INTRODUCTION

The British way of life is by tradition pluralist. In this country, size and uniformity have normally been distrusted ideals. The preference has been instead for local, or family, or individual autonomy. This is reflected in law - with its often jealous regard for private rights rather for any overriding discretion of the State, and with its plurality of legal jurisdictions within the United Kingdom and its various dependencies. It is reflected in political culture - with the acceptance of opposition as not merely legitimate, but as both natural and essential, and in its being given an honoured place in the Constitution.

Pluralism has also been reflected in the mostly private and decentralised economic structure of the country. It is untrue that a pluralist economy is sufficient condition for the existence of social and political pluralism: whatever can be said for Singapore and Taiwan and the recent past in Chile, they do present a challenge for the more naive kinds of economic liberalism. It is, even so, a necessary condition. As John Stuart Mill wrote in 1859,

[e]very function superadded to those already exercised by the government causes its influence over hopes and fears to be more widely diffused, and converts, more and more, the active and ambitious part of the public into hangers-on of the government, or of some party which aims at becoming the government. If the roads, the railways, the banks, the insurance offices, the great joint-stock companies, the universities, and the public charities, were all of them branches of the government; if, in addition, the municipal corporations and local boards, with all that is now devolved on them, became departments of the central administration; if the employés of all these different enterprises were appointed and paid by the government, and looked to the government for every rise in life; not all the freedom of the press and popular constitution of the legislature would make this or any other country free otherwise than in name. 1

Much twentieth century history can be taken as a commentary on these words. Endless misery could have been avoided had they been more widely accepted as true. But to read them only in terms of National and Soviet Socialist crimes is to miss much of their relevance. Economic pluralism is not merely a strong protection against being murdered. It is also required to guarantee more everyday human ideals, such as dignity and choice and quality of service.

Indeed, it is the denial of these things that did so much finally to destroy the Soviet systems of Central and Eastern Europe. By the 1980s, the deportations and show trials and other aspects of the Stalinist terror were fading from public memory. Even political dictatorship was accepted in practice by all but a few dissidents. What did remain an active source of mass grievance were the limitations of choice in private life. With their shortages and minimal standards, the shops were a disgrace. With their centralised ownership and dictation of content, the media were a disgrace. Housing was a disgrace. Health care was a disgrace. Environmental protection was a disgrace. So far as it existed, private law was a theatre directed from behind the scenes by a ruthless assertion of vested interest - this tempered at best only by corruption.

Material living standards had long since fallen below those of the West, and were fast falling behind those of the newly industrialising countries of Asia and the Pacific Rim. Any Western visitor to these countries before the 1989 Revolutions who could look behind the veil of propaganda saw greyness and standardised shoddiness everywhere. No better illustration could ever be needed to show that where no alternatives are allowed to exist, there will be no tendency towards improvement.

The British people are fortunate to have avoided totalitarian control, and to take pluralism so much for granted. Even so, there are no grounds for complacency. From many areas of British life, pluralism has during this century been excluded, in whole or in part. This is true, among much else, for education, for welfare provision and for health care. In these areas, the reassertion of pluralism has been and will for some time remain a struggle against ideological commitment and special interest resistance.

This paper will discuss what degree of pluralism has been so far established in the provision of health care in Great Britain, and what greater degree can reasonably be expected during the next few decades.

ONE: THE NATIONAL HEALTH SERVICE

The British National Health Service (NHS) was a product of the Second World War. Following the crisis of 1940, there was a total mobilisation of national resources. This was a necessary act for an island under close siege by air and sea. For the purpose of avoiding a catastrophic defeat, it was decided that central control had to be extended over all economic and much other activity, and that many traditional freedoms of choice should be suspended. It was also a popular act. It gave expression to the sense of collective danger and the belief in equality of sacrifice that guided public opinion at this time.

As victory became a question not of if but when, attention turned increasingly to the future. Not surprisingly, it was hoped that the collectivist consensus could be continued into peace. If it had achieved so much for destructive purposes, surely it could now be harnessed to the steady amelioration of the often unpleasant conditions in which much of the population had lived before the war. The Beveridge Report, published in 1942, proposed the establishment of a comprehensive welfare state. Deficit financing would prevent the re-emergence of unemployment as a serious problem. This would be supplemented by a system of public benefits and services to raise the living standard of all.

Most important of these services was to be a national health service. The 1944 White Paper, A National Health Service, announced three general aims. These were:

1. To ensure that everyone in the country "irrespective of means, age, sex or occupation" should have equal opportunities in securing the medical care they needed.

2. To provide a comprehensive health service covering all aspects of preventive and curative medicine.

3. To divorce the care of health from questions of personal means and to provide the service free of charge (apart from certain possible charges in respect of appliances). 2

These aims were given statutory form in the National Health Service Act 1946. By this Act the Minister of Health was empowered to take any hospital into public ownership that he thought appropriate, and to organise these, under Regional Health Boards, into a comprehensive system of health care that would be free at the point of use. At the same time, every general practitioner in the country was offered public employment, to provide health care at first instance or such health care as did not require attendance at a hospital.

It was widely believed at this time that the NHS would, with a few unimportant exceptions, become the sole provider of health care in this country. Some looked happily forward to this, others with dread. But there seemed little room for doubt that the private sector in health care was set for a total and permanent eclipse. When the 1946 Act came into force, the Minister took possession of 3,118 hospitals and clinics, with 388,000 staffed and 57,000 unstaffed beds. Only 230 hospitals and clinics were disclaimed by the Minister and left in the private sector. 3 Many of these were small hospitals run by religious orders and certain charities. Others were run by trade unions. The great majority of general practitioners accepted public employment. The varied system of private and voluntary health care that had existed before the war largely disappeared. 4

TWO: PROBLEMS OF THE NHS

a) Cost

Even so, the NHS has not proved so overwhelmingly successful as was hoped. The most obvious problem was cost. Relying on extrapolations of health care spending from before the War, the projectors of the NHS had believed that it would account for a small and stable share of public spending. There might at first be a surge of demand for spectacles and false teeth, and the treating of other ailments that for reasons of cost had previously been left untreated. But this would not last. The cost of health care provision would soon diminish. The NHS would create a healthier population, which would need less health care. 5

These assumptions were soon proved false. The Attlee Government and its advisers seem to have overlooked a basic law of economics. When a good is offered at zero price, effective demand for it will terminate only where marginal utility is exceeded by marginal cost of collection; and marginal cost of collection will usually be less than marginal cost of supply.

But the Government could not overlook its working. The 1944 White Paper had estimated an annual cost of £132 million. In 1946, this estimate was revised to œ152 million. It was again revised to £230 million just before the Act came into force, in July 1948. In its first full year, 1949-50, the NHS cost œ305 million, and required a supplementary estimate of £98 million. 6 It is worth noting that the pressure of unlimited demand for limited resources was not something that emerged after decades. From its first day, the NHS was faced with a demand for health care that no possible increase in supply was able to satisfy. Its first funding crisis had to be faced within months of its creation; and there have been recurrent crises ever since. 7

Added to economics was social and scientific change. The NHS was designed to provide a style of health care appropriate to the 19th century. Improvements in health had been a matter then mostly of immunisation, sanitation and better nutrition. These are cheap and easy to administer. Their improvements produced, their cost drops still further. The 20th century, however, has seen the development of treatments for a range of degenerative conditions. This means individual medication. It means high costs. Unlike with the eradication of scabies and rickets, effective treatments here bring no lowering of health costs elsewhere.

At the same time, the number of people most likely to suffer these degenerative conditions has been steadily increasing. In 1901, people over the age of 50 comprised 14.8 per cent of the United Kingdom population. By 1951, they comprised 27.6 per cent; and by 1981, 31.8 per cent. In 1910, 84,000 people lived long enough to die of cancer and heart disease; in 1950, 229,000; in 1980, 323,000. 8

In the early 1980s, the Department for Health and Social Security estimated "aggregate demographic pressure" on the NHS - that is, the increase of funding required to maintain health care for the old without diverting resources from the young - at 0.75 per cent per year. "[E]xtra demand generated by technological change" was estimated at 0.5 per cent per year. 9

b) Non-Price Limitations on Demand

 Although one of the founding principles of the NHS was that health care should be provided free at the point of use, this principle had early to be abandoned. In 1949, an amending Act was passed to allow the levying of a 1s charge on prescriptions. After the Conservative victory in the 1951 election, charges were introduced for prescriptions, spectacles and dental treatment. In 1956, the present scheme was first introduced, of levying prescription charges, not per prescription, but per item prescribed.

 The purpose of charges was to open a new source of funding for the NHS, while deterring frivolous demands for health care. It was not on the whole a success. While there was some slowing in the rate of increase of prescriptions issued - though at least 60 per cent of prescriptions have always been issued to patient exempt from charges - the revenue raised has never been significant. In 1950-51, charges contributed less than one per cent to the NHS budget. Even their largest contribution, later in the decade, was only 5.3 per cent. 10

 The other main check to demand was a more or less deliberate rationing of supply - though by scarcity rather than price. The doctors who worked in the NHS hospitals had been encouraged at first to treat their patients according to need, and not be deterred by financial considerations. Cash limits soon turned them into allocators of scarce resources. Patients were to be treated according to their needs - and according to a vague calculation of the greatest health of the greatest number. More than minimal care was to be quietly denied to hopeless cases. Health care for everyone else was to be provided sparingly by international standards. In the late 1970s, for example, coronary artery by-pass operations were performed about ten times more frequently in America than in Britain. Where these did not increase life expectancy, they tended to reduce pain. For all the faults of their health care system, American doctors responded to complaints about pain. British doctors paid far more attention to likely increases of life expectancy, or improvements in a "quality of life" not always synonymous with an absence of serious discomfort. 11

 The supply of health care was rationed still further by queue. Crowded waiting rooms were soon common with most general practitioners, and in hospital out-patient departments. Queues became a fact of life for in-patient departments, with often long waiting periods even for those operations given priority. Even in the 1980s, after years of years of reforms designed to cut the waiting lists, the median waiting time to have a hernia repaired was more than ten weeks, and 14 weeks for having a cataract treated.12 The waiting times for many other less urgently required operations was measured in months rather than weeks.

 Then there was rationing by exclusion. Much cosmetic surgery has never been available on the NHS. Face lifts, liposuction, hair transplants, sex change operations - these are not provided at all, or only if deemed necessary for reasons of health or if required as part of some other treatment. Other services have been provided on a minimal basis - for example, much psychiatry, the treatment of infertility and of drug and alcohol abuse.

c) Producer Sovereignty

Unlimited demand was compounded by the means adopted to organise limited supply. The NHS was created in the face of powerful opposition from the leaders of the medical profession, who feared that it might bring losses of status and income. The objectors were bought off in 1946 with a compromise that gave them a controlling influence over the running of the NHS.

As said, the great majority of general practitioners were persuaded to join the NHS. One of the chief means of persuasion was a very generous system of payment and supervision. They were to be paid per patient registered with them, rather than according to patients treated or success of treatments. They were also made virtually unaccountable for how much or how little health care they delivered to their patients.

To some extent, this second incentive contributed to the ballooning of NHS costs. Unchecked by considerations of cost, general practitioners were free to prescribe as they pleased, and to refer for further treatment. In practice, though, it often worked as a further non-price check to demand. According to Rudolf Klein, "there has actually been a fall in the number general practioner consultations made by the population of Britain over the history of the NHS. 13

The incentive to the general practitioner in the NHS is to minimise his or her work: given that earnings are not related to the services performed, the general practitioner has an incentive to maximise his or her leisure rather than to maximise medical activity - either by dampening patient expectations or by exporting problem cases into the hospital sector.14 Once in hospital, patients have frequently found their own wants subordinated to those of the staff working there. In one of its reports, published in 1978, the Royal Commission on the National Health Service, drew attention to discontent among patients with the non-medical aspects of their stays in hospital. Many complained about lack of privacy, many about being woken too early in the day: nurses had long found it convenient to wake their patients before 6:30 am, to prepare them for the day shift. Many were unhappy with the nature and extent of information given them with regard to their medical treatment. Many felt that they were being treated as "just another case", rather than as individuals. Further complaints were made about the care of children in hospital. 15

d) Ineffective Management

The natural effects of producer sovereignty were magnified by the public sector style of management within the NHS. Large at the time of its creation, the NHS had grown by the early 1970s into the largest employer in Europe after the Red Army. What was seen as remote and unresponsive management, combined with long hours and relatively low earnings, tended to alienate both medical and non-medical staff. This was manifested in high rates of sickness and absenteeism. Then, in 1973, sections of the non-medical staff went on strike. This was followed by a decade of union militancy, its high point being the 1979 "winter of discontent". Here, pickets were set up outside the hospitals, and in some places committees composed of non-medical staff decided which cases were and were not urgent, and so fit for admission to hospital.

The other main deficiency of NHS management was the misallocation of already scarce resources. The budget of each local health authority was set centrally, and that was the only effective limit to costs. The health authorities often had no idea of how much each area of their activities was costing. They therefore had no idea of whether money was not being wasted, or of whether certain services should be provided at all, or of whether they should not be contracted out to private suppliers. In the 1980s, for example, it was estimated that large amounts of money might be saved by putting many support services out to competitive tender. Even small savings here might have a dramatic effect on the provision of health care:

A 20 per cent cut in catering costs would save the NHS £70m per year. At about £700 per acute inpatient case, that would be enough to pay for 100,000 more cases per year. A rough calculation suggests that it might be enough to pay for over 30,000 more hip replacements per year, more than enough to clear that waiting list. 16

TWO: THE PRIVATE SECTOR

a) Its Second Beginning

As said, there was a loss of belief in the 1940s in the values of economic pluralism - most notably in the provision of health care. The intellectual mood of the age was in favour of collectivist provision. In 1947, Douglas Jay, a Minister in the Attlee Government, could state it as almost axiomatic that,

in the case of nutrition and health, just as in the case of education, the gentleman in Whitehall really does know better what is good for people than the people know themselves. 17

The practical expression of this was the creation of the NHS and the consequent nationalisation of much of the private sector. What remained of it was very small, and seemed to have been dealt a killing blow. After all, why should people continue to pay for what was now provided free? In answer, the Government Social Survey or 1952 showed that only 1.5 per cent of the population still used private general practitioners exclusively; and only a further 2.5 per cent were NHS patients who also were on the list of a private practitioner. 18 Those patients who preferred to remain in the private sector were confined to the rich and a few other groups who continued to find it demeaning to apply to the NHS for treatment, or inconvenient for various reasons. There is no evidence that they received a better standard of health care than that provided by the NHS. 19

Turning to hospitals, the opportunities for private care seemed still more limited. The 230 hospitals and clinics disclaimed by the Minister of Health were neither the largest nor the most modern. They contained a very small proportion of total numbers.

Moreover, the abstract expression of rejected pluralism was a widespread revulsion from the very concept of a private sector. As late as the 1900s, state welfare in any form had been unpopular among the working classes themselves. Many friendly societies went so far as not to register, disliking even the minimal state supervision that this would entail. 20 By the 1940s, the disconnection between health care and payment was seen as not merely beneficial, but also highly moral. According to Harry Eckstein,

they] found the voluntary hospital system morally obnoxious, particularly due to the repellent practices used in the latter days of the system to extract money from the public: stunt appeals, bridge tournaments, flag days, midnight matinees, and soap sales and, not least, the sale of advertising space on hospital walls to patent medicine manufacturers.21

The Manchester Guardian even believed that the allowing of competition from the private sector might fatally weaken the NHS:

Poor patients will claim their rights and be convinced that they are getting an inferior service: rich patients - and many others who cannot really afford it - will insist on paying fees in the expectation of preferential treatment, and will go elsewhere if they do not get what they are paying for. This, in short, is a false freedom that can only survive to the extent that it is abusing the doctor-patient relationship. It is the reef on which this splendid venture, with all its prospects for development, might founder at its outset. 22

Nevertheless, from this low point, the private sector did recover. From early in the century, the custom had developed among those who could afford it of financing health care from insurance policies. The older custom remained, of paying directly as and when required. But the increasing range and expense of care available prompted a rapid move towards an institutionalised sharing of risk. In 1946, the larger health insurance companies lost the majority of their facilities, but remained in being. Following an initial period of uncertainty, they entered the 1950s, merged and reorganised. Smaller and less well-equipped hospitals closed, and were replaced.

In 1950, the private sector was dominated by the three largest insurance companies - the British United Provident Association (BUPA), Private Patients Plan (PPP) and and the Western Provident Association (WPA). They had a total of 56,000 subscribers, who with dependants comprised an insured population of 120,000. 23 By 1955, the insured population had increased to 585,000. Since then, it has roughly doubled each decade, with large increases in the 1980s, until by 1991 it stood at 6,524,000. 24 This represents around 12 per cent of the British population. And the figure seems set to continue growing in the future. In 1988, Leon Kreitzman of the Henley Centre predicted that by the end of the century, it would reach 20 per cent. 25

Indeed, looking behind the statistics, to the social facts of which they are only aggregates, the growth of the insured population is still more striking. By 1987, 34 per cent of the professional classes aged between 45 and 64 were covered by private insurance. That applies for the United Kingdom as a whole. For London and the south east, the insured were estimated in 1991 to number 50 per cent of the professional classes. 26

In consequence, the number of private hospitals has begun to grow again. In 1979, there were 150. By 1990, there were 216, providing a total of 10,906 beds. 27 Much of this growth resulted from the entry to the market of commercial suppliers from the United States and from Europe. But it should be emphasised that 38 per cent of these hospitals were run by charitable institutions. 28 Take, for example, the Post Office and Civil Service Sanatorium Society, founded in 1905 by individual postal workers, its hospital disclaimed by the Minister in 1946. In 1988, it provided to its members a total of 24,503 consultations, and spent £10, 260.317.29

Again, take the Industrial Orthopaedic Society, another charitable institution. In 1992, it provided various kinds of health care to 61,211 patients, at a cost of £12,007,273. 30

b) Causes of the Rebirth

There were two reasons for this exponential growth. The first has already been given above, and at some length. The NHS was run from its start as a command economy, and its shortcomings became increasingly obvious with time. The second is that, in the 1940s, almost everyone was willing to accept these - or had no choice but to accept them; and today many people are not.

The social and economic changes of the past 45 years have all but destroyed the collectivist consensus inherited from the War. At that time, here were enormous pressures - mostly, but not always, unofficial - directing towards conformity and away from any obvious eccentricity, or even individuality.

But that age has passed since around 1960. The mass-society that emerged in the early 20th century has declined or is in decline. People are no longer tending to grow alike in their tastes. Older habits of thought have been recovered. Indeed, those opportunities for individual development, so highly prized in the 19th century, have never been greater. They now exist in countless ways. One of these has been an increasing desire for personal service and general convenience. In the high streets, as in most other aspects of national life, this desire has been met. The past 45 years have seen large and continuing improvements in both standards and expectations of service. These improvements have not been matched in the NHS. By the 1980s, endless queues and rationing were fading from the public memory everywhere but in the NHS.

Private insurance and the ability to escape from this have been insensibly brought within the reach of almost anyone willing to economise in other areas of discretionary spending. Much insurance, indeed, is no longer arranged by individuals. Increasingly since the 1950s, private insurance was offered by employers as a non-financial enhancement to salaries. The advantage for them was the ability to offer a non-taxed benefit to key workers. The other was the knowledge that if a worker fell sick, the problem could be rapidly diagnosed and where possible solved. By 1982, 45 per cent of health care policies were paid in whole or in part by employers. 31

An interesting third option is group insurance, where a large organisation, such as a trade union or professional body, negotiates preferential rates.

c) The Range of Private Provision

The NHS has not been equally good in all areas of health care provision, or in its manner of provision. The private sector has developed as a remedy for these shortcomings. Most obviously, it has supplied those services not generally supplied by the NHS. Anyone who opens a woman's magazine will find pages of advertisements for cosmetic surgery. Anyone who wants deep psychoanalysis, or fertility enhancement, or a discreet abortion,32 will normally do best to approach only the private sector.

But the range of services does not end here. There is much else, and the capacity for future growth is immense.

Take, for example, health screening. Where many conditions are concerned, prevention is better than cure. But where prevention is unrealistic, early diagnosis is the best available option. In 1993, £29 million was spent in the private sector on screening. BUPA was the market leader, with 30 centres across the country, and 90,000 patients. Prices ranged between £142 and £411. 33 There may be doubts in some quarters regarding the medical value of screening; but it is a service that many people desire; and many do feel happier to know that they do not have heart disease or rectal cancer, or some other potentially fatal but so far unobserved condition.

Again, take the provision of care for the old. The continuing growth of the aged population is putting an increasing strain on the capacity of state welfare to deliver even a basic level of service. Since 1980, state pensions have risen in value only with the increase of prices, not of incomes. In 1979, the basic pension has fallen in value from more than 23 per cent of average earnings to less than 18 per cent. Continue this policy for another generation, and the pension's value will have fallen to less than 10 per cent of average earnings. 34 Denounced by the Labour Party as a monstrous policy, the policy is unlikely to be reversed, bearing in mind the strain on both present and future government spending. The working population is being actively encouraged by the Government to make its own pension arrangements. Michael Portillo, Chief Financial Secretary to the Treasury, has made this plain, with his warning that young people who do not take out private pensions will receive only a "nugatory" state pension when they retire in the 21st century. 35 He followed this with the further warning that many other areas of state provision will gradually contract. 36

Residential care of the old is also set for privatisation. From April 1993, public funding for this was limited. Further funding will necessarily now come from the private sector. Already in 1992, private sector spending on nursing and residential home care had reached £4.4 billion, this being the largest outlay of the private sector. 37 In 1993, 25 per cent of admissions were funded by the private sector. This will and must increase still further. In 1992, there were 555,000 long stay care places in the United Kingdom. By the end of the century, according to current projections, a further 87,000 places will be required; and by 2050, a total of 1,300,000 places will be required. 38

Preparing for this demand, various kinds of long term care insurance services are being created in the private sector. Peter Maynard of M&G Reinsurance suggested in 1990 a scheme whereby people might take out an endowment policy while young, this to finance health and residential costs in old age. He also suggested an impaired life annuity for those already old and who expect that they will need expensive care in the near future. This would require lump sum payments, possibly from the sale of unmortgaged property. According to Chris Moraviecki of Allied Dunbar,

for those in relatively good health, and owning a property, conventional home income plans can provide enough money to buy domiciliary help and so put off the day when you have to go into a nursing home, which may be never. 39

In general, insurers are becoming more inventive in their creation of health care policies. In doing so, they are actually breaking down the barriers between the public and private sectors.

As a further concession to the medical profession in 1946, the National Health Service Act allowed consultants working in NHS hospitals to retain their private practices, and allowed the hospitals to set aside a number of beds for private patients. These have always been used to provide health care that could not be provided in private hospitals. Increasingly, the insured are being offered the option to "top up" their NHS treatment. That treatment which is readily available in the NHS is not covered by policies. Private treatment is reserved for where it is not readily available, or is only available after a long wait. Some types of policy give immediate access to private treatment where the local NHS waiting list exceeds three weeks. 40 Otherwise, people can take out policies to pay for "extras" in the NHS, such as single rooms, higher quality food, and televisions.41

In 1988, private treatment in acute hospitals and clinics reached £1 billion. 42 One in six non-emergency operations was performed within the private sector. 43 In 1990, 28 per cent of hip replacements were paid for by the private sector. 44

Take the case of Mrs Betty Stodwell, in 1990:

[N]ow 90, [she] is in the relatively unusual position of having had one hip replaced privately 14 years ago, and the other under the NHS two years later. She had both operations in the same hospital, Stoke Mandeville, quite feasibly by the same surgeon. The private surgery was advised by her family because of the declining health of her husband; at the time she would have had to wait a year for treatment under the NHS. The bill, which she paid herself, came to well over £2,000, including post-operative recuperation in a nursing home for one week, while the NHS operation cost her nothing.

The only noticeable difference as far as she is concerned was in the standard of accommodation rather than care or treatment. 45

In this case, the treatment was paid for directly. Her son calculated that it was more economical to pay in this way than to pay premiums for an insurance policy. 46 But this is an exception. The general rule is for payment through insurance.

Yet while the two sectors have to some extent been merging, private patients remain more satisfied with their treatment than NHS patients. This was to some extent quantified by the Consumers' Association in 1986. Late in the previous year, it had conducted a survey among readers of Which? magazine, these selected at random. It was seen that on average patients waited two weeks less to see a consultant than NHS patients; and 55 per cent had been given an appointment within one week - compared with only 32 per cent of NHS patients. Moreover, 96 per cent of private patients were given exact times for their consultation, and 89 per cent had their consultations at times convenient to themselves - compared with 81 per cent and 64 per cent respectively in the NHS. There were similar differences with regard to hospital admission dates. 47

Once in hospital, there is the question of privacy. 85 per cent of private patients are given single rooms, and 85 per cent of NHS patients are not.48 The former also do far better with regard to exact information of what is wrong with them and what is being done to put it right.

Of course, this is all health care at a price; and much has been said about increases in premiums and the sometimes lavish fees charged for private care - for example, the claim made in 1991 by the Western Provident Association that some hospitals were charging £130 for tins of talcum powder sold elsewhere for 68p, or œ7 for rubber gloves sold elsewhere for 20p.49

Even so, these are exceptions. Taking into account the cost of health care in other countries, the private sector in Britain is actually rather cheap. German insurers find it cheaper sometimes to send patients here for private treatment than to treat them at home. About 1,500 Germans are sent over every year for such treatments as heart valve replacements and coronary by-pass operations. According to Richard Dodds, Deputy Director of the independent London Bridge Hospital,

Insurers find it cheaper to pay the air fare on a German airline for the patient and his spouse or a close relative and accommodate them for the period of the operation - about seven to 10 days....

West German insurers are very interested in seeking the cheapest possible price for a given number of clients. Hospitals in this country offer bulk discounts to pull in business - for example, an agreement to do a set number of major operations. 50

THREE: THE FUTURE OF THE BRITISH HEALTH SERVICE

a) The Reform of the NHS

Much debate in the 1980s on the performance of the NHS was concerned with levels of funding. It seemed a settled view among many that only more more money was needed to make everything work as it should. The foregoing ought to indicate that the truth was less simple. The biggest NHS problem could not be solved by any increase of spending short of infinity. The other problems stemmed from or were exacerbated by a mode of organisation inherited from the 1940s.

In 1989, following earlier, less radical attempts at a solution, the Government announced its intention to remake the NHS on modern principles. The old monolithic structure was to be dissolved. In its place, each hospital and each general practice was to become an autonomous unit. Each would be given a budget, but would be free to use that largely as it pleased. It could compete both on cost and on quality with every other health care provider. It could make a profit or a loss, just like any private company.

There were differences, however, between these units and private companies. In the first place, competition would be closely regulated from above. What remained of the Regional Health Authorities would monitor standards according to new performance criteria. Where appropriate, outcomes of the "internal market" would be amended by supplemental grants to loss-making but essential health care providers.

In the second place, demand in the internal market would be voiced not by patients - who were seen as largely incapable of making informed choices - but by the doctors. General practioners had long controlled the referral of patients to consultants. So they would continue to do. But in addition, they would base their choices also on questions of cost effectiveness.

Regulation and producer choice aside, the internal market would force every health care provider in the NHS to pay close attention to costs. Explicit and limited budgets would require general practitioners to shop around among hospitals. Hospital managements would in turn be required to use their new freedom to control costs, or to improve standards, or both. It would be imperative for them to cut unnecessary staff, and to streamline or contract out ancillary services; and to ensure that waiting times for treatment were reduced so far as possible, and that patients were made to feel as welcome as possible.

A strict financial discipline would be gradually extended throughout the entire NHS. Without any reduction in levels of funding, it was to be transformed from the centrally planned, corporatist giant of the 1940s to an efficient, consumer-friendly service for the 21st century.

b) Implications for the Private Sector

Embodied in the National Health Service Act 1990, these reforms have still to be fully introduced. It is expected, though, that their effect will be still further to break down the distinction between private and public health care. There is eventually to be no distinction of status between NHS and private hospitals. General practitioners will be able to refer patients to any hospital willing to accept regulation from the Regional Health Authorities. In NHS hospitals, as in any private business, outside contracters will be able to bid against in-house suppliers to provide a range of medical and non-medical services. The pluralist health system, nearly abolished in 1946, will have been recreated.

This being said, pluralism is still a thing of the future. At present, the private sector, though long welcome as a buyer of NHS services, has yet to be welcomed as a supplier to the NHS; and is most unwelcome as a competitor.

c) Exclusion from the Internal Market

When the NHS reforms were first announced in 1989, there was much speculation on the opportunities opening up for private suppliers to the internal market. On the whole, these have not opened. In 1991-92, very little changed. In 1992-93, neither hospitals nor fund-holding general practitioners contracted out significant levels of provision to the private sector. There was movement towards a plurality of supply, most notably with the care of the mentally ill. But this was not important overall. 51

This may be about to change. In May 1993, it was reported that Ministers were thinking of ways to encourage private sector finance into NHS development. One option was to ask large retail chains such as Tesco or Sainsbury's to build and possibly to equip new hospitals, in return for the sites of redundant hospitals. 52

On the 26th May 1993, Virginia Bottomley, the Secretary of State for Health, addressed the Confederation of British Industry conference on the same subject. She endorsed the full opening of the internal market to private suppliers. Among much else, she said:

As Secretary of State for Health, my criterion in judging the opportunities for closer working between the NHS and the private sector is whether or not the project will lead to better services for NHS patients, better value for money, and an undiluted commitment to the values of the National Health Service....

Effective purchasing is absolutely fundamental to the better use of NHS resources, judged against criteria of cost effectiveness and the provision of better quality services....

We need to involve the private sector in our service planning and encourage them to come up with innovative ideas to meet our needs. If they can bring new solutions to long- standing problems, that can only be of benefit to patients. 53

This is a heartening announcement. It may be hoped that it will lead to a full opening of the internal market to both competition and cooperation, for the containment of costs and the improvement of health care services and their better integration.

d) Unfair Competition

Disturbingly, though, NHS hospitals are using their new freedom to provide private health care of their own, and in a manner detrimental to the established providers. In April 1990, a review of the market by Messrs Laing and Buisson warned that private providers might even be driven out of business by competition from an NHS now able to offer attractively- priced and integrated health care to patients.

Already in 1987-88, NHS private patient revenue had risen to £73 million, from £65 million in 1986. Though the precise danger to private hospitals remained unclear, it seemed "rather more significant" than a year earlier. "Non-affiliated independent hospitals are already facing an uncertain future, and new NHS competition could force them out of business or into the arms of one of the larger private hospital groups" the report claimed, adding:

London private hospitals, already with low occupancy rates, could also be particularly hard hit, both by new NHS pay-bed units and by new private patient services developed by NHS hospital trusts after April 1991.

The report saw self-governing trusts as the "crucial wild card" for the private sector. Unlike other NHS hospitals, they would employ their own doctors and be able to bind consultants with loyalty clauses. Even without explicit loyalty clauses, they might be able to make agreements with health insurers for exclusive surgery contracts which would prove so lucrative that consultants would forego other private practice. 54

Since then, NHS revenue from the supply of private health care services has risen still further. In 1991-92, it stood at £140.8 million.55 By the middle of 1993, the growth of the supply of these services had become so fast that it was halting the growth of private hospitals.56

Of course, there is nothing wrong with competition. That is what the present reforms are supposed to achieve. The problem is when it is unfair competition. There is much evidence to suggest that private health care in NHS hospitals has not been priced at its full cost. This was described by the Audit Commission as a "striking feature" in all areas of the NHS examined in 1991:

Most hospitals do not know, for example, how much of their surgery is undertaken on a day-case basis. They do not know the source of demand for their pathology services. 57

Nor did they know the precise costs of operations and other procedures. According to Tony Byrne, the Chief Executive of the Independent Healthcare Association,

We have seen figures of £1,000 to be charged for an operation which we know is a ludicrous amount; £1,500 or more would be realistic.58

In the past, this was a natural consequence of the management structure of the NHS: nobody knew the true cost of anything, and so it was impossible to know if private services were priced at the right level. Today, however, there may be deliberate cross-subsidisation of private services offered by NHS hospitals. According to William Fitzhugh, publisher of Fitzhugh's Directory of Trusts, there is a suspicion that these are using NHS pathology laboratories and NHS heating and lighting without charge.59

Again, there is evidence that small businesses supplying medical and surgical equipment to private hospitals have been unfairly underpriced. According to Nigel Lockett, Managing Director of Hygeia Care, complaining in 1991,

'We are losing markets to the health authorities,'.... 'We cannot compete on price because the NHS suppliers don't account for their true costs yet it is my taxes which they are using to get established.'60

He was seconded by Peter Boultby, Managing Director of Industriacare:

'The area health authorities are selling certain products at prices we cannot even buy at'... 'It is unfair competition and it could put us out of business.' 61

If true, these are serious charges. It is surely against the public interest for NHS hospitals to to seek to drive private competitors out of business by using public money. And it conflicts with what remains the primary function of the NHS - to provide medical services free at the point of use. It is one thing to subsidise this function with revenue from the provision of private services. It is another entirely to do the opposite.

It is also a subject of legitimate concern if NHS hospitals do seek to act in restraint of trade by demanding exclusive contracts from consultants. This possibility must be closely monitored, and checked where found - if necessary by amendment of the 1990 Act.

FOUR: CONCLUSION

Against the expectations and wishes of many of the founders of the NHS, there has long been a mixed market in the provision of health care in this country. From small beginnings in the 1940s, the private sector has developed into a large and sophisticated provider, covering an increasing share of the population. This is to be celebrated. Its further expansion is to be fostered. It is entirely in keeping with the best aspects of the British tradition.

Nevertheless, it is too early yet to describe the British health service as fully pluralistic. Much has still to be done. The private sector has still to be allowed to show its full potential; and before it can do so, there must be a long and tenacious struggle against the efforts of some within the NHS to use the liberating reforms of the 1990s to realise the monopolistic ambitions of the 1940s.

1. John Stuart Mill, Essay On Liberty (1859) - in Utilitarianism, Liberty, Representative Government, edited by H.B. Acton, "Everyman" edition, J.M. Dent & Sons Ltd, London, 1972, p. 165.

2. Ministry of Health, A National Health Service, White Paper, HMSO, London, 1944, Cmnd 6502, p. 47 - summarised by Joan Higgins, The Business of Medicine: Private Health Care in Britain, Macmillan Education Ltd, Basingstoke, 1988, pp. 13-14.

3. John E. Pater, The Making of the National Health Service, King Edward's Hospital Fund for London, London, 1981, p. 148 - cited Higginns, op. cit., p. 27.

4. It is quite untrue that ordinary people were destitute of medical and other welfare services before the 1940s. The remarkable achievements of the friendly societies and other voluntary institutions must not be forgotten. For a good history of these achievements, see P.H.J.H. Gosden, Self-Help: Voluntary Associations in the 19th Century, B.T. Batsford Ltd, London, 1973. See particularly p. 259:

"At the end of the 19th century the Chief Registrar [of Friendly Societies] wrote that 'it remains one of the great glories of the Victorian era that... welfare has been established in a very large degree by the labours and sacrifices of working-men themselves, and by the wise and judicious legislation which has permitted and encouraged their endeavour in the direction of self-help."

5. Rudolf Klein, The Politics of the National Health Service, Longman, London, 2nd edition 1989, p. 35.

6. Higgins, op. cit. p. 31; Klein, op. cit., p. 34.

7. See Aneuran Bevan, Minister of Health, explaining the increases in cost to his Cabinet colleagues, after just four months of the NHS:

"The demand for spectacles, as for dental treatment, has exceeded all expectations.... Part of what has happened has been a natural first flush of the new scheme, with the feeling that everything is free now and it does not matter what is charged up the Exchequer. But there is also, without doubt, a sheer increase due to people getting things they need but could not afford before, and this the scheme intended" (Memorandum by the Minister of Health, 13th December 1948 - quoted Klein op. cit., pp. 33-34).

8. David and Gareth Butler, British Political Facts: 1900-1985, Macmillan Press, Basingstoke, 6th Edition, 1986, p. 325.

9. DHSS quotations from Alain C. Enthoven, Reflections on the Management of the National Health Service: An American Looks at Incentives to Efficiency in Health Service Management in the UK, The Nuffield Provincial Hospitals Trust, London, 1985, p. 7.

10. Klein, op. cit., p. 39.

11. Henry J. Aaron and William R. Schwartz, The Painful Prescription: Rationing Hospital Care, Brookings, Institute, Washington DC, 1984, p. 67 - cited in Higgins, op. cit., p. 204. The example is given to show how the American system allegedly encourages over-medication. However, as Higgins notes: "One side of the argument here is that Britain was doing fewer operations than was justified..."(ibid).

12. Klein, op. cit., p. 155.

13. Ibid, p. 154. Klein is referring to Peter A. West, The Nation's Health and the NHS, King's Fund Centre, London, 1980.

14. Ibid.

15. Royal Commission on the National Health Service, Research Paper no. 5, Patients' Attitudes to the Hospital Service, HMSO, London, 1978 - cited Ibid, p. 156.

16. Enthoven, op. cit., p. 22.

17. Douglas Jay, The Socialist Case, Victor Gollancz, London, 2nd edition, 1947, p. 258.

18. Higgins, op. cit., p. 28.

19. Ibid, p. 29.

20. Gosden, op. cit., pp. 275-76.

21. Harry Eckstein, The English Health Service: Its Origins, Structures and Achievements, Harvard University Press, Cambridge Massachusetts, 1958, p. 178 - quoted Higgins, op. cit., p. 37.

22. Editorial, Manchester Guardian, 22nd March 1946 - quoted Higgins, op. cit., p. 20.

23. Higgins, op. cit., p. 46.

24.

The Growth of the Private Health Care Sector
1955-91 (United Kingdom)

        Year     Subscriber   Persons      Persons
                 Members at   covered      covered
                 31 Dec       31 Dec       % UK
                 (000s)       (000s)       popn

        a) BUPA, PPP and WPA combined

                1955             274                     585                     1.2
                1960             467                     995                     1.9
                1965             680                    1445                     2.7
                1966             735                    1565                     2.9
                1967             784                    1670                     3.1
                1968             831                    1770                     3.2
                1969             886                    1887                     3.4
                1970             930                    1982                     3.6
                1971             986                    2102                     3.8
                1972            1021                    2176                     3.9
                1973            1064                    2265                     4.1
                1974            1096                    2334                     4.2
                1975            1087                    2315                     4.1
                1976            1057                    2251                     4.0
                1977            1057                    2254                     4.0
                1978            1118                    2388                     4.3
                1979            1292                    2765                     5.0
                1980            1647                    3577                     6.4
                1981            1863                    4063                     7.3
                1982            1917                    4182                     7.5
                1983            1954                    4254                     7.6
                1984            2010                    4367                     7.8

        b)  All insurers
                1985            2380                    5057                     8.9
                1986            2428                    4951                     8.7
                1987            2590                    5283                     9.3
                1988            2809                    5918                    10.4
                1989            3043                    6208                    10.8
                1990            3251                    6625                    11.6
                1991            3233                    6524                    11.4

        Source:  compiled from figures supplied by Messrs Laing & Buisson, London, NW1, 0EB.
 

25. Margaret Hughes, "Fierce competition proves a headache for private sector" The Guardian, 30th November 1991.

26. Estimate by Dr Michael Calman of the University of Kent - reported by Jeremy Laurence, "In sickness and in wealth. The NHS is suffering a haemorrhage of the well-off from which it may not recover", The Guardian, 19th September 1991.

27. Source: Independent Health Care Association - reported in "Private hospitals turning to profit", The Guardian, 23rd July 1990.

In more detail, the growth is as follows:
 

PRIVATE HOSPITALS AND BEDS

                             1979              1991 
      Region         Hospitals  Beds   Hospitals  Beds 
   
      Northern           1        30       6       179 
      Yorkshire          9       341      16       601 
      Trent              9       286      12       544 
      East Anglia        5       123      11       537   
      NW Thames         13       837      19     1,247 
      NE Thames         24     1,383      23     1,597 
      SE Thames         15       609      19     1,085 
      SW Thames         12       762      14       878 
      Wessex             7       191      13       613 
      Oxford             7       232      13       556 
      S Western          9       345      11       472 
      W Midlands        13       419      21       806 
      Mersey             5       273       7       366 
      N Western          6       291      14       715 
      England total    135     6,122     199    10,196 
      Wales              4       202       5       247 
      Scotland           9       265       9       401 
      N Ireland          2        82       3       128 
      Rest of UK total  15       549      17       776 
      UK total         150     6,671     216    10,972

28. Ibid.

29. The Post Office and Civil Service Sanatorium Society, Annual Report, 1988.

30. The Industrial and Orthopaedic Society, Report and Accounts, 1992.

31. Ibid, pp. 229-30.

32. In 1991,of the 179,522 abortions performed in England and Wales, only 84,369 were on the NHS - Source: Richard Woodman, "Health: The painful dilemma of who not to treat: Doctors say society must decide how health service resources should be 'rationed'" The Independent, 2nd March 1993.

33. Sarah Stacey, "Don't wait until it's too late; Health Care", The Sunday Times, 24th October 1993.

34. Peter Riddell, "Is my pension going to be worthless?", The Times, 9th December 1993.

35. Ibid.

36. Arthur Leathley, "Portillo predicts more welfare opt-outs", The Times, 14th December 1993.

37. Source: Laing and Buisson. See also Laing and Buisson figures on the care sector as of March 1989:

                                         Places           Pounds
   
      Private nursing homes              88,600              1,002     
      Private residential homes         143,200             1,123
      Total private supply              231,800             2,125
      Voluntary nursing homes            10,400               101
      Voluntary residential homes        39,900               277
      Total voluntary supply             50,400               378
      NHS long-stay geriatric            49,100               828
      NHS elderly mentally ill           31,000               523
      Local authority Part III          135,300             1,070
      Total public supply               215,400             2,421 
      ALL SECTORS COMBINED              497,600             4,924

38. Ibid.

39. Mike George, "Insurers are aiming to fill the breach between the public purse and the rising cost of looking after the elderly", The Guardian, 6th October 1990.

40. Rebecca Smithers, "Would the doctor order private health insurance? If the insurance market is a minefield, then private health insurance must be its most dangerous corner", The Guardian, 27th June 1990.

41. David Brindle, "Insurance companies poised to provide 'extras'", The Guardian, 26th September 1990.

42. Sarah Bosely, "The new commercial battleground for patient care", The Guardian, 27th June 1990.

43. Nicholas Timmins, "More turn to private hospitals for surgery", The Independent, 19th December 1988.

44. Smithers, op. cit.

45. Ibid.

46. Ibid.

47. Consumers' Association, "Private Medical Insurance", Which? magazine, July, 1986 - cited Higgins, op. cit., pp. 180-81.

48. Ibid, p. 231.

49. Cited - David Fletcher, "Private hospital costs 'a case of bedside robbery'", The Daily Telegraph, 10th January 1991.

50. "Germans fly in for cheap operations", The Daily Telegraph, 31st January 1990.

51. Source: Laing and Buisson.

52. David Brindle, "Superstores may build hospitals", The Guardian, 10th May 1993.

53. Transcript of her speech, supplied by the Independent Healthcare Association.

54. Laing's Review of Private Healthcare 1989/90, Laing & Buisson, London, 1990 - reported by David Brindle, "NHS Pay beds may drive private hospitals out", The Guardian, 23rd April 1990.

55. David Brindle, "NHS private-patient income soars", The Guardian, 30th July 1993.

56. Peter Pallot, "NHS claims distorted by pay beds" The Daily Telegraph, 5th June 1993.

57. David Cooksey, Chairman of the Audit Commission, forward to Report and Accounts, HMSO, London, 1991.

58. Bill Cater, "Patients are a virtue in fresh contest", The Times, 4th June 1991.

59. Ibid.

60. Charles Batchelor, "Management (The Growing Business): Suppliers lose patience - Small firms in the medical sector claim they are being undercut by the NHS", The Financial Times, 17th September 1991.

61. Ibid.