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- guardian.co.uk, Sunday April 7 2002 08.41 BST
The Symptoms
The NHS has a severe shortage of capacity, directly costing the lives of tens of thousands of patients a year. We have fewer doctors per head of population than any European country apart from Albania. We import nurses and doctors from the world's poorest countries, and export sick people to some of the richest.
More than one million people - one in sixty of the population - are waiting for treatment. They are waiting far too long, every step of the way - for the first appointment with a GP, for initial consultation with a specialist, for diagnosis and for treatment. Patients needing heart bypasses often have to wait over a year for treatment. One in four cardiac patients die while waiting and one in five lung cancer patients wait so long they go from being treatable to untreatable. The cancer survival rate in Britain is lower for cancers than almost all other developed nations. World Health Organisation figures show that if the UK had the same cancer survival rates as the European average, it would save 10,000 lives a year; if we had the best in Europe, it would save 25,000 lives a year.
People with painful skin conditions, children needing speech therapy, or elderly people needing hip replacements so they can walk, can expect to wait several years for treatment. In Accident and Emergency wards, patients routinely have to wait in pain for six hours or more to see a doctor. Many drugs and treatments widely available elsewhere are denied to NHS patients.
The patient experience of the NHS is often far below what they would tolerate in any other area of their life. They generally have no choice of the time or date of their appointment, and even so still have to wait for many hours before being seen. Hospital food is often unpalatable, and hospitals are often filthy. GP appointments last on average seven minutes, far too quick for a proper diagnosis.
The treatment in the NHS is so bad that it is driving millions of people towards private medicine. Seven million people are covered by private medical insurance, while in addition around a third of a million pay out of their pockets for private operations each year. Most NHS hospitals are now so short of money they have abandoned their core founding principle, and now accept money from private patients to give them privileged access to the same beds, nurses, doctors and operating theatres. Specialist NHS hospitals, such as the Royal Marsden, now generate up to a quarter of their income from fee-paying patients.
The health system in Britain is now clearly a two-tier service with the rich getting treatment denied to the poor - precisely the problem that the NHS was meant to address. Without serious reform, the NHS is sliding further into becoming a "sink service" for the poor.
The Diagnosis
The poor performance of the NHS is the result of a range of fundamental problems. Most are closely tied to the issue of funding, which is why changing the funding system of the NHS is essential to any serious reform.
Underfunding
We spend far less on health services in Britain than most other European countries, both in absolute terms and as a proportion of GDP. We spend roughly a third less than France and Germany, and half the amount of the US. The volume of health spending that is funded through taxation is in fact roughly the same in both the UK and our European neighbours (and indeed, even in the US), at around 6 per cent of GDP. The difference is that much of Europe supplements the tax payment with a further 3-4% of GDP in 'private' spending by the individual through charges for services and health insurance.
The NHS was long hailed as the best way to provide a cost-effective health service, but its defenders and critics alike agree that we are now 'rationing ourselves to death'.
Inability to match supply with demand
There is no mechanism within the NHS monopoly to ensure that supply of health care - spending on doctors, hospitals, drugs etc - keeps up with the public demand for it. This is the fundamental root cause of underfunding in the NHS.
NHS defenders say that under-spending on health is the cause of the problems in the NHS; but in reality it is the tax-funding monopoly that is the cause of the under-spending. Figures from the OECD show that spending on health is far lower and more erratic in countries whose health services are funded mostly out of general taxation, and health spending is higher and more responsive to societies' demands in those countries where health services are funded out of social insurance.
Apart from going private, the only way for members of the public to increase health spending is to vote once every five years for a new government that promises to spend more on health. Imagine if we had to decide how much money we were going to spend on our food for the next five years by voting for a political party!
People vote on a range of issues - crime, education, immigration - of which health spending is just one. Often, in Britain electors have not even had any choice - in the 1997 election, for example, Labour promised to match the Conservative's budget plans, which amounted to a spending freeze on health for the next two years.
Chancellors have to decide spending on a range of other issues - social security, education, defence etc - and will always be under pressure to strictly control spending on health. The NHS has long-run excessive rationing built into it, because there are constant direct pressures to contain spending, and only once every five years, indirect pressure to increase it.
After a delayed start, the government has now promised to sharply increase spending on health, with Tony Blair promising committed to meet the European average. But no one should expect this growth to be sustainable. Things may look rosy when there is a Labour government, elected to increase spending on health, and thanks to record budget surpluses, actually able to do so. But what happens when there aren't budget surpluses, or it loses power because of other policies? After a brief spurt, we will just be back to the long run situation of excessive rationing.
Perverse incentives
Simply increasing spending from general taxation also does nothing to address the perverse incentives that riddle the NHS, making it possible to throw increasing amounts of money at it with no noticeable effect.
The money flows in the opposite direction in the NHS than it does in almost all other organisations that provide goods or services, flowing from the top to the bottom rather than the bottom to the top. The Chancellor pays a big cheque to the health secretary, who then divides it up between regions, and eventually the money filters down to the patient. In most organisations, the money comes from those actually receiving the service, and flows up the tree to pay for the service, overheads and central administration.
This financial inversion in the funding of the service leads to perverse incentives throughout the NHS, so that good practice tends to be punished and bad practice rewarded. Treating a patient imposes a cost burden on a hospital, rather than bringing it a financial reward. Treating a patient well - taking time, labour and resources - simply increases the costs of the hospital without any hope of financial reward for the extra expenses occurred. Throughout the history of the NHS, managers have been encouraged to go over budget and have long waiting lists - even if that means treating as few patients as possible - because they would then be given extra money to help them cope. Managers with no waiting list would be punished by having their budget cut.
The Conservatives made some attempt to redress these perverse incentives by introducing the internal market, which only came into partial effect and had little impact before being abolished. Labour has now partially reinvented the internal market by devolving most health care spending to primary care trusts, and has also invented bonuses for well-performing hospitals and sacked managers of poorly performing hospitals.
However, the NHS will remain a centralised state monopoly, and all these reforms will do little to reverse the perverse incentives that undermine most attempts at reform. Sweden, which also largely funds health care out of taxation (in combination with extensive user charges), has undergone a far more radical programme of introducing an internal market with massive decentralisation, splitting up purchasers and providers, and establishing each hospital and department as a 'profit centre'.
Lack of choice
The state monopoly means that patients have very limited choice, and basically have to accept what they are given. They have some choice of GP within their area (but it is difficult and time consuming to switch between them, in contrast to the ease of going to another doctor in France), and almost no choice of hospital or specialist. Obviously, choice doesn't apply in some areas - if you are in an accident, you just want to be treated as quickly as possible. But true accidents and emergencies are a tiny fraction of the entire NHS workload.
This can be intensely frustrating for patients who have learnt to enjoy choice in every other area of their life, and seriously undermines complaints systems for redressing wrongs. Patients with ongoing treatment are too frightened to complain about a doctor who quite literally holds the power of life and death over them. Medical authorities can adopt an incredibly defensive, dismissive and arrogant position because they know that the patient has to either 'like it or lump it'.
It is also inefficient, because it removes a strong incentive for improvement in the services. Since patients by and large can't choose to go to a clean hospital or a good doctor, there is limited pressure on dirty hospitals and bad doctors to raise their standards.
If the government still controls where the money goes, then patients have only whatever choice the Health Secretary decides to grant them which is ultimately very little choice indeed.
Monopolistic lack of competition
The lack of patient choice is reflected in the almost complete state monopoly of both the funding of health care (through the tax system) and the provision of services (through the NHS). This constrains the amount of health care we can access and offers no mechanism for responding to patients' preferences. It stifles innovation because different practices are not tried out in different areas and shown to be effective or otherwise. Because different hospitals are not competing for patients but are part of the state monopoly, they have limited incentive to improve by adopting best practice.
Too big and too centralised
The NHS is the largest employer in the free world with over one million employees, so centralised that the health secretary has to tell hospitals how to improve their cleaning, and spice up their menus. But an organisation of this size cannot be efficiently centrally managed. The top-down, almost Soviet-style, micro-management of the service simply isn't working. Layers of bureaucracy and short-term political priorities create major inefficiencies, emasculate local management, thwart local responsiveness and encourage creative accounting in responding to Whitehall target-setting. There are now more bureaucrats in the NHS than beds.
Political control
The problem for the NHS is not just that it is centralised, but that it is centralised in the hands of politicians. The Prime Minister and health secretary have total managerial control over the NHS, even though they may previously have had no relevant experience. The power is concentrated in their hands because they control the funding of the service. Secretaries of state and their junior ministers come and go with sometimes stunning frequency, and they all have one thing in common: they want to make headline-grabbing changes in order to advance their careers. The NHS suffers from a bewildering array of initiatives dictated by ministers, who are then replaced by other ministers who issue totally conflicting sets of dictats. The most obvious recent example was the target to cut waiting lists by 100,000, which was dropped as soon as it was reached because it had such a disastrous effect on clinical priorities.
The NHS, then, is a large complex organisation being steadily devastated by management by political whim. This is not a controversial point - it has almost universal agreement among health analysts, doctors, hospitals managers and patient groups, and is the conclusion of endless reports from NHS-supporting organisations such as the King's Fund and the Association of Community Health Councils of England and Wales. The only people who dispute it are the politicians.
Successes of the NHS
The NHS has strengths as well as weaknesses, and any alternative system must also be able to replicate these.
Ensuring access for the poor
Despite the growing two-tier health service in Britain, the NHS does in principle offer equal treatment to rich and poor alike. It is taken as axiomatic that those on low incomes should have access to high quality medical services, and that no one should be denied access to essential treatment because they can't afford it. Although this is meant to be one of the strengths of the NHS, social insurance systems such as those in France, Germany and Netherlands achieve this far better, ensuring their poor get better treatment than they do in the UK.
Pooling risk
Risk must be pooled between those who enjoy a long healthy life and those suffering chronic illness; between the young and the old. This is absolutely essential to ensure that the burden of health care doesn't fall on those least able to bear it.
Cost control
The greatest success of the NHS is its ability to keep down costs. It suppresses wages for medical staff such as nurses, restricts the number of doctors, hospitals and beds, rations drugs and other modern treatments, and so delivers a very cheap health care service. By some measures, this is cost-effective, although it also imposes a lot of external costs - for example, keeping sick people away from work for too long. But in contrast, some health insurance systems have a very poor ability to contain costs, which consequently spiral out of control. In the US, France and Germany, controlling spending is one of the biggest challenges their health systems face.
Economic impact
Paying for the health service must not cause damage to the wealth of the nation by distorting the economy. In France and Germany, businesses frequently claim that social insurance, paid by employees and employers, is a tax on jobs, leading to high unemployment.
· From NHS Reform - Towards Consensus by Anthony Browne, Health Editor of The Observer and Matthew Young of the Adam Smith Insitute. The report will be published this week by the Adam Smith Institute. The full text is also published online in The Observer NHS debate pages.
You can respond with your views to the author at anthony.browne@observer.co.uk.
If you are interested in contributing your view of the NHS to The Observer's NHS debate pages, please contact Observer site editor Sunder Katwala at observer@guardianunlimited.co.uk
