This is the fourth in a five-part series on the inherent flaws of the National Health Service which mean it can never work satisfactorily no matter how much money is poured into it. You can read part 1 here, part 2 here and part 3 here.
NHS patients receive no invoices for their treatment. The service is famously ‘free at the point of delivery’.
Before the creation of the NHS, patients were invoiced for the services they received. Few patients had unlimited resources: they had to cope with this financial strain somehow. There was thus a visible link between the services that patients received and the invoices they had to pay.
The treatments had value (that is, they fulfilled some degree of desire by the patient) and they had price (that is, they cost some degree of effort by medical professionals). It was up to the individual patient to weigh up the two and come to a decision. Nothing is as valuable as your health, but everything has – or should have – its price.
The old system was thus an example of an efficient price control mechanism. Doctors and hospitals had to deliver services at prices their patients could pay, knowing that their patients would see the bill; patients, in turn, in most urban areas at least, could exercise their choice of service provider.
In the NHS, on the other hand, nothing has any price, for patients or staff. There are probably administrators somewhere in the organisation who know the cost of everything, despite the fact that there is no incentive at all to calculate these costs. If you did calculate them, what would you do with this information and what difference would it make to anything? The figures I have seen for various health procedures all cover a huge range and are all prefaced with the phrase ‘it depends’.
Patients neither know nor care about the price or cost of what they are consuming. There is no competitive price mechanism, either for patients or service providers; neither consumers nor providers have any way of influencing costs, having no means of optimising costs or reducing spending. The only economic operation left is rationing by means of shortages, inefficiency and incompetence.
Being ‘free at the point of delivery’, the NHS is not only economically defective, it is also morally defective. This type of moral defect is pithily summed up in an old saying: ‘What costs nothing is worth nothing’.
For a patient whose MRI scan costs nothing, waiting two years to get this worthless thing is just a case of ‘that’s how it is’; if the patient were paying £250, say, for the scan, he or she would be kicking the clinic door down after a week’s delay.
As far as the front-line staff of the NHS are concerned, the scan is also worthless. It makes no difference to them when or if it takes place and how much it costs. They are soup kitchen staff who are in as much of a moral limbo as their customers. They have no incentive for economic efficiency.
You are sceptical? Let us suppose, then, that as a matter of course the NHS wrote invoices for what it did and presented them to its patients. The bottom line would be zeroed out in the same way that a credit card transaction would zero out a normal sales invoice. The service is still ‘free at the point of delivery’, but value and price have been restored. What effect, if any, might this have on those writing the bills and those receiving them?
It doesn’t do this, so everything the NHS does is literally worthless. In the midst of all this worthlessness, the NHS gets the worst of all economic worlds, famously summed up as the ‘fourth way of spending money’ by the great economist Milton Friedman in a Fox News interview in May 2004:
‘There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40 per cent of our national income.’
Since no one in the National Health Soup Kitchen, neither patient nor practitioner, knows or cares what the treatment of a patient costs, this means that on one side of the ledger there are the innumerable treatments carried out by the NHS, on the other side a mountain of unspecified money to pay for them. It is a perfect example of Friedman’s fourth way of spending money, the worst of all possible systems.
Everything that is wrong with the NHS today was wrong at its inception. The NHS hasn’t got worse over the intervening years, its inherent defects have just grown with it as it has swollen and got more expensive. The many serious failings reported by the media almost every day of the week – poor outcomes for many cases, outrageously long waiting times in every respect, out-of-control budgets and absurd spending decisions – are merely symptoms of the deeper cause: a charitable gesture gone wrong.
The reformer looks at this mountain of indeterminacy and thinks: ‘Where do I begin?’ ‘Not here’ is one answer to that question. My answer is ‘Don’t bother’. The NHS cannot be ‘reformed’. This word is code for yet more tweaking and top-down general administrative messing about trying to patch up the various symptoms. As long as we are trapped in the misguided thinking that set up this gigantic soup kitchen, nothing will improve.
In the final part of this series I will look at what a good health service can be like.
