© 2008 Delmar Cengage Learning. Chapter 20 Taking Medicine to Market: Competition in Britain and the United States Daniel Ehlke

© 2008 Delmar Cengage Learning. 2 British National Health Service: Antecedents Insurance Act of 1911 –Introduced state-sponsored health insurance coverage to “workingmen” Benefits were strictly circumscribed –Covering only the workers, and not their families –Hospital care was also not funded under the program

© 2008 Delmar Cengage Learning. 3 British National Health Service: Antecedents Emergency Medical Service during World War II –Brought many aspects of hospital care under the supervision of the State

© 2008 Delmar Cengage Learning. 4 British National Health Service: Antecedents Wartime Beveridge Report –Envisioned broad government involvement in social welfare following the war –Including some form of national health care system

© 2008 Delmar Cengage Learning. 5 Creation of the NHS Proponents of a national health service: –Sought to tackle several structural problems of the health care system to date Hospital care and provision of primary care was of very uneven quality across the British Isles

© 2008 Delmar Cengage Learning. 6 Creation of the NHS Medical profession was riven by divisions between GPs and specialists Many citizens did not have access to quality health care

© 2008 Delmar Cengage Learning. 7 Creation of the NHS Three-tier system was established: –Representing compromises with key interest groups Basic public health responsibilities remained with local government –Had long shouldered the burden of hospital care as well

© 2008 Delmar Cengage Learning. 8 Creation of the NHS Hospital sector was nationalized –Hospital-based specialists becoming direct employees of the State General practitioners –Allowed to remain “independent contractors” who owned their own practices Salaries were largely set by officials in London

© 2008 Delmar Cengage Learning. 9 Early Years of the NHS NHS almost immediately went far over early budget projections –Not unlike Medicare and Medicaid in the early years of those programs

© 2008 Delmar Cengage Learning. 10 Early Years of the NHS Issue of financing the service was not definitively settled until the 1950s –When it was determined that funding should come out of general tax revenues and insurance contributions

© 2008 Delmar Cengage Learning. 11 Early Years of the NHS Care remained largely free at the point of service –Though some fees were soon introduced

© 2008 Delmar Cengage Learning. 12 The Road to Reform By 1970s –Britain was in the economic doldrums –Government thus had trouble funding all of its commitments Including the NHS

© 2008 Delmar Cengage Learning. 13 The Road to Reform Thatcher government –Entered office in 1979 with a vision toward injecting market principles into large parts of the welfare state in an effort to make it more efficient Nonetheless –NHS left largely untouched until the 1980s

© 2008 Delmar Cengage Learning. 14 Taking the NHS to Market Griffiths Report (1983) –Stressed need to introduce a business ethic into a startlingly fragmented NHS Health spending in the 1980s –Did not keep pace with demand –System was seen to be in need of major repair

© 2008 Delmar Cengage Learning. 15 Taking the NHS to Market While pledging to keep the tax (state) financing of the system intact: –Thatcher almost unilaterally applied features of the “managed care” phenomenon originally outlined by American economist Alain Enthoven

© 2008 Delmar Cengage Learning. 16 Managing Medical Markets Thatcher government constructed “internal market” within the NHS –Giving “fundholding” GPs greater independence –Proving for a much-vaunted “provider- purchaser split” within the state-run structure –Thus introducing a quasi-market to a heavily managed system

© 2008 Delmar Cengage Learning. 17 Managing Medical Markets Opposite process attempted in the U.S. –Quasi-competitive market system was “disciplined” through the introduction of “managed care” –HMOs and the private sector broadly attempted to tame the market where Clinton et. al. failed

© 2008 Delmar Cengage Learning. 18 Lessons of Reform Health care reform –Still playing itself out across the NHS, with mixed results –While health care “consumers” have perhaps been empowered Many providers express dissatisfaction

© 2008 Delmar Cengage Learning. 19 Lessons of Reform Extensive management appears necessary to keep costs down –Health spending in the U.K. has risen somewhat dramatically during recent episode of reform Course of reform highly contingent on what kinds of policy framework exists in the first place

© 2008 Delmar Cengage Learning. 20 Chapter 20 Summary National Health Service –Preceded by gradual state expansion into a fragmentary early health sector NHS popular over time –But later seen to be in state of “crisis”

© 2008 Delmar Cengage Learning. 21 Chapter 20 Summary Market reforms in Britain –Sought to inject principles of free enterprise into a system still run by the state –In U.S. the goal was to manage an already- competitive system Lessons of reform on both sides of the Atlantic