Creeping Privatization?

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Shortages
of skilled workers, low morale, long queues for services, crumbling
facilities and corrupt practises. Is this a picture of your typical
industry in Soviet Russia 40 years ago? No, welcome to today's
British National Health Service (NHS) in all its naked glory.

I
recently read a press clipping concerning one Dimitri Padelis
who took the NHS for nearly 4 million in fraudulent invoices
from his agency, which placed locum doctors with hospitals. Let
it be noted that critical to the success of this scam was the
reliance on inefficient, over-worked and understaffed accounts
departments not noticing the double billing and overcharging.

I
read Ryan McMaken's recent article
on USA healthcare where the US government controls 45% of the
health care. Here in Britain, the percentage is lamentably higher.
We should be so lucky to have such a low proportion, but these
times they are-a changing.

The
NHS system has been hailed (by someone, somewhere) as the "envy
of the world". One may enquire which world is being referred
to. Mars? Admittedly, no communication has ever been received
from the Red Planet, which is critical of the NHS. If any signal
is ever received that praises the NHS, then one must insist that
the case for intelligent life beyond Earth remains unproven.

Now
for the stark truth. The NHS is not the envy of any country, let
alone any world, based on the simple fact that no one else today
copies it. The British system of health care is the only one in
the world, which maintains general taxation as the sole means
of central government funding. It is in so need of its own surgical
operation that even the government recognises this fact. The unions
should swallow that bitter pill when they vehemently protest about
the threat to their vested interests.

In
fact, last year, the socialist healthcare system which was ranked
highest by the World Health Organisation was France. France combines
a system of private and public hospitals, and there are a lot
of private organisations eagerly "sticking their kissers
under the faucet" for State payments.

I
got that quote from James Cagney in "The
Roaring Twenties,
" though he didn't mention healthcare
tax policy. But it did remind me of those who live at other people's
expense. The French system has two obvious advantages over the
discredited British system.

  1. It
    encourages the growth of privately owned hospitals and consultancies
    in greater numbers than we British have.
  2. It
    encourages a degree of competition and innovation as private
    hospitals compete with each other and the state ones for "customers".

These
factors, no doubt, combine to make it the best socialist healthcare
system in the world — but what is the cost of all this? From a
French monthly salary of 10,000 francs, 7,000 are taken by the
State — 4,500 from the employer and 2,500 from the employee. This
large payment also includes the "contributions" for
pensions and unemployment "insurance"; though we all
know these are tax by another name. For comparison, we Britons
pay up to 10% for employees and up to 12% for employers. Alas,
the French Statists coerce over twice as much, which leads us
to conclude that it is no surprise that the Gallic way of healthcare
is better; they just launch more money at the problem. How deliciously
socialist in its solution and execution — just raise those juicy
taxes!

The
French way of things stands on the edge of the great ocean of
the free market. They look out and see wave after wave of willing
service providers washing in, but they do not walk in. Yea, rather,
they irrigate their little water channels around their statist
sandcastles and declare they have controlled the waves. If King
Canute had suggested that as a way of commanding the waves, they
would have laughed even louder.

Needless
to say, once the potent waves reach the statist bucket and spade,
they have become mere economic puddles. So the analogy holds in
the French system, which Tony Blair is so obviously keen to emulate
in Great Britain (who are still in the beach hut).

As
I stated in the two points above, it is an improvement on the
British system, but it can in no way be called free market. True,
it has allowed the private sector to grow at a certain rate and
we would expect poorly performing companies to find themselves
falling behind.

Where
it fails is on the customer side of the exchange. A typical free
market customer has money to spend and if it has come out of their
own hard earned wages or savings, there is a degree of expectation
surrounding the purchasing power of it. In other words, they regard
their money as a valuable commodity, and behind that psychology
lies a more demanding and discerning consumer.

What
do you think their psychology is regarding other people's
money? What is their attitude to that which is regarded as free
money (albeit limited to health bills)? Free money has this unfailing
habit of being abused and unloved, as the parent has natural affinity
to their own offspring rather than other people's, so it is with
state handouts.

In
France, the afflicted consumer has the choice of a range of health
providers, depending on place and plague, but they go in the knowledge
that the State will pick up the bill anyway. The psychology of
choice has suffered its first setback; free money is not so carefully
targeted.

The
main objection that may be raised is that one's own flesh is more
highly prized than either free or earned money. If you come out
of a hospital worse than you went in, you do not go back, irrespective
of where the money came from. But, this is true whether the system
is wholly state owned or partly privatised. Nobody goes near bad
service providers even if the money grew on trees.

Consider
hospital A and hospital B who provide the same level of service.
However, hospital A will charge 10% more than hospital B in fees.
If the customer pays out of his own pocket, hospital B normally
wins. If the State pays the bill direct, the customer doesn't
care and both hospitals will probably share the customers. As
we can see, hospital B has less incentive to lower its prices
and is rather tempted to "normalise" and also hike its
prices to keep in line with other local service providers. The
only brakes on this potential inflationary spiral are the inefficient
government inspector and State imposed price controls.

And
herein lies the French fait accompli, this money is not
also perceived as free but also fixed. Looking at outpatient care
rather than operations, the State only pays 70% of the bills and
the remaining 30% has to be picked up by the consumer, either
through employer insurance schemes or one's own pocket.

The
trouble begins when private doctors charge what they think local
and global market conditions dictate and the insurance companies
only partly pay out if it is regarded as excessive. With a socialist
eye on the poor, the government imposes the inevitable price control
by bribing doctors with a promise of a generous State pension
if they only charge within their national fee system.

Thus,
the risk-aversion of future but fixed profit wins over the risk-taking
of near but potentially increasing profit. Unfortunately, fixed
price services means lower quality services if free market forces
beyond the French government's control still impact our helpless
doctor.

The
irresistible free market meets the immovable State and wins again.
Moreover, they say that the infant hanging off the nipple inevitably
slips off into a helpless sleep. Twas ever thus with State dependency
and all those who resort to its soporific milk.

Pragmatically,
I would want to see Tony Blair move in this direction, only because
the private sector would be in a stronger position to assume the
reins of full privatisation when it inevitably comes.

The
brontosauri currently stomping through the health union jungles
are still a formidable force, albeit diminished since Margaret
Thatcher reduced their Marxist powers. New Labour is not called
New Tory for nothing and we can expect Blair's autocratic style
of government to win the day. It is a pity taxes won't come down
despite the efficiency savings.

August
6, 2001

Roland
Watson [send him
mail
] writes from Edinburgh, Scotland.

Roland
Watson Archives

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