First published in Health Service Journal, 8 November 2001
The private sector is sometimes seen as a zombie, mortally wounded in the NHS’s founding – yet reanimated by the unholy forces of Tory and New Labour governments.
But according to a book published by the King’s Fund*, past political efforts to kill off the private sector have only fuelled its strength. Now, authors Justin Keen, Donald Light and Nicholas Mays say the government needs to put aside the ideological debate about healthcare funding and face up to the reality of private healthcare, by making it subject to the same standards that rule the NHS.
Around 16 per cent of UK health care funding is private. Medical insurance takes £2 billion, over-the-counter medicines £2.5 billion and complimentary therapies at least £450 million.
But then there is state buying: two-thirds of NHS-funded acute psychiatry comes from the private sector, along with GPs, dentists, opticians and pharmacists.
The book’s authors argue that the NHS has compromised between public and private from its foundation. The National Health Insurance scheme, introduced in 1911, gave workers limited free healthcare: by the time of the Second World War, half the population was covered. But there were large gaps, filled by mutual schemes or charities, particularly as housewives and children received only limited state support.
The new NHS retained some of this mixed market. GPs remained as independent contractors, although effectively banned from private work. Hospital consultants were paid a salary but allowed to do freelance work. State hospitals kept ‘pay beds’ for private use, and relied on private companies for drug research and development.
Successive governments have turned a blind eye to the practice. In the 1970s, Labour social services secretary Barbara Castle was an exception. She tried and failed to ban pay beds. Her successor David Ennals reduced their number from more than 4,000 in 1976 to 2,800 in 1979.
However, this actually stimulated use of private hospitals. Before Mrs Castle made her arguments, the private sector made up just 3 per cent of health spending.
The authors point out that Mr Ennals set up the Health Services Board, to regulate the private sector. Its powers were transferred to the secretary of state by the Tories in 1979 and are still on the statute book.
They were rarely used by the Conservatives or by Frank Dobson, health secretary from 1997 to 1999: ‘The policy on private health care, both under the Conservatives and under Labour until 1999, was that there was no policy,’ the authors write, conceding that, under health secretary Alan Milburn, this has changed.
Yet moving from blind eyes and crusades to Mr Milburn’s pragmatism is just the first step.
Justin Keen, the book’s lead author and professor at Leeds University’s Nuffield Institute for Health, says that in future a consultant could work on a standard NHS ward, a pay-bed NHS unit (there are still 2,000 such beds), one of the suggested private sections within an NHS hospital and a separate private hospital.
These sectors have different inspection and regulatory regimes, with very little information shared and compared.
‘How do the new arrangements fit in with the existing public private partnerships?’ Professor Keen asks, adding that patients and inspectors must know where the buck stops.
The book lays out the maze of private sector regulation. Medical insurance is government-regulated as a financial product, but its selling is self-regulated by industry bodies. Cash payments for clinical procedures are unregulated.
Labour’s establishment of the National Care Standards Commission, opening in April next year, may help, but Professor Keen says more needs to be done: ‘What we still don’t have is co-ordination.’
Dentistry, where private and state work co-exist, might be a good choice for a unified regulator.
The King’s Fund says that better comparisons could mean more, rather than less, state sector healthcare. Anthony Harrison, research fellow at the King’s Fund, has written a linked paper** pointing out that the government is considering taking over generic drug procurement from pharmacies, due to the monopolistic status of some drug manufacturers.
The state is also challenging private staffing agencies through NHS Professionals, and is selling its NHS Direct clinical decision support software to other countries.
‘The secretary of state, correctly, is saying that the NHS has specialist skills and knowledge the private sector doesn’t,’ says Mr Harrison, pointing out that ‘the received wisdom is that it’s the other way around’.
Professor Keen suggests that both sectors have strengths and weaknesses. Private institutions may be better at routine procedures, but ‘there are several hundred people a year who get shipped off to the local NHS hospital when things go wrong. We’re missing hard data.’
If the NHS is to get more out of the private sector, it will require strong negotiating skills. ‘Local managers will have to sharpen up,’ says Mr Harrison. Professor Keen says such managers should ask government for better guidance on when deals with the private sector are appropriate.
If the public and private sectors work together, it could help improve the fairness of British health care – contrary to the suspicions of many within the health service. The authors say the Netherlands uses a mixed economy of state and private funding, yet provides services to both kinds of patient on the basis of need without shortcuts for paying customers.
‘It is possible,’ says Professor Keen. ‘The government could at least reduce the difference.’
* Public-Private Relations in Health Care, Justin Keen, Donald Light & Nicholas Mays, King’s Fund
** Developing the Public Role in a Mixed Economy, Anthony Harrison
Copyright SA Mathieson 2001