How to abolish the NHS

The National Health Service enjoys strong support among the public, making it almost impossible to introduce radical reforms, even if the performance of the NHS is relatively poor compared with systems in other developed countries.

Over the last thirty years reform efforts have therefore focused on greater private sector involvement within the NHS system and the deployment of some internal market-style mechanisms in an attempt to improve efficiency. In a recent initiative, for example, a private company has been contracted to manage a ‘failing’ NHS hospital.

The problem with such ‘part-privatisations’ is that they typically involve complex contractual arrangements and the creation of numerous ‘interfaces’ between government bureaucrats and the private sector, which may result in increased transaction costs and a reduction in overall efficiency. At the same time, private firms working within the NHS framework remain constrained by a strict regulatory framework on top of rigid contractual commitments. There is therefore little scope for the entrepreneurial discovery and innovation that brings such enormous gains within genuinely free market arrangements.

Moreover, since politicians and officials retain control over funding, the system remains unresponsive to consumer preferences and subject to capture by special interests, particularly producer interests such as the medical and nursing professions and the pharmaceutical industry. Mixed public-private systems therefore risk introducing additional transaction costs while suffocating the potential gains from private sector entrepreneurship. If this results in disappointing outcomes, as is likely, the whole concept of privatisation may be brought into disrepute.

There is therefore a strong case for taking a different approach. Rather than focusing on the gradual introduction of  ‘market reforms’ and public-private partnerships within the NHS system, an alternative strategy would seek to bypass the NHS by liberating the private healthcare sector such that the NHS became less and less relevant as more and more people opted out of state provision to avoid long waiting lists and substandard care. This option has the potential to create a virtuous circle – by reducing burdens on the NHS, taxes could be cut, wealth created, and more people would be able to afford private healthcare, reducing the NHS burden still further and gradually undermining its political base.
But radical regulatory reform is necessary if a dynamic private health sector offering low-cost, high quality and innovative treatment is to emerge. A selection of regulatory changes is suggested below:

– Perhaps most importantly, the compulsory licensing of medical professionals should be abolished. Anyone should be at liberty to practice as a doctor or nurse, with patients relying on brand names or competing voluntary associations to ensure quality. Ending current restrictive practices is essential to enable private firms to increase productivity in the sector.

– Restrictions on the types of treatment available ‘over the counter’ should be lifted to enable patients to obtain medication without recourse to registered doctors and regulated pharmacies.

– Burdensome drug licensing regulations should be rescinded. Instead, the testing of new drugs should be left to private firms and free markets. Reputable companies would have strong economic incentives to ensure the safety of their products, while there would also be far more freedom for experimentation and innovation by new market entrants, with huge potential benefits for patients.

– Prohibited recreational drugs, such as cannabis and opiates, should be legalised to allow the sick to benefit from their numerous medical applications.

– Private firms should be free to bring in low-cost medical professionals from abroad and at liberty to determine rates of pay and working conditions through private contract.

– Legal reforms could enable patients to waive their right to clinical negligence claims.

– Planning controls and building regulations should be liberalised to enable the rapid development of new private healthcare facilities.

Finally, it should be noted that internet technology has mitigated many of the information asymmetry problems that have previously been cited as a rationale for heavy state regulation of health. A combination of new technology and a dynamic, entrepreneurial private health sector could make the NHS increasingly irrelevant.

23 January 2012, IEA Blog