The Ranting Kraut

19.3.2006 – 27.9.2010

Maximum efficiency limits in the NHS

Posted by rantingkraut on August 2, 2006

The Telegraph today has two articles on a Hospital being effectively given minimum waiting times after treating patients too quickly, thus violating the allowance made for treatment in the PCT’s budget plan. This case neatly illustrates the impossibility of making a bureaucracy behave like a market. After all, no industry would ever operate production under the guidance of a budget and administratively set priorities while ignoring market demand. If health care where financed by insurers, they would simply pay for the services demanded by patients.

In America, the insurers who pay can put up the premiums to raise more money. PCTs can’t do this. They have very few levers to control the rate of expenditure. I think we will see the emergence of maximum and minimum waiting times.

In European countries like France and Germany, where the insurance based systems are more regulated, the feedback into insurance premia may not be as clearly and immediately visible, but it still happens. Thus the choice is simple: a centrally planned economy –in the health sector or elsewhere- will work by rationing. A market based economy –in the case of health insurance or elsewhere- will work through price adjustments.

So the choice between public healthcare systems isn’t cost free. It comes down to whether the damage to patients’ health produced by delayed treatment in a rationing based system is considered to be more of a problem than the higher financial burden in a regulated insurance based system. (See here for a comparison of health expenditure.)

A further concern is of course the amount resources taken up by administrative overheads. I haven’t seen any data on this but would expect it to be higher in a centrally planned system.


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