Lansley’s market dogma at odds with OECD health study

A key OECD report on “Value for Money in Health Care” has criticised as “zealots” those like Tory MEP Daniel Hannan who “adhere absolutely to the belief that competition offers an unalloyed solution to society’s more intractable problems” – especially in the field of health care.

Such criticisms of a market-based approach are bound to come as a blow to the Conservatives’ Shadow Health Secretary Andrew Lansley, who in a speech to the party conference in October said:

“Labour have turned their back on patient choice and competition. I will not.”

Professor Peter Smith, of Imperial College, in a chapter on “Market Mechanisms and the Use of Health Care Resources” (pages 53-77), explains why the assumptions of a competitive market do not apply in a series of points. These include (pp. 54-55):

• Consumers (patients) are relatively uninformed about the characteristics of the health care on offer;

• There are other major information gaps throughout the health system, especially concerning the clinical outcomes achieved;

• In many specialties and geographic locations there exists little realistic choice of provider;

• Exit and entry to health care markets is severely circumscribed by practical and regulatory constraints;

• Many aspects of health care, such as research and development, and education and training, have the characteristics of a public good, which traditional markets cannot deliver on their own;

• Society frequently has objectives relating to equity and solidarity that may conflict with the efficiency criteria underlying a pure market approach.

In November, in a speech to the NHS Employers Conference in Birmingham, Mr Lansley attacked the Health Secretary over competition – specifically Andy Burnham’s pledge to make the NHS “the preferred provider of services”, and the Government’s drive to reduce waiting times – saying:

“I know of no evidence that supports 18 weeks as a target for reducing waiting times. What drives reduced waiting times is capacity and choice.”

Professor Smith also cites (p. 58) one of the biggest problems of market-based systems, namely that those at greatest risk, and in greatest need, are likely to be priced out of insurance, with insurers given incentives to “cream skim”, to seek out insurees “whom they judge to have lower expected expenditure” – the starkest example of this being in the States:

“Concerns about adverse selection has led to a competitive race to the bottom in US health care, in services for chronic conditions such as mental illness, in order to avoid enrolment of high-risk patients.”

He concludes by saying (p. 72):

“True market competition introduces a set of raw incentives that carry serious potential for adverse outcomes for many aspects of health care.”