Lansley’s retreat on price competition for healthcare

Campaigners against the coalition’s NHS reforms secured a victory this week, following a u-turn by Andrew Lansley on price competition for healthcare, reports Trevor Cheeseman.

Campaigners against the coalition’s NHS reforms secured a victory this week, following a u-turn by Andrew Lansley on price competition for healthcare. The Financial Times reported that Lansley’s NHS bill is to now be amended to remove the right of the new health regulator to set “maximum” prices for NHS care.

This follows Labour health shadow John Healey’s letter last week, which sought clarity on this issue following conflicting statements between Lansley and top NHS officials.

Price competition is significant in that it marks a big change from Labour’s approach – whereby a fixed tariff ensures a focus on quality rather than cost reduction. Many campaigners, including doctors’ leaders, have voiced concern about its implications for reducing quality of NHS care.

A leading healthcare researcher, Prof Carol Proper, has been even more direct, writing:

“…the consequence [of previous Tory price competition] was that patients in hospitals located in competitive markets were more likely to die after an admission following a heart attack.

“These kind of unforeseen consequences are likely to happen again – especially now when budgets are tight.”

Yet the issue of price competition remains sensitive for the government. David Cameron recently said:

“Instead of having to justify why it makes sense to introduce competition in some public services – as we are now doing with schools and in the NHS – the state will have to justify why it should ever operate a monopoly.”

Lansely himself sees the Thatcherite-style deregulation of utilities and telecoms as the inspiration for his NHS reforms; indeed Lansley himself worked as a civil servant under Norman Tebbit to open up telecoms to competition.

He remains sensitive on the subject, as witnessed on last week’s Any Questions when he was caught – eight times – in a “Paxman/Howard”-style question avoidance, when quizzed by Jonathan Dimbleby on whether GPs will be able to choose between providers of equal quality on the basis of price.

Yet the threat of a “race-to-the-bottom” on price remains a threat, given the Health and Social Care Bill will create an economic regulator in the NHS, known as Monitor, with a primary remit to promote more competition.

Lansley recently appointed as Monitor’s chair former McKinsey mangement consultant David Bennett, who, when interviewed by the The Times (£) about the NHS reforms, was clear that:

“It is too easy to say, ‘How can you compare buying electricity with buying healthcare services?’ Of course they are different. I would say… there are important similarities and that’s what convinces me that choice and competition will work in the NHS as it did in those other sectors…

“We, in the UK, have done this in other sectors before. We did it in gas, we did it in power, we did it in telecoms, we’ve done it in rail, we’ve done it in water, so there’s actually 20 years of experience in taking monopolistic, monolithic markets and providers and exposing them to economic regulation.”

Yet as Shirley Williams said, in criticising NHS reforms in a column in The Times (£) this week:

“British Gas raised energy prices by 7 per cent last year, while making £700 million in profits. Since rail privatisation, the UK had paid the highest fares in Europe. Should this inspire confidence?”

The next development will be the government’s plans for “Any Willing Provider” – in other words the private and voluntary sector alongside the NHS – to be opened up to NHS services provided outside hospital, such as district nursing and rehabilitation.

National tariffs do not exist here, allowing private firms to “cream-skim” the more profitable NHS services, leaving the financial burden of more complex work for NHS services to pick up.

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