Dr Clive Peedell

Co-leader National Health Action Party

Consultant Clinical Oncologist

James Cook University Hospital, Middlesbrough

DOI: Member of BMA Council

BMA Westminster Lecture 2015

The politics of NHS reform in England

Why we needed a new political party to defend the NHS

Overview

• Austerity and NHS funding

• Market based reforms

• Market failure in healthcare

• Political economy of NHS reforms

• NHA Party solutions and policies

Political consensus for a tax funded NHS• Single payer publicly (taxpayer) funded system supported by

all main parties

• Wanless review 2001: £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”

Austerity and NHS funding crisis

• 2008 Financial crisis

• “Ringfenced” Flat funding, average 0.7% increase

• £20bn efficiency savings programme (QIPP, “Nicholson challenge”) 2010-2014

• NHS reforms “£4bn policy fiasco”

• Health inflation runs at 4%

• Hence £30bn funding gap by 2021

• Population increase of 3.5m 2010-18

Political consensus in England for market based policies

• All 3 main parties support the use of market based policies in the provision of healthcare

• Conservatives. Thatcher’s counter-revolution. Internal market - “purchaser-provider spilt” 1991

• New Labour policies pro-market from 2002 onwards

• Lib Dems pro-market from 2004 “Orange Book”

• Health and Social Care Act 2012

The Health and Social Care Act

• Legislation changed NHS from a planned and publicly accountable system, to a regulated economic external market

• Removal of SoS responsibilities and powers to provide a comprehensive health service

• EU competition law and TTIP. Risks irreversible privatisation

The legislation clearly promotes increasing NHS privatisation

• WHO definition of Healthcare privatisation

“A process in which non-governmental actors become increasingly involved in the financing and/or provision of healthcare services”J Muschell, Technical Briefing Note on Privatization in Health, 1995, WHO/TFHE/TBN/95.1

• Oliver Letwin’s own definition.

Democratic legitimacy?

Cameron’s speech at 2006 Conservative party conference:“no more pointless and disruptive reorganisations”

Why oppose market based reform?

Proponents argue that market based policies will lead to:

• Greater efficiency, innovation and quality

• Less meddling by Government

• Increased responsiveness to patients

• More equitable

Theory of market failure in healthcare

Market Failure in healthcare - TheoryMarket failure in healthcare is a well recognised problem in theory and practice (Kenneth Arrow, Gordon Brown)

1. “Information asymmetry”. Patients are not well enough informed to make choices

2. Healthcare is difficult to commodify. Contracts are complex. Transaction costs

3. Risk of supplier induced demand

4. Excess capacity is needed for market choice to work i.e a plurality of providers

5. Expensive to enter market – e.g ISTCs (given 11% extra tariff)

6. Exit is problematic. Highly political

7. Insurance systems will give the cheapest and best coverage to the well, and the most expensive and least coverage to the sick. Inverse Care Law

8. Doctors control access to the healthcare market. Professionalism is a problem

9. Patients become “consumers”

10. Price signals don't work. Payment occurs after care. Healthcare costs are prohibitive. Pooling of risks

11. Need for specialty clusters, colloborative working and high volume workload

12. First duty of investor owned firms is to their shareholders, not patients –“cream skimming”

.

Speech by the Chancellor of the Exchequer, Gordon Brown, to the Social Market Foundation at the Cass Business School on Monday 3 February 2003

“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”

“The very same reasoning which leads us to

the case for the public funding of health care also

leads us to the case for public provision of

healthcare”.

Market failure in practice: USA“Evidence from the US is remarkably consistent: Public funding of private care yield poor results” Woolhandler, Himmelstein, BMJ 2007

• 17.9% GDP, $2.3 trillion dollar system - “Medical Industrial Complex”

• 50 million uninsured ?millions underinsured• Concept of “Medical loss”• Massive costs to employers e.g General Motors• 62% of all personal bankruptcies (900,000/year) due to

medical expenses. 78% had “insurance” (User fees/Top ups)http://www.businessweek.com/bwdaily/dnflash/content/jun2009/db2009064_666715.htm

• 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”

LA Sports Arena, Sept 2012

CEO pay in the USA

HumanaCurrent CEO: Michael.B.MccallisterCompensation 2009: $5 million and has $50 million stock options

UnitedHealthCEO: Stephen J HelmsleyCompensation 2009: $3 million and stock options worth $660 millionn.b previous CEO, Bill McGuire involved in $1.5 billion stock options scandal

AetnaCEO: Ronald A WilliamsCompensation 2009: $24 million and stock options worth $170 millionn.b Former Aetna CEO John Rowe earned $175 million in 65 months ($225,000

per day!!)

Source: Forbes website

Market Failure in practice: England• Strong evidence that price competition worsens care

• Transaction costs

- 14% NHS budget versus 5% prior to the PP split (HSC report)

- More conservative estimates - £4bn per year

- Commissioning contracts, commodification (HRG coding), Managerialism (91% increase in NHS managers, consulting £640m per year), NHS IT , marketing

• Costs associated with excess capacity – e.g ISTCs, Darzi Polyclinics

• Regulatory costs – CQC, Monitor

• 15 major NHS reorganisations in the last 20 years (NHS Confedreport)

“Losing the medical profession”

“Without doctors, attempts at radical large-scale change are doomed to fail” Ham/Dickinson. Engaging Doctors in Leadership: A review of the literature 2007

• Clinical leadership and followership are crucial to healthcare delivery and reform

• Shared vision and values

The Medical Profession and market reforms

• Doctors control access the healthcare system – “Allocate resources”

• Doctors favour collaborative working and oppose market reforms.

• Most GPs and patients want a good local service

• Lansley speech to NHS Confederation:

“The first guiding principle is this: maximise competition”

• The medical profession is an obstacle to competitive market reforms

• “Public service professionals are in a profound sense not just non-market, but anti-market” Professor David Marquand, Decline of the Public

• Political attack on the medical profession since 1990s

Loss of political influence

Managerialism

Education and training (MMC, Shape of Training Review)

Working for Patients White Paper, 1989

“It was the first time in the history of the NHS that the medical profession was systematically excluded from the decision making process”

Signalled end of corporatist approach to policy-making

Medical profession excluded from policy making since 1989

New Public Management (NPM)“Managerialism”

• To counter the power of the professions and control public expenditure

• Assumes that the quality and effciency of public services will improve if delivered along commercial lines

• Favours narrow economic priorities and micro-management practices (e.g audit, inspection, performance indicators, league tables, monitoring and centrally imposed targets) over professional judgment

Modernising Medical Careers

• MMC – competency based, minimal standards, tick box culture. Tooke report: “Aspiring to excellence” cited MMC for aspiring to mediocrity.

• Competency based training

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 designed to produce a “fit for purpose” medical workforce

• British Journal of General Practice editorial: “…. 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.”

Lessons from over the pond

“Medical professionalism cannot survive in the current commercialized health care market. 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.”

“American medical profession lost public support faster than any other professional group”. Blendon JAMA 1989

Summary of the evidence on market based healthcare

“Only a dunce could believe that market based reform will improve efficiency or effectiveness”

Woolhandler/Himmelstein BMJ 2007

So why have so many countries, including England, gone down this route?

It’s the economy, stupid!.......and politics and philosophy

NeoliberalismThe dominant political, economic and philosophical doctrine of the last 30 years. (D Harvey. A Brief history of neoliberalism. OUP)

Basis of Thatcherism, Reaganomics, Blair’s “Third Way”

• Maximum market freedom. Liberalisation and deregulation of trade and finance eg “the Big Bang”.

• Minimal Government intervention - “Rolling back the state”

• Low tax, low inflation economy .

• Labour market deregulation – defeat of unions

• Privatising state-owned enterprises, premises and public services

• Remodelling the state’s internal operations along business lines (NPM)

• Encouragement of voluntary sector as a source of welfare - “Social capital” eg The Big Society

• Supply side economics or “Trickle-down economics”

Consequences of global financial deregulationLoss of national sovereignty to the global financial markets

‘Every day about $1 trillion moves across the foreign exchanges, most of it in London. Any government that thinks it can go it alone is wrong. If the markets don’t like your polices, they will

punish you’

Tony Blair, Chicago, 2004

• “The Markets” demand further deregulation to maximise returns on investment:

“I was under, and Britain was under, relentless pressure from the City that we were over-regulating. All through the 10 to 15 years, the battle was not that we regulated too little, but that

we regulated too much.”

Gordon Brown, Telegraph 2011

• “TINA” because of risk of “capital flight” in a globalised financial system. Race to the bottom.

• Thus global financialisation has eroded the sovereignty of nation states over their domestic policies

The power of the bond markets

Labour becomes “New Labour”• 4 successive election defeats (‘79, ’83, ‘87, ‘92)

• “New reality” - Retain the confidence of the global financial markets by whatever policy modification is necessary

• “In economic management, we accept the global economy as a reality and reject the isolationism and ‘go-it-alone’ policies of the past”

Labour Election Manifesto 1997

• Abolition of Clause IV of Labour party constitution – denouncing nationalisation, emasculating unions and policy making power of Party Conference

• “Prawn cocktail offensive” (1992-97)

• “We are all Thatcherites, now” Peter Mandelson, The Guardian 2001

• “Social democratic model abandoned in favour of a variant of neoliberal Thatcherism”. Eric Shaw. Losing Labour’s Soul. 2007

• Margaret Thatcher’s greatest success: “New Labour and Tony Blair. We forced our opponents to change their minds”

A succinct summary of New Labour’s political position by 2 Labour MPs

“After years in opposition and with the political and economic dominance of neoliberalism, New Labour essentially raised the white flag and inverted the principle of social democracy. Society was no longer to be master of the market, but its servant. Labour was to offer a more humane version of Thatcherism, in that the state would be actively used to help people survive as individuals in the global economy - but economic interests would always call all the shots”John Cruddas MP and Jon Tricket MP – New Statesman, 2007

• Orange Book liberals regard free market economics as synonymous with freedom and individual choice – Just like Thatcher

• The Orange Book (2004) advocated a social insurance system with private providers to replace the NHS

Consequences for public services under New Labour

“All public services have to be based on a diversity of independent providers who compete for business in a market governed by Consumer choice. All across Whitehall, any policy option now has to be dressed up as “choice”, “diversity”, and “contestablity”. These are the hallmarks of the “new model public service”

John Denham MP, former Cabinet Minister quoted in the Chartist 2006

“Unless Labour made public services more like the market first, the Tories would just do it on their own terms”

Alan Milburn

“The commodification of public space has now become an aggressive Blairite objective”

Roy Hattersley, Labour MP quoted in the Guardian, 7th November 2005

2000-2010Labour’s healthcare market

NHS Concordat 2000

Introduction of a market based system driven by:

• Purchaser-provider split,

• Patient Choice

• Payment by Results (PbR)

• Competition between a plurality of providers

• “Any Willing Provider” policy

• Foundation Trusts

• Patients budgets

Outsourcing of commissioning to private companies (FESC)

“If this is not privatisation of the Health Service, then I don’t know what is”Frank Dobson, MP

• Aetna Health Services (UK) Ltd

• AXA PPP Healthcare Administration Services Ltd

• BUPA Membership Commissioning Ltd - (Patricia Hewitt advisor to Cinven)

• Partners In Commissioning

• Dr Foster Intelligence

• Health Dialog Services Corporation - (Phylis Shelton, former DH lead for measurement of the integrated care programme)

• Humana Europe Ltd

• KPMG LLP – (Mark Britnell head of Global Health, formerly DH, Stephen Dorrell)

• McKesson Information Solutions UK Ltd- (Chair, Lord Carter of Coles, Chair CCP)

• McKinsey & Co - (Partner, Dr Penny Dash, former DH head of strategy)

• Navigant Consulting, Inc

• Tribal Consulting Ltd – (Director of health division, Matthew Swindells, former chief Information officer at DH)

• UnitedHealth Europe Ltd – (Head of European arm, Simon Stevens, former advisor to Tony Blair)

• WG Consulting

“In this environment of greater choice, increased contestability and competition driving improvements in services, there is a greater need to ensure rules and guidance exist to encourage competition and the effective operation of markets.”

Professor Chris Ham stated that the CCP rules were written by a “Neoliberal economist on speed” HSJ 2009

Private Finance Initiative

• Kept public sector borrowing off balance sheet

• This prevented Brown from breaking his “Golden Rule” of keeping HMG debt <40%GDP

• Shiny new schools and hospitals

• Kept the markets happy and gave huge returns for the private investors like RBS

Thus, New Labour provided the perfect platform for Lansley’s full blooded market reforms, which

represent the roadmap to increasing NHS privatisation.....

Health Investor

“It doesn’t matter who provides the service, as long as it is free at the point of use”

AusterityThe consequences for healthcare

Austerity – increases demand on healthcare system

• Public health time bomb (“The Body Economic”)

• Negative impact on the social determinants of health (Marmot). Austerity worsens wealth inequality

• Smoking/alcoholism/obesity/mental health problems

Austerity – reduces supply of healthcare services

• A+E crisis, bed shortages

• Diagnostics, shortage of GPs, district nurses

• Social and nursing care, health

• Mental health services. “Parity of esteem”

• Child health services

Conclusions• 30 years of global neoliberalism• Deregulated global financial markets eroded sovereignty of

nation states because of the fear of “capital flight”• Structural reforms of increasing marketisation and

privatisation of public services • Financial crisis caused by failure of the banking system• Huge government bailouts. Private debt rechristened as public

debt• All main parties support further doses of austerity• NHS is under serious threat of being dismantled and

increasingly privatised• NHS is the most popular institution in Britain and is part of the

social fabric of this nation• We need a political party to fight for it

The National Health Action Party’s prescription for the nation

• Address wealth inequality through progressive taxation. (Tax wealth as well as income)

• Crack down on tax avoidance/evasion

• Invest in health and education, which promote economic growth

• 13 point NHS plan

• Focus on the social determinants of health and public health

Paul Mason

Paul Mason, the BBC Economics editor of Newsnight wrote:

" A deregulated banking system brought the entire economy of the world to the brink of collapse. It was the product of giant hubris and the untrammelled power of the financial elite."

"Basically neoliberalism is over: as an ideology, as an economic model. Get over it and move on. The task of working out what comes after it is urgent . Those who want to impose social justice and sustainability on globalised capitalism have a once-in-a-century chance". Mason P. Meltdown. The End of the Age of Greed. Verso. 2009

Joseph Stiglitz

“Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.”

NHS unaffordable?• According the Parliamentary Committee 25% of multinationals operating in the UK didn't pay any

corporation tax at all

• Barclays PLC had 315 tax subsidiaries in April 2009

• Shaxson estimates that wealthy people and coporations hold over $10 trillion offshore

• Willmington, Delaware in the USA. 882,000 companies registered there for tax purposes

• An office at 1209 North Orange Street, Wilmington, houses 217,000 companies!

• It's interesting that Obama criticised the Cayman Islands for having an office that housed over 12,000 companies - he obviously needs to look closer to home!

Aneurin “Nye” Bevan on the NHS:

“It will last as long as there are folk left with the faith to fight for it”