More myths: Introducing payments, cutting back on managers or bringing in tax breaks for private care will fix the NHS

My previous articles have looked at popular misconceptions about the NHS’s many and real problems. Here I explore three proposed solutions that are beset by similarly magical thinking. Some of them have an element of validity, but this is often lost in the headline and in their proponents’ enthusiasm to reach for simplistic solutions to the complexity that characterises modern health care.

Proposed solution no1: Introduce payments for treatment

Whenever the affordability and sustainability of spending on health care is discussed, it is usually not long before someone takes to a national newspaper to propose the introduction of user charges as a remedy for these challenges.

Two reasons for imposing user charges are generally proposed: firstly as a way of raising revenue, and secondly as a method of reducing demands made on the system through deterring “unnecessary use” or misuse. This might include charges for missed appointments.

There are limits on the effectiveness of charges as a method of financing the health system. Any charge that is large enough to raise significant amounts of money will quickly cause problems for people unable to afford it, either through poverty or having chronic conditions (hence requiring more care). For this reason, health systems tend to cap the total exposure to this risk at a relatively low level. This is because, in a number of areas of care, a small number of patients account for a high proportion of the demand. Such caps significantly reduce the revenue-generating potential of charges, as is seen with the pre-payment card used for prescription charges.

All these systems require a substantial administrative machinery to collect the payments, and for some areas there may need to be dispute resolution procedures (for example, for payments for days spent in hospital, someone could argue they are not paying to be in hospital because their discharge from hospital wasn’t organised properly). This further eats into the money raised.

The evidence for the impact of user charges on demand is also less than compelling. A review of studies of the German health system found little impact on demand. A wider review found that it did reduce GP and outpatient visits (which are higher in Germany than the UK), but had no impact on hospitalisation. The evidence for the impact on medicines consumption is much stronger, but this is not a policy objective in the UK.

The OECD report that user charges in Sweden reduced utilisation, but it disproportionately affected the poor. Similar problems were experienced in Canada, with care being delayed with the potential for higher future costs. This is in line with the well-known RAND Health Insurance Experiment, which found that charges did reduce utilisation, but importantly it affected both appropriate and inappropriate care. Unsurprisingly, it had the greatest impact on low-income people. The effect of this is potentially to delay treatment and increase the future costs of care as a result. 

Opinion is more mixed about the merits of charging for missed appointments – something proposed by Rishi Sunak and swiftly dropped when he became Prime Minister. But the overall impact of this sort of policy is likely to be very small, both in terms of revenue and efficiency improvement.

*Nigel also debated this subject in The Times’s “The Big Question” feature on 14 January. Click here to read that article.

Proposed solution no2: Reduce managers, cut bureaucracy and put the money into the "front line"

A favourite argument of those wishing to agitate for radical health service change is to argue that it is overmanaged, full of bureaucrats, and that not enough money is directed to the hard-working doctors and nurses at the front line.

But a quick look at the evidence does not support the view that there is a particular problem with NHS management. Managers and senior managers have been among the slowest growing groups of staff in NHS trusts over the past decade. Their numbers fell at the start of the period of austerity from 2010, and some were shifted out into commissioning bodies in 2013. But this period saw the start of a decline in NHS performance, albeit for much wider reasons.

Criticising NHS management has the advantage of picking on a group that has few friends. And yet, many of the managers in the NHS are clinicians, many of them do management as part of their clinical role, and there is good evidence that these roles are key to staff retention and for delivering another policy priority – efficiency. As Stephen Black puts it in an excellent blog: “The big NHS problems are problems of coordination and operational effectiveness. The NHS has a big issue with knowing where to spend money to make the whole system better and struggles to consistently improve or to spread best practices quickly.” A similar argument was recently made by Emma Duncan in a column for the Times.

The last 20 years have seen a culture of checking, assurance, performance management and other manifestations of a controlling and low-trust approach to management, alongside a system with a very large number of objectives and ‘priorities’ and a growth in central regulation and oversight. This was highlighted in the Francis Report and in the reviews of NHS management by Lord Rose and Sir Ron Kerr.

A culture of checking and upward report is a major issue, and means that management time could be more usefully used to improve the system. The Messenger Review said that this had a negative impact on the front line. This in turn will affect staff retention.  

Administrative jobs are often lumped in with management and therefore become a target as well. However, good administration is important for both patient experience and the efficiency of the organisation, and frees up clinical staff from tasks that they don’t like so they can do clinical work instead. There is more scope to use digital tools to streamline routine administration. The performance culture may also mean that administrative resources are being wasted on ‘feeding the beast’ rather than more useful support to the rest of the organisation.

Taking a critical look at how NHS organisations are managed and identifying scope for reducing administrative burden on staff is absolutely right. But a simplistic “managers bad, front-line staff good” mantra often does more harm than good.

Proposed solution no3: Tax breaks for private care will stimulate competition and patient choice

One idea for stimulating competition and patient choice, and taking some of the burden off the NHS, is the idea of tax breaks for private care. But the main capacity constraint in NHS planned care is staff, and for doctors these are generally the same staff who also work in the private sector. Using the private sector can help with bottlenecks of beds or theatres, but for staff the impact could be to make this worse.

As I have argued before, if the policy is a success and there is a significant rise in activity in the private sector, this could be down to consultants reducing their NHS commitments for better paid private sector work. It is unlikely that many consultants are income maximisers, as they otherwise would just work exclusively in the private sector – it’s likely instead that they ‘satisfice’, to have an interesting mix of work. Other goals, and the time off to pursue them, are traded against pay. Once a certain income level has been reached, the individual will not be incentivised to carry on working.

Any productivity gain from a shift to the private sector (which is not guaranteed) could as a result be offset by reductions in the amount of work done due to this effect. It could increase demand for private treatment and therefore price, given the relatively fixed supply of consultant staff. This could mean a bidding war for consultants and nurses in areas where there is high demand.

Offering tax breaks to new or existing policy holders would have little impact on the waiting list. People on the waiting list may find it difficult to get insurance for an existing condition. Tax breaks would be subsidising people who were already willing to pay or intending to self-pay, or not even on the waiting list at all. There would also likely be a significant administrative cost to address this problem – all of which represents a potentially substantial deadweight cost to the public purse, which would further significantly reduce the value of the policy.

Offering to subsidise those who can afford care via tax breaks is obviously highly inequitable – patients who are able to pay upfront are not necessarily the ones with the greatest health needs.

From a government perspective, a tax break is equivalent to increasing spending, but the question is whether this is the best way of spending extra money. As a policy, it is both inequitable and of very questionable effectiveness.