It’s official: publicly funded health care provides ‘competitive advantage’

The credit crunch is a threat to publicly-funded health care. Yet I believe our beloved systems can be defended on the same basis as public service detractors: economic efficiency. However, protecting government funding of health care is not enough. As in all economics, and in life, there are several quid pro quos – we still can’t have something for nothing. The key sounds rather mundane, but it is to get more out of our systems by addressing issues of value for money. ‘Getting more’ means meeting more of the health needs of patients and communities.

The efficiency arguments for retaining publicly funded systems are in some sense subtle, but also quite straightforward. The alternative, of a market-based insurance system, does not work as well, and will simply bring with it more inefficiencies. Furthermore, we care about each other, and taxation is the best way of bringing about the money transfers from rich-to-poor and healthy-to-sick that such caring implies. Finally, despite the public’s affection for doctors, it is actually the case that we need the power of the state to combat such a powerful profession in negotiating things like rates of pay and what services to provide.

But saying that public funding of health care should prevail is not enough. Public funding does not make limits on resources disappear. We need to have in place mechanisms to control costs and ensure we get the best out of our systems for the communities they serve. This can happen in two main ways:

1. Reforming health care. This is something we have done continually in the UK, and other countries, for some 20 years now. What lessons have been learnt from the international literature? First, user charges do not work. It may seem contradictory to say so, but they are inflationary and place the emphasis for decision making wrongly on the consumer or patient. Secondly, other reforms, like those that have been implemented in the UK by all governments, have proved limited in their impacts on health care efficiency and fairness. This includes previous incarnations at the reforms about to be introduced in England, giving general practitioners more control of the health care budget, although, of all such ‘internal market’ type reforms of the past two decades, this seems the most promising.

2. Getting serious about priority setting. This will involve us managing scarcity more explicitly by attempting to measure the costs and benefits of what we do, including placing values on health and life. Given that health services cannot possibly meet all health needs, we already do this, but implicitly. Economists themselves have not helped, and seem to have devised ‘economic evaluation’ methods which simply amount to adding on more costs to the system without aiding judgements about how these costs will be met (i.e. what will be sacrificed). Frameworks which allow these trade-offs to be made have been developed and need to be implemented more.


Credit crunch health care: How economics can save our publicly funded health services by Cam Donaldson is publishing this month.

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