Cost containment

Yesterday, I attended a magnificent event hosted by the private medical insurer Western Provident Association

They had hired Britain’s leading health lawyer, Nigel Giffin QC, to provide a definitive view on people’s legal rights to NHS treatment and care.

It was a fascinating meeting which made it clear that people living in England and who face huge medical bills because they cannot get life-saving drugs on the National Health Service, could benefit by moving to Scotland for treatment. The issue arises because cancer patients in Scotland can be prescribed on the NHS one or more of 19 life-saving or life-prolonging drugs that are denied to patients south of the border. In addition, two drugs that can prevent blindness in some cases are available on the NHS only in Scotland. Nigel Giffin, QC, said: “I might ask as a resident of England, what can I do to take advantage of the favourable regime in Scotland. It all hinges not on what is under your kilt, but where you are ordinarily resident. To be ordinarily resident for the purposes of healthcare in Scotland, residency does not have to be permanent.” He continued: “You can be in two places at once. If you are called Gordon and you’re in London four days a week and the rest in Scotland, are you ordinarily resident in two places at once.”

Polls carried out on behalf of Western Provident Association show widespread disapproval over the Scotland/England split on access to medicines. Nine in 10 thought it “unacceptable” that people in some parts of the United Kingdom were able to get drugs on the NHS while others were not. Similarly, nine in 10 MPs of 97 polled, representing a cross section of the Commons, also thought the anomaly was unacceptable.

Almost a third of the public – 29 per cent – thought they did not have a legal right to use their own money to top up NHS treatment by buying drugs not available on the NHS.   A slight greater proportion of MPs – 31 per cent – thought likewise. 

A total of 21 drugs are available on the NHS to people living in Scotland. The list includes cetuximab (brand name Erbitux) for stomach cancer at £3,685.50 a month, which was approved in Scotland in March 2005; docetaxel (Taxotere) for types of lung cancer at £1,069.50 per cycle, approved in Scotland in May 2003; capecitabine (Xeloda) for gastric cancer at £585.48 per cycle, approved in Scotland in September 2007; and dasatinib (sprycel) for leukaemia at £2,606.63 per month, approved in Scotland in May 2007.

Two of the 21 drugs are not in the cancer field.  Both are for age related macular degeneration, which leads to blindness.  People in Scotland are able to access on the NHS ranibitzumab (Lucentis) and pegaptanib (Macugen).  The first costs £1,522.40 per cycle and the latter £514 per cycle.


Below is the text of a speech a I recently gave in Washington DC at the event organised by the International Policy Network and the Galen Institute It was a good event with more than 170 health opinion formers present.  The debate was “Is there a role for Markets in Healthcare?”

While in Washington I also spoke at three other events. One was a breakfast meeting with representatives of patient groups and health professional’s organisations. Then an informal meeting on Capitol Hill with some New Democrat staffers and finally at a dinner hosted by the Fund for American Studies.

The US is important to NFR because so many Europeans foolishly believe that American healthcare is organised along free market lines. Europeans generally have no idea that the US government has historically spent a greater proportion of GDP on its state healthcare programmes – Medicaid and Medicare – than Britain on the NHS. Again, they have little understanding of just how regulated every facet of US private healthcare is.

Conversely, many Americans seemingly have no idea just how expensive and murderous “free” healthcare really is. Told by Michael Moore and other lefties that single payer socialised medicine is the way forward many remain clueless as to the horrors of healthcare socialism.

This is what I said in Washington:

Ladies and gentlemen, thank you for inviting me here today.

I have been asked to speak on the subject: ‘Is there a role for markets in healthcare?’  In dwelling on this, I want to turn the question on its head and begin by addressing the rather unfashionable question should the state ever have a role in healthcare? Being British I come from a country that has spent the last 60 years trying to make state healthcare work. However, at every turn, it has not only failed with the most horrendous consequences but it stands as a testimony as to why only genuine markets are compatible with healthcare.

A few weeks before the architect of the NHS – Sir William Beveridge –  first proposed the service in his 1942 government paper Social Insurance and Allied Services he told the Daily Telegraph that his proposals would take Britain: “…half-way to Moscow”.

Similarly, after the Second World War, two papers marked ‘secret’ and providing a detailed commentary on Beveridge’s plan were found in Hitler’s bunker, in Berlin. One ordered that publicity should be avoided, but if mentioned the report should be used as ‘…obvious proof that our enemies are taking over national-socialist ideas’. The other report offered a Nazi assessment of the plan as being no ‘botch -up’. The author wrote that the NHS would be “…a consistent system…of remarkable simplicity…superior to the current German social insurance in almost all points”.

Designed to take Britain half way to Moscow and simultaneously admired by Hitler’s inner coterie, in 1948 the British government pushed on with the development of the NHS. A leaflet was issued to every home in the country.  It contained – in black and white – the promise that was supposed to be full blown state healthcare. It stated and I quote the NHS:  “…will provide you with all medical, dental and nursing care. Everyone  – rich or poor – can use it.”

The key word was all. The state was going to deliver all medical, dental and nursing care.

Today, six decades on, and the NHS has never come close to delivering this promise. Indeed, as time passes it is arguably moving ever further away.

Following the 1948 nationalisation of more than 3,100 local and independent sector hospitals, homes and clinics, in 1949 the decision was made to introduce prescription charges.

While at first doctors who worked in NHS hospitals were encouraged to treat patients according to need, within a couple of years they found themselves working under the imposition of unprecedented cash limits which turned them into the politicised allocators of scarce resource. Moreover, as we all know, the supply of health and social care in the UK has been rationed still further by massive queuing. Crowded waiting rooms are common in most general practices and out-patient departments.

By the late 1960s queuing had even become a significant factor for in-patients and those waiting for operations and treatments deemed a priority. Indeed, certain health services have never been provided by the state, reducing demand still further. Much psychiatry, the treatment of infertility and substance misuse services remain cases in point.

In reality, people have never had a right to free and equal treatment. What they have had is an unlimited right of access to a waiting list, from which – with some important exceptions – they will not be excluded.

As part of the 1948 nationalisation process, NHS hospital capital expenditure was supposed to be funded by central government. However, in the early years, the government made very little investment in its newly acquired health estate. During the first decade of the NHS, not a single new hospital was built.

None were even approved until 1956. Even by the late 1990s the NHS had still not implemented a hospital investment programme first agreed in 1962! As the health commentator Allyson Pollock has pointed out: “The plan…remains unfulfilled, with only a third of the projected 224 schemes completed, and a third not yet started.”

Only in theory does the NHS exist to treat the whole population and people of all social classes in an equitable manner and according to need. For in practice this has rarely happened.

As Professor Julian Le Grand of the London School of Economics has shown – relative to need – professional and managerial groups receive more than 40 per cent more NHS spending per illness episode than those people in semi- and unskilled jobs and there is no evidence that this is going to change.

Today, the NHS has around one million people on its waiting lists with probably another 200,000 trying to get onto them. In NHS hospitals, more than 10 per cent of patients pick up infections and illnesses that they did not have prior to admission. According to the Malnutrition Advisory Group up to 60 per cent of NHS hospital patients are under-nourished during inpatient stays. In many areas, it is increasingly difficult for people to get an appointment with an NHS GP – or to even find a NHS dentist.

As a result of this situation recent years have seen an inexorable re-birth of Britain’s private healthcare sector. Today, more than 6.5 million people have private medical insurance. 6 million have private cash benefits. 8 million pay privately for a range of complimentary therapies and 250,000 self-fund each year for private acute surgery. Millions more opt for private dentistry, ophthalmics and long term care.

Today, politicians determined to get themselves off the hook of past promises are increasingly relaxed about the idea of private companies delivering services for NHS funded patients.

In the year 2000, Tony Blair’s government signed an historic Concordat with the country’s private hospitals which meant that for the first time state funded patients could receive treatment and care in private hospitals. More recently, the government has made it clear that it would like to see all NHS hospitals return to the independent sector as Independent Foundation Trusts able to attract private capital and investment.

Having spent decades arguing that healthcare is so important it is ‘beyond monetary consideration’, politicians are now obsessing over value for money and seeking new ways to legitimate rationing. In Britain, Europe and the even the US, politicians who promised various forms of socialised medicine in years gone by, have now been followed by a new generation of vote-seeker promoting the paradigm of Health Technology Assessment (HTA).

As most of you will know, under HTA the government invariably appoints a group of experts to dictate which drugs, procedures and treatments should be made available for people receiving NHS treatment and care. In Britain, the National Institute for Health and Clinical Excellence (NICE) is essentially a top down government body that seeks to ‘scientifically legitimate’ the rationing of drugs and other forms of treatment.

An increasingly controversial body that has tried to stop breast cancer patients from receiving Herceptin and patients with Alzheimer’s disease from receiving Aricept, the criteria by which this agency makes its decisions are kept secret from the general public. No one knows how it makes its decisions or the process of its work.

Sadly, the slow and incremental privatisation of health provision is also being coupled with ever more subtle forms of imposed rationing and counter-productive public health campaigns. Because most forms of commercial health advertising have been banned users of health care have no access to the legitimate, mainstream, information that would allow them to become true consumers. This rationing of information helps to ensure that demand on NHS services is again much reduced.

The State’s attempts to ensure a healthy population that would reduce demands on NHS services still further have taken the form of so-called public health campaigns. The government has set targets for reducing Heart Disease, Smoking, Obesity, Teenage Pregnancy and Sexually Transmitted Diseases. None of these campaigns have worked, and in fact the UK has some of the highest rates of these health problems in Europe. As well as some of the worst rates for curing cancers.

Government advertising campaigns against smoking have resulted in delivering a new generation of counter-cultural teenagers – usually girls – determined to pick up a habit that is frowned on by on their elders. Likewise, promising ever more lavish forms of welfare support, the government’s campaign against teenage pregnancy has delivered little but a new wave of young mums “who know their rights”.

While the NHS is still free at the point of delivery people have very little incentive to remain healthy by taking optimal life-style choices.

To conclude, healthcare is compatible with the market and the profit-motive because it is the only economic system that provides the necessary incentives for efficiency, innovation, high quality and personal responsibility.

It is because healthcare treatments, products and services are valued by consumers (or in some instances their advocates) healthcare is better delivered in a free market than by government.

This is because the free market and the language of price are the very sources and mechanisms of wealth.

The diversity of health goods produced by many individuals is richer and more useful, ensuring greater and more widespread wealth than any system which attempts to control from the centre.

A diversity of different attempts to predict future needs is what guarantees innovation. The role of market pricing is partly that of allocating resources to the preferred use. Its more important role however, is that of transmitting information about preferences and about relative scarcities. Only markets can effectively utilise information dispersed throughout millions of economic agents.

Profit is a signal which demonstrates that the entrepreneur is doing the right thing for people he cannot know. Price is therefore the language of the complex or extended order of modern societies and their healthcare systems. The knowledge utilised in this extended order is greater than that which any single agent such as a government department or a minister can possibly acquire. 

State interventionism on the other hand is driven by the vote-motive and invariably leads to producer capture, monopoly, inefficiency and technological stasis. As the NHS has demonstrated, state health systems not only neglect the poor and chronically sick, because of their relative lack of political voice but governmental public health initiatives are all too often counter-productive because their agents become institutionally addicted to the so called problems they are supposed to be solving. 

As I look to the debate in the United States I would urge you to use the market and not more state intervention to reform your healthcare system. I say this because I believe that as in Britain, your politicians would never actually deliver the additional resource and monies that some might imagine.

Away from the short term promises of politicians, I believe the state would actually end up giving you less funding and support in the long-term, it would squander the funding that it does provide and at the same time turn you in to an even more bureaucratised political football than you already are.

Health savings accounts, moving the system away from an employer dominated insurance model and further de-regulation is the way for you to go.

Whatever you do, be wary of Health Technology Assessment and the imposition of any politically driven reforms which purport to represent scientific and economic efficiency.

Above everything else, avoid the uniformity that comes with egalitarianism and actively embrace choice, excellence and the majesty of genuine free market consumerism.

Thank you.

This very sad story speaks for itself.

As a national charity that supports those with Alzheimer’s and their carers the Alzheimer’s Society does wonderful work.

Indeed, NFR fully supports their recent campaign to make sure that those with the early stages of this dreadful condition get the latest and best medicines available. It is in the realms of bestial cruelty that patients should have to wait for their condition to get worse before they are entitled to have their medication – and thereby loose its full benefit and in time cost us all more.

As nurses, there is a professional onus on all of us to support the best available treatment and to attack any state body which actively seeks to deny access. This is precisely why elements of this recent campaign are to be welcomed.

Nevertheless, delighted that patients in the independent sector will surely continue to receive the best, NFR demands three things:

  1. Social Engineering. NICE should immediately make open for all to see the formula by which it makes its decisions.
  2. Transparency. NICE should no longer sit in private. Its meetings should be held in open with nothing less than the full glare of the media.
  3. Responsibility. The government should actively encourage those patients and their loved ones who have the money to immediately make provision for these medicines.

Back in the 1950s, 60s and 70s many politicians and opinion formers around the world promised that state healthcare systems would provide a safety net to aid the poor and needy – and that they would do this in a high quality manner. In
Britain, politicians promised that the NHS would provide all medical, dental and nursing care and that its provision would be of the highest quality. Similarly, in 1977 the Italian government introduced a National Health Service that in its aspirations was similar to the British system.

Today however instead of delivering the best, these systems are firmly straying into the mediocre. As politicians seek to get themselves off the hooks of past promises so they are invariably invoking a wide range of cost containment measures with ever greater restrictions on the use of quality medicines topping their list of priorities.

It is in this context that a recent opinion editorial in the Washington Post is of profound interest. Written by
Alberto Mingardi of the Italian think tank, Istituto Bruno Leoni , and the Centre for the New Europe  in Brussels, he argues that the Italian experience with price controls on medicines should make the new Democratic leadership in the US hesitate when it comes to the repeal the non-interference clause of Medicare Part D. He concludes:

“By attempting to hold down drug prices, the Italian government has deprived its citizens of the best care without reducing health-care spending. And it has deprived the country of what could be a vibrant sector of the economy. In their rush to revamp
Medicare, U.S. policy leaders should be careful not to make the same mistake.”

No doubt, this op-ed is based on a presentation that Alberto gave at a Capitol Hill briefing organized by the Galen Institute, the Institute for Policy Innovation and the International Policy Network last September. You can watch the archived webcast of the conference at this link:

The published proceedings of the conference are available here