For the first time the entire NHS has been put under competition law. The financial and clinical safety of NHS foundation trusts used to be the responsibility of the regulator, Monitor. Now its website proclaims: \”The first of Monitor\’s three core functions is to promote competition.\” That means \”enforcing competition law\” and \”removing anti-competitive behaviour\”. Few yet understand the nuclear nature of this. It compels every NHS activity to be privately tendered. If the NHS is the preferred provider, that can be challenged in the courts or referred to the Competition Commission. Red-in-tooth-and-claw commercial competition breaks all partnerships.
I do find this bizarre. The entire point of this system of getting GPs to commission services is exactly this: to ensure competition in the provision of services. This isn\’t some odd, unknown and hidden consequence, this is the very reason it\’s all being done in the first place.
If the NHS is cheaper/better than some other, whether for or not for profit, provider, then the NHS will be doing the work. If some other provider is cheaper/better (and of course, in something as complex as medicine cheaper is not necessarily better than better….which is exactly why the commissioning is being done by doctors, who can indeed tell the difference between the two) then that other provider will do the work.
Which leads to two highly desirable outcomes.
1) We get more bang for our buck. If all work is being done by the most efficient provider (and again, note that efficiency does not translate directly to price, price is only a part of it) then for whatever level of resources we want to put into the system we are getting more health care out of it. This is good.
2) We also know, because Polly has told us so, that the NHS has its own inflation rate, rather higher than the general inflation rate for goods and services as a whole. Part of this is simply Baumol\’s cost disease and is common to all services. But the other part of it is that NHS productivity rises more slowly (and has even been negative according to some estimates) than the economy in general. Well, these are really just two ways of saying the same thing.
But, and here\’s the important point. We really only know of one way to consistently improve productivity over the long term. That\’s the use of markets and competition. There\’s a lovely Paul Krugman essay out there that makes this point very well (sorry, lost the link), showing that that planned economy, the Soviet Union, managed no growth in total factor productivity at all, over its 74 years, while 80% of the 20th century growth in the market economies came from growth in that TFP.
So from competition and a market (and note that this says nothing about who is doing the financing, this can remain government, no problem) we not only get more health care now for whatever tax we put into the system, we also get progressively more over time. This is also a good thing.
So, to return to why I find this bizarre. Why are people complaining about these two good things?