Stop feeding the dysfunctional NHS

Whatever you made of the Chancellor's various sleights of hand on Tuesday, lurking beneath his Budget plans was one inescapable fact. The hungry maw of the NHS is swallowing more and more resources, at the expense of virtually everything else. The defence budget is at its lowest since 1930, despite our dwindling troops being dotted across three continents. Prison overcrowding is at such record levels that Jack Straw will have to release even more inmates early in a few weeks' time. But the health service marches relentlessly on, having hoovered up two thirds of the increase in public spending in the past five years.

Even "enterprise" - once one of Mr Brown's favourite words - has been tapped. This week's new taxes on small business seemed unwise, given the fragility of the economy. They were also wholly avoidable, had the NHS been awarded the 3 to 3.5 per cent spending settlement that was expected. But a 4 per cent annual rise for the NHS, raising its budget from o90 billion to almost o110 billion by 2010, seemed to have become a political imperative.

Why? Well, 4 per cent is a nice round number. It is also more than half the 7 per cent annual increases that the service has got used to. But it is also simply very hard to row back once you've built an expanded State. This applies to all public services - which is why I wonder whether Messrs Darling and Brown will actually meet their lower spending targets - but it is particularly acute in health.

The NHS is Britain's last big state monopoly. It is the largest employer in the developed world. Its 1.4 million staff outnumber the private and public healthcare workforce of Germany, a country with 25 per cent more people and better health outcomes. Its powerful unions view any slowdown in spending growth as a "cut". And cut is a deadly word in political terms. The Government had its chance, when it was flush with cash, to demand reform as a quid pro quo for more money. But it did not go far enough.

In the 1990s it was possible to argue that the NHS was starved of cash. But not any more. Britain is now spending at about the European average, but lags behind too many other European countries in terms of results. Far too many cancer patients, babies and stroke victims are still dying needlessly. Far too many patients, particularly the elderly, are treated with a callousness bordering on brutality. Almost everyone I know who has had a baby recently has been told by the nurses to bring their own Jif, and not to set foot in an NHS shower without scrubbing it. World-class that isn't.

Sir Derek Wanless, Gordon Brown's former health guru, reported last month that almost half of the extra o45 billion that has been spent in the past five years has gone on pay and price inflation. The NHS generates its own inflation as though it were a country in its own right. But the slowdown in government spending is not, sadly, due to a realisation that there are diminishing returns to spending in a monolithic health service. It is merely the Government running low on cash.

The real issues are repeatedly obscured by homilies about the NHS being the envy of the world. The latest to fall into this trap is Lord Darzi of Denham, the eminent surgeon who is supposed to be reviewing the structure of the NHS. Thank heavens he is still practising on Thursdays and Fridays. For his interim report last week was little more than an advert for the Government's two populist priorities: extending GP opening hours and tackling MRSA. Until then, the greatest worry about the Darzi review had been that it might delay progress towards much needed reforms. No one had dreamt that he would be coopted into a propaganda exercise. We do not need a top surgeon to tell us to wash our hands. Nor to invent another centralised "Innovation Council" to champion change, a snip at o100 million. The NHS badly needs more innovation. But you cannot impose it. You can only nurture it, by liberating doctors and by introducing competition.

If this simple fact is not obvious to ministers by now, then all is lost. For the limited moves that the last Blair administration made to introduce competition have paid off handsomely. Letting independent providers carry out some procedures has slashed waiting lists for hip replacements, cataracts and heart operations, and has raised the standard for what can be achieved. Payment by results and the NHS tariff have helped to make costs more transparent and to give a wake-up call to poor performers. Giving the best hospitals more freedom as foundation trusts, under a savvy regulator, has injected a new sense of financial rigour.

Yet ministers have always been embarrassed to claim credit for these achievements, which are loathed by the unions. They are in the strange position of presiding over some brave reforms while having to bloviate about minor issues: free health checks (didn't we used to get those at the doctor?) and expanded GP opening hours (which was the norm, until ministers decided to pay them more to do less).

Ministers are too easily persuaded that the battle is between public and private provision. They are ashamed to endorse the private. But the real battle is between those who want to protect their monopolies - including many private hospitals - and those who want competition. Many NHS insiders who believe most fervently in the service are those who are fighting for competition. But they are still an endangered species. It is of no help to them when ministers send ambivalent signals.

No one is quite sure yet how committed the new Prime Minister is to market-based reforms. The opposition parties will not ask him. Labour's largesse has boxed them into a corner. Neither Conservatives nor Liberals dare to make the case for proper reform. That is the real price of having built a bloated State. No one dares speak the truth, because there are so many vested interests to offend. But the writing is on the wall: a tax-funded free healthcare system is looking ever less sustainable. Politicians always fear the "popularity" of our health service. But that popularity will wane if the NHS comes to be seen as the enemy of every other public service.

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Medical Competition Works for Patients

By John Stossel

Health-care costs overall have been rising faster than inflation, but not all medical costs are skyrocketing. In a few pockets of medicine, costs are down while quality is up. Dr. Brian Bonanni has an unusual medical practice. His office is open Saturdays. He e-mails his patients and gives them his cell-phone number. "I need to be available 24 hours a day," he says. "I want to be there when a patient has questions, and I want to be reachable."

I'll bet your doctor doesn't say that. Bonanni knows he has to please his patients, not some insurance company or the government, because he's paid by his patients. He's a laser eye surgeon. Insurance rarely covers what he does: reshaping eyes so people can see without glasses. His patients shop around before coming to him. They ask a question that people relying on insurance don't ask: "How much will that cost?" "I can't get away with not telling the patient how much exactly it's going to cost," Bonanni says. "No one would put up with it. And the difference of a hundred dollars sometimes makes their decision for them."

He has to compete for his patients' business. One result of that is lower prices. And while the procedure got cheaper, it also got better. Today's lasers are faster and more precise. Prices have fallen and quality has risen in other medical fields where most people pay for care themselves, like cosmetic surgery. Consumer power works -- even in medicine.

When government and insurance companies are kept away from the transaction, good new things happen. A doctor in Tennessee I talked to publishes his low prices, such as $40 for an office visit. Most doctors would say you can't make money this way. But Dr. Robert Berry told me you can. "Last year, I made about the average of what a primary-care physician makes in this country," he said. Berry doesn't accept insurance. That saves him money because he doesn't have to hire a staff to process insurance claims, and he never has to fight with companies to get paid.

His mostly uninsured patients save money, too. Unlike doctors trapped in the insurance maze, Berry works with his patients to find ways to save them money. "It's coming out of their pockets. And they're afraid. They don't know how much it's going to cost. So I can tell them, 'OK, you have heartburn. Let's start out with generic Zantac, which costs around five dollars a month.'" When his patients ask about expensive prescription medicines they see advertised on television, he tells them, "They're great medicines, but why don't you try this one first and see if it works?" Sometimes the $4 pills from Wal-Mart are just as good as the $100 ones.

Speaking of Wal-Mart, medical clinics are popping up in Wal-Mart stores and in other similar markets. The clinics offer people with simple problems like sore throats and ear infections relatively hassle-free care ... cheap. Almost everything costs $59 or less. And the clinics are typically open seven days a week. Grace-Marie Turner, president of the Galen Institute, a health-policy research organization, explains how these clinics thrive: "They're figuring how to do something faster, better, cheaper! They're responding to consumer demand because they see that they might make some money on this."

When consumers pay for medicine themselves, saving insurance for the big things, and doctors deal directly with consumers, doctors begin to compete. They start posting prices and work to keep them low. And consumers gain more control of their health care. Instead of governments and insurance companies deciding for patients, patients decide. Competition gives consumers more choices. And choice gives them power. Remember that when you hear a politician promise to make health case accessible and affordable through the force of government.

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