the government money that’s attached through the Payment by Results system. They leave local NHS Hospitals underfunded to pick up the pieces and deal with everything else they are expected to deal with - the full and comprehensive range of healthcare services to local communities. The NHS currently subsidises this comprehensive range of services with the more profitable treatments. As these are picked off by private providers, the NHS is already struggling - even leaving aside the huge financial pressure of the Nicholson cuts.
The NHS will either have to cut back staff and close services, and/or increase their private income by treating more private patients, taking advantage of the Health and Social Care Act which allows them to make half their income this way. They may even have to consider closing and/or merging with other Trusts. This actually reduces choices for local people as they lose local services, and a two-tier system is created, whereby those with health insurance can get access to NHS beds quicker than those without.
There is also a serious problem with staff transfers from NHS hospitals to private hospitals (which don’t train their own staff). This will take vital expertise out of the NHS and create yet more pressure, especially in professional groups where there are already national shortages. Care pathways will also become fragmented as patients have different parts of their care performed in different hospitals depending on the contracts that CCGs have signed up to. Quality is put at risk, expertise diluted, and costs driven up.
Healthcare systems need to be planned and develop and evolve over many years in order to provide for the specific healthcare needs of the local populations they serve. Instead they are being destabilised by the “creative destruction” of market forces.
Increasing the use of private sector providers also causes “Privatisation creep” and a “revolving doors” culture between the private health firms, politicians, think tanks, and civil servants within the Department of Health. Once the private sector starts getting contracts with the Department of Health, it becomes increasingly influential and entrenched within the policy making community. This leads to the “privatisation” of the policy making process, reduces trust in our democratic political system, and increases the risk of corruption.
NHS culture and professionalism is also undermined by the privatisation and marketisation of healthcare. Running hospitals along business and financial lines distracts from patient care, which was highlighted by Francis in his Mid Staffordshire NHS Trust public inquiry.
During the rapid commercialisation of the US healthcare system in the 1980s, the American medical profession lost public support faster than any other profession.
We should listen carefully to warnings of the former editor of the New England Journal of Medicine, Professor Arnold Relman:
“The continued privatization of health care and the continued prevalence and intrusion of market forces in the practice of medicine will not only bankrupt the health care system, but also will inevitably undermine the ethical foundations of medical practice and dissolve the moral precepts that have historically defined the medical profession”
Finally, in wider economic terms, the use of the private sector in the NHS can also damage our economy. Since public funds are used to pay for private sector provision of NHS services, taxpayers’ money is going directly into the profits of multi-national private companies and their shareholders. It is diverted away from direct patient care, and also diverted outside of our economy. Many of these companies are also registered in offshore tax havens. Privatisation of the NHS is a false economy.
There is clear evidence that this Government is increasing private sector involvement is the delivery and commissioning of NHS services. Coalition denials of increasing NHS privatisation don’t stand up to scrutiny, and they have tried to use the argument that “it doesn’t matter who provides care, as long as it is free at the point of use” to justify their reforms. However, it clearly does matter who provides the service, because the use of private sector creates requires an expensive and inefficient market system, which drains money from frontline care, fragments care, undermines professionalism, and destabilises local health economies.
It creates a vicious circle of increasing health care costs and financial pressure on the NHS. It leads to staff cuts, hospital and ward closures, increased waiting lists, and fewer core services provided by the NHS. A failing NHS will further stimulate the secondary market in private healthcare insurance for those that can afford it, thus signalling the death knell for a universal healthcare service, free at the point of use.
In practice, public-private competition means that private firms carve out the profitable niches, leaving a financially depleted public sector responsible for the unprofitable patients and services.
According to Professors Woolhandler and Himmelstein from Harvard University, writing in the BMJ,
“....based on this experience, only a dunce could believe that market based reform will improve efficiency or effectiveness.”
But then as we know, Oliver Letwin MP, current Minister of State for Policy has said: