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Coffee House

Put people before Burnham’s platitudes: Competition in healthcare benefits patients

29 July 2014

2:05 PM

29 July 2014

2:05 PM

We are used to political parties trying to claim credit for any positive development that happened during their time in office. The Labour Party’s current stance on healthcare is the exception to this rule. It represents the rare phenomenon of a party denigrating one of the best bits of its legacy.

In the mid-2000s, the Labour government managed to inject a dose of competition into the once sclerotic provider-centric NHS. If shadow health secretary Andy Burnham is now positioning himself against the entry of private providers into the NHS, he is really positioning himself against one of his party’s biggest achievements.

It is due to Labour’s legacy that patients now have a greater degree of provider choice, that NHS hospitals are now paid according to what they actually do (which improves incentives), and that private providers can compete with NHS providers.

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That, at least, is the situation on paper. We know from patient surveys that patients’ experience of healthcare delivery on the ground is a bit different. Too many GPs have boycotted patient choice right from the start; many of them have kept referring patients as they see fit, without even informing them about their right to choose a provider. They kept particularly quiet about the option of choosing private/independent sector care.

And yet, despite the NHS doing its best to fight off outside competitors, some of them have succeeded against the odds. Between 2006 and 2011, NHS spending on treatment delivered by non-NHS providers almost doubled in real terms, rising to about 12% of the secondary care budget.

Part of this is to do with PCTs’ commissioning decisions, but part of it is directly driven by the choices patients make. Insofar as patient choice has been realised, private providers cannot turn profits unless patients choose to go there. Thus, calls to end the ‘privatisation’ of the NHS are really calls to end patient choice. From the perspective of an NHS purist, patient choice is dangerous. What if patients care more about an individual provider’s reputation than about who owns it? If you see the presence of private providers as a desecration of a noble institution, you have to take that choice away from people, because the risk that they make ideologically impure decisions is just too great.

But those who care more about outcomes than purity should welcome the entry of private competitors. Private providers are not per se better than NHS providers. But there is good evidence that competition has had a positive impact on quality and efficiency in healthcare, and the entry of private providers (or even the threat of entry) can drive competition. Private provision is only a problem if it is introduced over people’s heads, but the solution to that is to go further in expanding patient choice, not to fight off private companies.

Burnham’s ‘people before profits’ phrase is a nonsensical platitude. In a market or even a ‘quasi-market’ setting, the way to make profit is to give people what they want. Let’s have more of what people want and let those who provide it earn a handsome profit from doing so.

Kristian Niemietz is a Senior Research Fellow at the IEA

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