Six Reasons Why Privatisation Is Bad For Our Health

Public health expert David Lawrence explains why competition and marketisation aren’t the change that the NHS needs. 

The NHS in England was once a collaborative and cooperative public service, with the aim of reducing our suffering, and improving our health. Over the last 30 years, successive governments have introduced more and more elements of competition, contracting and privatisation, including the purchaser-provider split, the Private Finance Initiative and ‘any qualified provider’. There are several reasons why this is not good for us.

1. Competition Creates Bureaucracy

Public financing, using general taxation and public, non-profit healthcare, has lower costs than a part-market system with for-profit providers and mixed public and private financing. The traditional NHS (pre-1980s) had low management costs of around 5%. That was perhaps too low, and required more expenditure on expert management data collection and systems management.

The Health Select Committee has noted that, by 2005, the internal market had increased the administration costs of the NHS from 5% to 14% of the total NHS budget. Large costs are associated with the purchaser-provider split and competition, such as accountants and lawyers, and transaction costs associated with tendering, contracting, procurement and the regulation of for-profit companies. This management cost difference is nearly a tenth of all NHS expenditure; the amount wasted is estimated conservatively at £4.5bn per year.

2. Markets and Healthcare Don’t Mix Well

Certain conditions have to be met for market-based systems to be effective and efficient; they are not met in health care.

First, consumers have to know what they want and understand what they have been given (‘consumer sovereignty’). As patients we do not know always know enough to assess what is being offered to us, and thus rely on the clinicians and hospitals to treat us fairly. This creates an asymmetry in the market, making less knowledgeable patients vulnerable to being ripped off by exploitative market practices.

Secondly, a market requires multiple firms competing in the same area. Having several competing hospitals in one place is wasteful, even in cities. Outside cities, it does not work at all. The inevitable result is one of the firms going bust, or both firms becoming mediocre in order to cut costs.

Thirdly, competition works well with mass-producible goods, whereas healthcare is a bespoke, craft service – economies of scale do not apply. Building two competing hospitals would mean doctors and nurses not getting enough experience and expertise, forcing both hospitals to try to take on simpler cases in order to increase throughput and maintain funding. Regional centres of excellence depend on collaboration, not competition, being the norm.

Finally, use of a market requires management strategies to focus on targets, threats of competition and closures. In healthcare, attention also has to be paid to matters such as quality improvement, morbidity and mortality, and training of junior staff.

3. Pay-For-Access Will Become The Norm

The more a privatised competition-based market system is introduced, the more there will be restrictions on the publicly-funded NHS, forcing many NHS users to pay more for care, or get top-up insurance, as in many other countries. This is already happening with certain rationed operations in the UK, with NHS patients charged five figure sums to jump the queue.

4. Private Firms Cherry-Pick The Easy Work 

Competition-based marketisation, especially from using private providers, produces ‘cherry picking’ of less expensive patients, leaving the NHS public service to pick up the tab for more complicated and long-term cases. In the cases where private companies do take on unprofitable work, they will either drop their contract after a few years or end up taking on further NHS contracts in order to stay in the black.

5. Competition Prevents Integrated Care

Service fragmentation, characteristic of marketisation, allows the government to have a more ‘divide and rule’ regime. Separate service providers can blame each other for failures. It also makes it far more difficult for patients to access services, as their GPs have to climb false walls to organise integrated care. Transfer of staff expertise is restricted.

Though there is already a ‘postcode lottery’ in the NHS, there is at least a recognised NHS ethical-legal basis for clinical decision making policy which limits it. A market-based system makes it more difficult to allocate resources fairly and ensure equal access to care.

6. Private Firms Don’t Pick Up The Pieces

The existing legal duties on the public NHS are in danger of being undermined if private corporations make treatment funding decisions and provide care. The various forms of creeping privatisation will soon put control in the hands of firms who have little interest in the long term outcomes of patients, provided that contractual obligations have been fulfilled.

The sorry saga of deficient PIP breast implants shows up a situation that will now occur much more widely. In the case of failure of a private health care organisation, private insurers are unlikely to pay out, leaving either the public or patients themselves to cover the cost of remedial treatment.

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