Can the English National Health Service learn from the Dutch reforms? Meeting the medium term challenge of the financing of health & aged care in England 27 January 2011 The Royal Society, London Gwyn Bevan Department of Management, LSE

Objectives of health care reforms in OECD countries* 2. Cost control: rationing & expenditure caps 1. Equity: access by need not ability to pay 3. Performance: incentives & competition * Cutler (2002) Equality, Efficiency, & Market Fundamentals: The Dynamics of International Medical-Care Reform. Journal of Economic Literature.            UK from 1990s

Law of requisite variety: 3 goals  3 instruments Cost control Equity Performance

NHS 1980s: 3 goals & 2 instruments Health authorities run providers Above target  income: cuts not ‘efficiency’ savings Below target  income: no ‘efficiency’ savings ‘Efficiency’ savings Cost control: fixed total budget Formula funding  equitable allocations

From 1991: purchaser / provider 3 goals & 3 instruments Purchasers Private providers NHS providers Efficiency by competition Cost control: fixed total budget Formula funding  equitable allocations

Internal market ( ): Design*  Purchaser / Provider  Provider competition ‘money follows the patient’  Selective contracting health authorities GP fundholders (no patient choice) *Working for Patients

Internal market ( ): Impact  Le Grand (1999)* Little evidence of change Incentives too weak & constraints too strong  Tuohy (1999)** NHS logic  Ministerial accountability  Collegial decision making  Poor information on prices & quality * Le Grand (1999) Competition, cooperation, or control? Health Affairs ** Tuohy (1999) Accidental Logics. Oxford University Press

Patient choice & competition ( ): Design*  Provider competition ‘money follows the patient’ (PbR) standard tariff: quality competition  Selective contracting Primary Care Trusts World Class Commissioning  Patient choice  Provider diversity Foundation Trusts & Independent Sector Treatment Centres *Delivering the NHS Plan

Patient choice & competition ( ): Impact  Failure to create functioning market* political interference weak purchasers barriers to exit & entry changing policies reorganisations No * Brereton & Vasoodaven (2010) view_NHS_market_Feb10.pdf

Impact both NHS markets? Overview of literature*  No good evidence reforms produced beneficial outcomes classical economic theory predicts of markets  provider responsiveness to patients & purchasers  large-scale cost reduction  innovation in service provision  NHS incurs transaction costs of market without benefits? * Brereton & Vasoodaven (2010)

NHS from 2010? We will stop the top- -down reorganisations of the NHS that have got in the way of patient care

If reorganisation of purchasers is the answer … Population ('000s)

Liberating the NHS: Objectives?*  NHS commissioning board Steering not rowing?  GP Consortia GPs involved in shaping services?  Independent providers Choice & managed competition?  Reorganisation Evolution not revolution? * Equity and excellence: Liberating the NHS

Reflections: 20 years of market reforms The Netherlands  1 agreed policy Dutch procession of Echternach  MHP competition as yet little selective contracting  Model exported Germany & Switzerland England  5 blitzkriegs (SW1) army of occupation in hostile territory?*  Provider competition limited impact  Model abandoned New Zealand, Scotland & Wales *Shock (1994) Medicine at the centre of the nation’s affairs, BMJ

Going Dutch: Provider  Purchaser competition? Mutual Healthcare Purchasers (MHPs) PCT clusters Efficiency by purchaser competition & selective contracting / integration Cost control: fixed total budget Risk-adjusted funding  equitable allocations

Mutual Healthcare Purchasers (MHPs)  Plurality PCTs / GP consortia Insurers? Foundation Trusts?  Define catchment areas Guarantee duty of care Selectively contract / integrate  Explicit insurance contract Choice of packages  Restrict choice? Charges?

NHS Commissioning Board: Regulation of MHPs  Entry key competences & duty of quality  Competition sufficient numbers & information  Equity funding & open enrolment  Insurance solvency & transparency

Can the English National Health Service learn from the Dutch reforms?* Thank you Gwyn Bevan Department of Management, LSE * Bevan & van de Ven (2010). Choice of providers & Mutual Healthcare Purchasers: can the English NHS learn from the Dutch reforms? Health Economics, Policy & Law