House of Commons - Health - Written Evidence

Select Committee on Health Written Evidence

Memorandum submitted by the Centre for International Public Health Policy, University of Edinburgh (PCT 43)

The creation of a marketised NHS is resulting in the loss of area and population planning for services and local needs assessments for services. In turn, this will lead to lower levels of efficiency, equity and quality within the NHS because of:

1. higher transaction and administration costs, leading to constraints on resources;

2. fragmentation of services and risk pools;

3. loss of mechanisms for fair distribution and monitoring of allocation of resources;

4. loss of central and local accountability; and

5. an increase in the likelihood of fraud and embezzlement.

In contrast, a maximally efficient, equitable and high quality NHS requires:

1. needs based planning and funding;

2. a resource allocation mechanism based on the needs of the population and not price or tariffs;

3. an integrated, not fragmented, approach to care;

4. salaried GPs and primary care health workers, working within the NHS, not as independent contractors to it;

5. buildings and services that are in public ownership and control; and

6. stronger systems of public accountability.

1. DOH GUIDANCE REQUIRES THE PRIVATISATION OF PRIMARY CARE PROVISION IN SPITE OF MINISTERIAL ASSURANCES

1.1. Recent Ministerial statements, designed to reduce the degree of controversy generated by the current market driven policies still require Primary Care Trusts to divest themselves of their primary care provider function.

1.2. On 28 July 2005, the Department of Health sent to Strategic Health Authorities a guidance note, Commissioning a Patient-Led NHS. It states: "the Department will not approve proposals for restructuring unless they satisfy the criteria set out in this document." These criteria specify that: "arrangements should be made to secure services from a range of providers—rather than just through direct provision by the PCT." These criteria were reiterated on 14 September in the Department's Green Paper, Your Health, Your Care, Your Say, which was published for public consultation. It confirms DoH policy, that: "the resulting White Paper will be used to inform the process of divestment of services from PCTs in line with the wishes of patients and the wider public" [our emphasis].

1.3. In a statement to the House of Commons on 25 October 2005, the Secretary of State Patricia Hewitt appeared to contradict both the guidance and the Green Paper, saying that: "community staff employed by PCTs will continue to be employed by PCTs unless and until the PCT decides otherwise, following full public consultation." However, the instruction to PCTs to divest themselves of their provider role has not been withdrawn by the DoH in spite of the Secretary of State's assurances. PCTs are therefore still subject to existing DoH guidance, Commissioning a Patient-Led NHS which requires them to divest themselves of provision. Meanwhile, the Green Paper only gives PCTs an opportunity to offer views on how they would like divestments to proceed, not whether they should do so.

2. BACKGROUND TO THE PRIVATISATION OF PRIMARY CARE PROVISION

2.1. The government's decision to change the role and responsibilities of PCTs from providers to commissioners of care must be seen within the context of the break up, fragmentation and marketisation of primary care and the NHS more generally including the establishment of foundation trusts and a regulator or Monitor.

2.2. The government argues that GPs have always been independent practitioners and that therefore the involvement of the private sector in primary care is not new. While this is true, it is misleading. GPs within the NHS cannot have private patients; they cannot charge patients; they have had a duty of care that has been carefully laid down in regulations and professional codes. The sale of good will has been proscribed until recently. Providers of primary care services have not operated in a market or had to compete for patients and money.

2.3. However, the new GP contract means that, from April 2004, contracts for the delivery of care are between PCTs and general practices, rather than between the Secretary of State and individual GPs. This contract ended the GP monopoly on care. As of April 2004, GPs' duty to provide 24-hour comprehensive general medical service was dissolved. Instead, they will provide a "minimum package of healthcare" and can opt to provide care at one of three levels.

2.4. The first level is classed as "essential", and must be provided by all practices. It includes services whose provision is initiated by patients who are, or believe themselves to be, ill and services for patients who require terminal care. GPs will be paid a global sum for providing these essential services, plus what are now termed "additional services", including contraceptive services, maternity services and cervical screening (hitherto seen as key elements of general practice). GPs may, however, choose to opt out of providing such "additional services", in which case a fixed sum is deducted from their global payment for each service not provided.

2.5. Providing "out of hours" service is also now an "additional service". General practices have first refusal of providing it: thereafter, the PCT is responsible for finding another provider, making a deduction from the budget of the practice concerned. This money is then available to be competed for by other providers. GPs have no automatic right to opt back in.

2.6. A third level of care, not included in practice budgets, is classed as "enhanced" services: these include care for pregnant women during labour, and anticoagulation monitoring for certain people at risk of a stroke, and will be commissioned locally, according to a national tariff.

2.7. PCTs must ensure that all these optional services are provided in one way or another. Currently, they are free to employ salaried staff to provide the services themselves, if they can show that they can offer value for money. The changes outlined in Commissioning a Patient-Led NHS mean that PCTs will instead be expected, in almost all cases, to commission these services from other providers, including the for-profit sector.

2.8. The requirement to break up and subcontract primary care services to numerous for-profit providers brings an end to the much copied and admired model of British family medicine which predates the NHS. The level and type of primary care services available under the new system, and the methods of provision, will vary from place to place.

3. RELATED MOVES AND FURTHER PRIVATISATION IN PRIMARY CARE

3.1. The privatisation of primary care and community based services will in part be accomplished through LIFT, the equivalent of PFI in primary care. There are currently 42 LIFT projects, either completed or in procurement, but the programme has never been evaluated (see Memorandum to Public Accounts Committee attached).[7] A further nine schemes are now in the process of being tendered. These schemes differ from their predecessors in that the PFI industry is now being asked to manage clinical service provision.[8] A document from the DoH-owned agency Partnerships for Health, circulated to the private health care industry in February 2005, showed that LIFT companies are being encouraged to become clinical providers: "Health corporations are being encouraged to find new niche markets linking into LIFT, as subsidiaries of LIFT and members of LIFT's supply chain."

3.2. The clinical services that will be included in LIFT's fourth wave and thereby opened up to the market, according to documents circulated to the industry, correspond to the services outlined in 2.4, 2.5 and 2.6 above.

4. CONFLICT BETWEEN THE TREASURY AND DOH OVER THE ROLE OF THE MARKET IN HEALTH CARE PROVISION

4.1. The requirement on local NHS organisations to create markets for the provision of health care runs against stated government policy. In a document published in April 2003, Public Services: Meeting the Productivity Challenge, the Treasury outlined the economic arguments which justify a "publicly-funded, publicly-provided" NHS. This states that, from both an efficiency and equity point of view, markets are unsuitable for the provision of NHS care because of a number of failures, including: the absence of consumer sovereignty; the difficulty of writing and enforcing contracts to protect the public interest; and the existence of providers that cannot be allowed to fail.

4.2. "It is important to ensure that choice is not promoted at the expense of equity or efficiency, particularly where there are market failures and capacity constraints," the documents states. The Treasury outlined in a precise and theoretically cogent way the advantages of an integrated NHS. Government health policy-makers have, apparently, abandoned this reasoned approach, but no rebuttal of its logic has been presented.

5. SOME PCTS HAVE DECIDED TO "STRENGTHEN" COMMISSIONING FUNCTIONS THROUGH PRIVATISATION

5.1. Oxfordshire PCT has revealed that it is to contract out its commissioning budget—that is, the 70% of local NHS funds that are held by the PCT—to a private company. The DoH has backed Oxfordshire PCTs' decision. The front-runner to take up the new role is the American Health Management Organisation United HealthCare.

5.2. United HealthCare has been forced to pay some $7 million in fines in the two years to 2004. The company paid $2.9 million in November 2002 to settle claims that it had charged the US government for care to patients who it falsely claimed were in nursing homes. In July 2002, the New York State Insurance Department fined United HealthCare $1.5 million for "cheating patients out of money": when patients were denied payments under their insurance programme, some were given wrong information by the company on how to appeal against this. Since March 2000 United HealthCare has also paid out almost $2 million in penalties in nine different US states for a variety of different offences, including passing work to a doctor whose medical licence had been revoked.

5.3. The nature of this company was made clearer when Vice-president Michael Mooney was jailed for three and a half years in August 2002 and fined $220,000 for insider trading. The firm also has a record of denying care to the vulnerable—or "cream skimming" as this feature of market-driven healthcare delivery is known. Similarly, a subsidiary of United Health Group, "Evercare", is under contract to provide services to the NHS in the UK. Evercare has been publicly praised by President George Bush—but academic research shows that it operates by restricting care to the patients it thinks it can make money out of.[9]

5.4. United is targeting the NHS, and in particular the emerging primary care market in provision and commissioning functions. In May 2004, Tony Blair's senior health policy adviser, Simon Stevens, (previously policy advisor to the former Secretaries of State for Health Frank Dobson and Alan Milburn) and Richard Smith, the then editor of the British Medical Journal, announced that they were leaving their jobs to join United HealthCare, now renamed the United Health Group, as the Group's Europe President and CEO, respectively.

6. THE AMERICAN MODEL OF HEALTH CARE THAT IS EMERGING

6.1. The new model which is emerging parallels the changes in acute hospitals where foundation trusts and a regulator distance government from public accountability and allow a market to operate. In addition to the privatisation of provision we are now seeing the privatisation of the commissioning function. This is to be done either by the direct privatisation of the commissioning budgets that PCTs hold or indirectly through practice based commissioning where, as with GP fundholding, practices will receive an indicative budget based on their practice lists. In this way the market will be operationalised.

6.2. These developments suggest that the government is now restructuring the NHS along the lines of the US Health Maintenance Organisation (HMO) system. The distinctive feature of an HMO is that risk is passed to providers through a remuneration and reimbursement system. The resulting financial incentives mean that providers manage risk by the careful selection of patients, treatments and services—restricting eligibility and entitlements to care through "cream skimming". This is already happening in the intermediate care sector where time-limits are placed on entitlement to NHS continuing care at the health and social care interface.

6.3. These strategies create new mechanisms for user charges, top up fees and co-payments for those elements of care which are no longer deemed part of the NHS package. The assurances by the Secretary of State that NHS care will continue to be free will be difficult to monitor in practice. Commissioners and providers are likely to have increasing discretion to decide what benefits and packages of care NHS patients will be entitled to receive and what levels of remuneration staff will command. There is a risk that in the absence of systems to assure service planning and population needs assessment, and the monitoring of access and the distribution of resources, there will be growing inequities in access to care.

6.4. Already, under the current resource constraints, evidence is emerging of the ways in which PCTs are scaling back what patients are entitled to.[10] The key question is how the new structures and incentives and the duties of providers and commissioners of care will be consistent with the principle of universal coverage.

6.5. Questions too arise over the efficiency of a privatised NHS. In this new, "marketised" NHS, evidence shows that transaction and administration costs will grow. The management reforms of the 1980s and the introduction of the internal market in the early 1990s saw the NHS's administrative costs rise from 6% to 12%.[11] With the creation of a full market, these costs are certain to rise again. Making and monitoring contracts, billing for every treatment (to achieve payment by results and related pricing mechanisms), and paying for accounting, auditing, legal services, advertising and shareholders' profits, will swallow an increasingly large chunk of NHS money, adding to resource constraints.

6.6. Transparency and accountability for public funds will suffer as the public has no right of access to private institutions. The serious fraud office is now considering establishing a system, along the lines that the US Department of Justice established to monitor fraudulent billing practices such as those employed by United in response to the US equivalent of payment by results.

6.7. As the NHS approximates more and more to a full health market, its administrative costs are likely to move closer to those of established market-based systems. In the USA in 1991 administrative costs accounted for between 19.3% and 24.1% of total hospital costs. By 1994 these costs had increased to 22.9% in public sector hospitals, 24.5% in independent non-profit hospitals, and 34% in for-profit hospitals.[12] We are currently unclear what payment mechanism will apply to the planned market in primary care services. However, there is no reason to assume that these extra costs will be avoided in primary care services and the effect on efficiency is likely to be similar.

7. CONCLUSIONS