article-single

Creeping Privatization?

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 Archives