The White Paper and the Politics of market-based NHS reforms

1. The White Paper and the Politics of market-based NHS reforms Dr Clive Peedell Consultant Clinical Oncologist JCUH

2. Conflicts of interest • Member of BMA Council and BMA Political board • Member of NHSCA

3. Outline • Political consensus for market based reforms in England • Current market policies • Summary of the NHS White Paper • Market failure in healthcare • Politics and Political economy • NHS Market reforms • NHS White Paper in political context • Conclusions

4. Political consensus and evidence for financing the NHS • All 3 political parties signed up to a single payer publicly fundedsystem • Major evidence to support this: Guillebaud report 1951, The Commons Expenditure Committee report 1973, Wanless review 2001 • Wanless - £267 billion underspend 1972-1998 “The surprise may be that the gap in many measured outcomes is not bigger, given the size of the cumulative spending gap” Wanless • No wonder the NHS had problems!

5. Political consensus in England for market based policies • All 3 main parties support the use of market based policies in the provision of healthcare • Conservative party introduced the “internal market” in 1991 • New Labour policies were pro-market from 2002 onwards • However...devolved nations have abandoned market based policies

6. What is a market system? • The essence of a market system is that “free agents” try to maximise their own “utility” or wellbeing by comparing market prices for goods and services with what they are worth to them. Provided prices are free to move, they will adjust to the forces of supply and demand. • Price signals enable the market wring out the most of an economic situation • Driven by self-interest and competition, and relies on information symmetry between buyers and sellers

7. Current English NHS market-based policies The key levers of the NHS market are the mutually reinforcing policies of: Purchaser-Provider split between primary care (PCTs) and secondary care Patient choice to promote competition (Choose and Book, Extended Choice Network) Plurality of providers - FTs, Private companies (ISTCs, ICATS), “Third sector” non profit organisations Payment by Results (PbR) using a tariff system “PbR is the reform which makes everything else possible” Timmins BMJ 2005 Patient held budgets New Public Management – to run the NHS along business lines

8. Markets in healthcare Proponents argue that market based policies will lead to: • Greater efficiency and innovation • Less meddling by Government • Increased responsiveness to patients

9. White Paper: “Equity and Excellence: Liberating the NHS” • Published on 12/7/10. • Sets agenda for NHS for the next 5 years. • Associated publications: analytical strategy, impact assessment, structural reform plan • 4 separate consultation documents • Another White Paper on Public Health due soon, and a further White Paper on Adult and Social Care in 2011

10. Core values • A commitment to a comprehensive service, available to all, free at the point of use, based on need, not ability to pay  • Put patients at the heart of everything the NHS does • Focus on continuously improving those things that really matter to patients - the outcome of their healthcare • Empower and liberate clinicians to innovate, with the freedom to focus on improving healthcare services

11. Key policies (1) • GP Consortia to take control of commissioning and £80 billion of the £100billion NHS budget. “Localism” • SHA and PCTs abolished. 45% cut in management costs over 4 years. DH and Quangoes slimmed down • Increase patient choice – “no decision about me, without me” • “Any willing provider”, withdrawal of practice boundaries, patient held budgets • Information revolution

12. Key Policies (2) • FTs to become “employee owned” Social Enterprises • NHS Commissioning Board • Monitor to be economic regulator • PbR. Best practice tariffs and price competition • NHS Outcomes Framework • NHS held to account against clinically credible and evidence-based outcome measures, not process targets. Quality standards • Targets with no clinical justification removed • HealthWatch will be created as a new independent consumer champion within the CQC

13. GP Consortia • Responsibility for commissioning and budgets given to GP consortia on statutory basis • GP Consortia working with other HCPs, local communities and authorities will commission great majority of NHS care, but not GP provision, dentistry, pharmacy, primary opthalmic services and maternity • Every GP will be a member of a consortium • Freedom to choose what commissioning activities they undertake and what support to buy in • Full financial responsibility by 2013

14. NHS Commissioning Board • Statutory NHS Commissioning board will be created • SpHA from April 2011 and go live in April 2012 • Take over CQC responsibility for assessing Commissioners and hold GP consortia to account • 5 main functions: 1. Provide national leadership on commissioning for quality improvement 2. Promote and extend patient choice 3. Ensure development of GP commissioning consortia 4. Commission some services 5. Calculate and allocate budgets to Consortia, and account for NHS resources

15. Freeing Existing NHS Providers • All NHS Trusts to become FTs (within 3 years) • All FTs to become employee led Social Enterprises – “The largest and most vibrant social enterprise sector in the world”. • FTs/SEs will cease to be public sector organisations and “will be regulated in same way as any other providers” • Abolition cap on private income. Mergers. Governance tailored to local needs

16. Monitor • Role of economic regulator strengthened: Promote competition Price regulation Supporting continuity of services • Monitor will have concurrent powers with the Office of Fair Trading to apply competition lawto prevent anti-competitive behaviour e.gdiscriminating in favour of incumbent providers

17. Secretary of State • Hold NHS Commissioning Board to account • Lay out mandate for NHS Commissioning Board • Arbiter in disputes between Commissioners and local authorities • Setting legislative and policy framework • Accounting annually to parliament

18. Education and training • Less role for DH • Employers will have greater autonomy and accountability for planning and developing workforce • Providers will pay to meet costs • Centre for Workforce Intelligence will act as source of information and analysis • Further consultation document later

19. Pay and Pensions • Pay decisions will be led by healthcare employers rather than government • All individual employers will have right to determine pay for their own staff • Hutton review on Pensions

20. Proposals for legislation

23. Significant opposition from NHS stakeholders • Unite • Unison – judicial review • BMA – “critical engagement”. Opposes market based policies • NHSCA - oppose • RCN –"The scale and speed of reforms pose a significant risk to the future of the NHS in England“ • RCGP – Concern that proposed scale, pace and cost of change will prove disruptive • NHS Confederation – 40 suggestions to improve WP • King’s Fund – Reform is too fast

24. Democratic legitimacy? • 2010 Conservative Election Manifesto: “More than three years ago, David Cameron spelled out his priorities in three letters – NHS” This refers to the document: “NHS Autonomy and Accountablility. Proposals for legislation” (2007)  • The introduction was written by Cameron and Lansley : “Improving the NHS is the Conservative Party’s number one priority....this requires an end to the pointless upheavals, politically-motivated cuts, increased bureaucracy and greater centralisation that have taken place under Labour..” • David Cameron’s speech at the 2006 Conservative party conference: “no more pointless and disruptive reorganisations”. Instead, change would be “driven by the wishes and needs of NHS professionals and patients”.  • The 2007 WP says: • 4.25 “As part of our commitment to avoid organisational upheaval, we will retain England’s ten SHAs, which will report to the NHS Board.” • 4.28 “PCTs will remain local commissioning bodies.”

25. Walshe (BMJ) highlighted the fact that the Coalition agreement had specifically pledged to "stop the top-down reorganisations of the NHS that have got in the way of patient care“ (HM Government. The coalition: our programme for government. Cabinet Office, 2010.) Estimated costs of reorganisation - £3 billion • Liberal Democrat MP, Andrew George, of the Health Select Committee, said that Lansley had "Torn up the agreement to resist imposing a top-down re-organisation" •  Zack Cooper from the LSE: “The new health secretary campaigned on a pledge to eliminate top-down shakeups of the health service.  This white paper contradicts his campaign promise”  • The rapidity of the publication of the White Paper and the above statements suggest that that the Liberal Democrat side of the coalition have had little or no influence of the planning of the WP.

26. Why oppose market based policies?

27. “The White Paper’s proposals are ideological with little evidential foundation. They represent a decisive step towards privatisation that risks undermining the fundamental equity and efficiency objectives of the NHS. Rather than “liberating the NHS”, these proposals seem to be an exercise in liberating the NHS’s £100 billion budget to commercial enterprises” Whitehead, Hanratty, Popay. Lancet. 6th Oct 2010 Dept of Health Inequalities and Social Determinants of Health, University of Liverpool.

28. Purpose of the NHS • NHS Pre 1948 – market system. Fragmented care. “Pain and discomfort were accepted as part of life to be endured with stoicism” Geoffrey Rivett • Central feature of the Welfare State (Beveridge/Bevan) • To sweep away the failed “market” of voluntary sector, private and municipal hospitals, through nationalisation • Pooling of risks. Everyone covered - “Universality” by a “Single payer” system • Based on importance of healthy society, social solidarity and social contract between doctors and patients • “A unique example of the collectivist provision of healthcare in a market society” Rudolph Klein

29. Founding Principles of the Universal Free at point of delivery Equitable Paid for by central funding – “Single Payer” The NHS: “Labour’s greatest achievement. It is a working example of the best interests of the people in this country. It is the most popular institution in Britain” (Dobson) “Sacred Cow” status

30. Market failure in healthcare

31. Market Failure in healthcare - Theory Market failure in healthcare is a well recognised problem in theory and practice (Arrow, Brown) 1. “Information asymmetry”. Patients are not well enough informed to make choices. Patient vulnerability. Need for “Choice advisors”. Also primary and secondary care 2. Healthcare is difficult to commodify. Contracts are complex. Contracts are based on mistrust 3. Risk of supplier induced demand 4. Excess capacity is needed for market choice to work i.e a plurality of providers 5. Exit is very difficult ie Hospital closures are a political hot potato 6. Expensive to enter market – e.g ISTCs (given 11% extra tariff) 7. Insurance systems will give the cheapest and best coverage to the well, and the most expensive and least coverage to the sick 8. Doctors control access to the healthcare market. Professionalism is a problem 9. Markets provide for wants rather than needs. 10. Price signals don't work. Payment occurs after care. Healthcare costs are prohibitive. Pooling of risks 11. Need for specialty clusters and high volume workload 12. First duty of investor owned firms is to their shareholders, not patients – “cream skimming” 13. The market is a blind power without any social orientation: it cannot solve social problems 14. Need to plan for local population needs

32. Speech by the Chancellor of the Exchequer, Gordon Brown, to the Social Market Foundation at the Cass Business School on Monday 3 February 2003 “Indeed, the case I have made and experience elsewhere leads us to conclude that if we were to go down the road of introducing markets wholesale into British health care we would be paying a very heavy price in efficiency and equity and be unable to deliver a Britain of opportunity and security for all” “The very same reasoning which leads us to the case for the public funding of health care on efficiency as well as equity grounds also leads us to the case for public provision of healthcare”.

33. Market failure in practice: USA “Evidence from the US is remarkably consistent: Public funding of private care yield poor results”Woolhandler, Himmelstein, BMJ 2007 Market failure is recognised - US system is not a free market (Medicare/Medicaid) $2.3 trillion dollar system - “Medical Industrial Complex” 50 million uninsured. ?millions underinsured Massive costs to employers e.g GM 62% of all personal bankruptcies (900,000/year) due to medical expenses. 78% had “insurance” (User fees/Top ups) 30% budget on transaction costs. (40% in for profit sector) Massive CEO pay. Healthcare fraud Poorer outcomes for life expectancy and infant/maternal mortality rates Plagued by undertreatment and overtreatment – “islands of excellence in a sea of misery”

34. CEO pay in the USA Humana Current CEO: Michael.B.Mccallister Compensation 2009: $5 million and has $50 million stock options UnitedHealth CEO: Stephen J Helmsley Compensation 2009: $3 million and stock options worth $660 million  n.b previous CEO, Bill McGuire involved in $1.5 billion stock options scandal Aetna CEO: Ronald A Williams Compensation 2009: $24 million and stock options worth $170 million n.b Former Aetna CEO John Rowe earned $175 million in 65 months ($225,000 per day!!) Source: Forbes website

36. Market Failure in practice: England “All evidence and analysis shows that the actually existing market created by New Labour is likely to exacerbate the terrible social injustices of unequal access to healthcare and unequal health outcomes” Raine, McIvor, Lancet 2006 “On public services, the Government talked a technocratic language, using words like “contestability”, and seemed sometimes to suggest that private sector solutions were always better – when public services users just wanted guarantees of good schools, hospitals and policing” Ed Balls, candidacy statement for Labour Party Leadership 2010

37. Evidence for market failure: • Quasi-market and recognised need for regulation • Transaction costs: University of York study - 15% NHS budget versus 5% prior to the PP split Commissioning contracts, commodification (HRG coding), Managerialism (91% increase in NHS managers, consulting), NHS IT system to provide information for “consumers”, marketing • Costs associated with excess capacity – e.g ISTCs, Polyclinics, Third sector • Regulatory costs – CQC, CCP, Monitor • Complexity of Commissioning • 15 major NHS reorganisations in the last 20 years • Attack on professionalism and public service ethos • .............And I’ve not even mentioned the PFI!

38. NHS Confederation report on NHS restructuring

44. Deprofessionalisation • Market systems reject medical professionalism and the public service ethos

45. Doctors and NHS market reforms Doctors control access the healthcare system Paul Starr defined “medical sovereignty” as a combination of economic power (control over the market), exerted mainly through a “cultural authority” on patients, and political influence (control over policy making). Starr, P. The social transformation of medicine. 1982 “Public service professionals are in a profound sense not just non-market, but anti-market” Professor David Marquand, Decline of the Public The medical profession is therefore an obstacle to market reforms Attack on medical professionalism since the Griffiths report, 1983 Working for Patients white paper, 1989. This led to the “End of the Double Bed” of policy making. Rudolph Klein, BMJ 1990 BMA has not been involved in policy making ever since

46. “Knights, Knaves, Pawns and Queens” • Public Choice Theory. A concept in economic theory that suggests public servants are “self interested rent-seekers” – “knaves” rather than “knights”. “Public policy should be designed so as to empower individuals: turn pawns into queens” Julian Le Grand Thus, public services are best delivered through consumer choice and the market. • Rejection of the “Trust” model of healthcare delivery • Gave rise to New Public Management (performance management and market discipline) • Paradoxically, this view of medical professionals as “knavish” self interested agents of business, feeds on itself. American medical profession has lost public support faster than any other professional group. Blendon. JAMA 1989

47. PMETB • Government took control of training through PMETB • British Journal of General Practice editorial described how the proposals for the establishment of the Medical Education Standards Board (which later became PMETB): “…. are clearly intended to enable the Secretary of State of the day to direct that standards can be lowered to meet the manpower demands of the NHS • President of the RCA, Peter Hutton, pointed out: “For a Government dedicated to a quality service, I found it surprising to see the statement: ‘The competent authorities (e.g the STA) typically apply considerably higher standards than the minima specified by law’. Quite frankly, thank goodness they do”. • Clear agenda for a drive towards minimal standards rather than excellence

48. MMC • Competency based training - CBT originated in the 1980s and was a politically driven movement with the aim of making national workforces more competitive in the global economy by focusing on discrete technical skills with an emphasis on outputs, performance assessment, and value for money. • MMC – competency based, minimal standards, tick box culture. Tooke report: “Aspiring to excellence” cited MMC for aspiring to mediocrity. • MMC designed to produce a “fit for purpose” medical workforce : “...most importantly, (MMC) will deliver a modern training scheme and career structure that will allow clinical professionals to support real patient choice” (DH Website) • Recent briefing from NHS Employers stated: “The future NHS will not require all doctors to progress to the current role of consultant. New roles and structures must be developed that will meet the needs of employers....”

49. Lansley has a problem…. “Without doctors, attempts at radical large-scale change were doomed to fail.”Ham/Dickinson. Engaging Doctors in Leadership: A review of the literature 2007 Clinical leadership is well recognised to be crucial to health reforms. Strong “Clinical Leadership” drive in Darzi reforms. “Change Agents” to deliver market based reforms e.g “Service Line Management” (business units) Market reforms need doctors to become more entrepreneurial – “Doctorpreneurs” Virtually no mention of the role of consultants in the White Paper

50. “Only a dunce could believe that market based reform will improve efficiency or effectiveness”Woolhandler/Himmelstein BMJ 2007So why have so many countries, including England, gone down this route?It’s the economy, stupid!(And some politics and philosophy)