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Financing the U.K. national health services
329
Health Policy, 6 (1986) 329-340 Elsevier HPE 00122
Financing services
the U.K. national
health
Alan Maynard Centre for Health Economics, Accepted
for publication
University
20 September
of York, England
1986
Summary In this article a short description is given of the national health services in the United Kingdom. It is observed that the ways of financing the services have changed only marginally over the decades. Furthermore, it is pointed out that not much is really known about the efffciency of health care provision in the NHS. lt is clear, however, that there are many adverse incentives in financing and payment errangements. A number of recent innovations to overcome the W probfems are being discussed as well as a number of ideas to change organisational structures and incentive systems. One of the more promising ways seems to be to reorgenise buying power of the financing agencies within the NHS and use this to countervail the power of providers. financing national health service; incentive structures
Introduction Although there has been much rhetoric produced by politicians of competing parties about the reform of the National Health Service, the substance of the Service has remained largely unaltered since 1948: the system is publicly financed and publicly provided. Since 1979 when the Conservatives under Margaret Thatcher formed the Government, the rhetoric about the NHS has intensified and the case for ‘privatisation’ has been advanced by some factions within the Administration. Despite this Mrs. Thatcher stated in 1982, and this was reiterated in the 1983 election manifesto, that the “NHS was safe”, and that:
Address fur correspondence: Prof. Alan Maynard, Ph.D., Director, Centre for Health Economics, University of York, Heslington, York YOl SDD, U.K.
016%8510/86/$03.50 0 1986 Elsevier Science Publishers B.V. (Biomedical Division)
330 “the principle that adequate health care should be provided for all, regardless of their ability to pay, must be the foundation of any arrangements for financing the health service” (Mrs. Thatcher, speech at the Conservative Party Conference, Brighton, October 8th, 1982).
It is against this background that this paper seeks to examine the financing of the National Health Service and the small private health care sector. The existing structure of health service finance is set out in section 1 and this system is best described as being characterised by passive use by public and private agencies of buying power and little evaluation of inputs, processes and outcomes. In the next section service developments, public and private, introduced since 1979 in particular are examined and this might be described as more active use of buying power, with still too little consideration of the evaluation of innovations. In the final substantive section, the forecast scenario in which there is active use of buying power within and without the NHS is analysed, and an era of more vigorous evaluation of input-output relationships is anticipated.
Financing the National
Health Service: the existing system
(a) The source of funds The National Health Service’s budget in 1985/86 is nearly 220 billion and is financed largely out of general taxation. Eighty-six (86) per cent of total expenditure is financed out of general taxation and the rest of the budget is financed out of national (social) insurance contributions (11 per cent of the total) and user charges (co-payments). The personal social services (PSS) which are managed by local government complement the NHS with a variety of services (e.g., residential care for the elderly, the mentally ill and handicapped and children, social work services and other inputs for community care) are also largely publicly financed with 84 per cent of finance being derived from local taxes (the rate, a property tax) and central government grants. A further 14 per cent of PSS finance is derived from user charges. The importance of these sources of finance have changed only marginally over the decades. NHS user charges are derived largely from prescription charges (22.20 per item in 1986) and dental charges: in some places the latter service has been privatised de facto with practitioners charging full cost fees. However, these charges are very selective with exemptions for children, expectant mothers, the elderly and the poor. The result of these rules is that, for instance, only 17 per cent of prescriptions are now paid for by consumers directly (another 6 per cent pay for their drugs with an annual bulk purchase contract or ticket). The shrinking capacity of these user charges to generate revenue may induce the present Government to contemplate new charges (e.g., charges for each visit to a GP) to maintain the relative size of user charges to the finance of the NHS. The private health care sector is financed with resources from the public and private sectors. The private acute sector provides cold, elective surgery in 9800 private sector beds and about 2500 NHS pay beds (private sector beds in NHS
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hospitals). This is financed, usually with zero co-payments and deductibles, by notfor-profit and a small number of for-profit insurers. The largest insurer is the British United Provident Association (BUPA) which has nearly 60 per cent of the market. The total size of this market is small, f462 million from insurance and another 30 per cent of self-finance, i.e. about f600 million in total. However, although small in relation to the total NHS, it is quite large in relation to NHS cold surgery alone: about 1 in 8 cold surgical interventions in England are now carried out in the private sector and financed with non-NHS funds. The other substantial private care sector is that providing residential and nursing home care for the elderly in particular. Those of the elderly with limited resources (less than 23000 in capital) can acquire social security to finance their accommodation. This public finance of private care grew rapidly until 1985 when the central government set limits on these payments. (b) Financing the constituent parts of the NHS There are four National Health Services in the United Kingdom: one each in England, Scotland, Wales and Northern Ireland. Each NHS has an independent budget and is controlled by national bodies in each of the constituent parts of the U.K.: the Department of Health and Social Security in London controls the English NHS, the Scottish Home and Health Department in Edinburgh controls the Scottish NHS, the Welsh Office controls the Welsh NHS, and a separate Ministry of Health controls the NHS in Northern Ireland. Each of these National Health Services have slightly different organisations for the provision of health care and each nation has a resource allocation formula which is slightly different from its neighbours. The level of resource endowment between the 4 countries is very unequal with the Scats and the Irish having had higher resource endowments for generations. Indeed, if the hospital budgets of the 4 countries are aggregated and divided according to the English resource allocation working party (RAWP) budget formula, the Scats would lose over 19 per cent and the Irish would lose nearly 27 per cent of their respective budgets. As can be seen from Table 1, these inequalities seem to be increasing rather than declining [1,2]. The price of retaining the Celtic fringe nations in the English Union is high for the Table 1 The effects of redistributing the Revenue Hospital Budgets (using RAWP)”
England Wales Scotland N. Ireland
1977-78
1984-85
1985-86
+ 2.21 + 1.56 -14.94 - 13.65
+ 4.07 + 1.88 -19.57 -26.99
+ 4.11 + 0.32 -19.32 -26.94
a All data are percentages and indicate the gains (+) and losses (-) arising from the application of the Resource Allocation Working Party (RAWP) formula to the HCHS current budgets of the four countries. Taken from Refs. 1 and 2.
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English who would get an increase in their budget of over 4 per cent if the U.K.NHS budget was ‘RAWPed’. Each of the individual National Health Services is compartmentalised to some degree. The English NHS is divided into 3 sectors. The hospital and community health services (HCHS) budget is cash limited and divided amongst the 14 constituent Regional Health Authorities (RHAs) of the English NHS by a formula (RAWP) based on population weighted by standardised mortality ratios (SMRs). The SMR weighting is used in an attempt to direct resources to Regions with greater need (higher mortality). Similar formulae are used in Scotland, Wales and Northern Ireland. The revenue of the 14 Regional Health Authorities (RHAs) in England is determined by the RAWP formula. Each RHA has discretion as to how it distributes resources amongst their constituent District Health Authorities. Some use the RAWP formula at the sub-regional level and others augment with other indicators of social deprivation (e.g., socio-economic group profiles). The effect of RAWP since its implementation in 1977 has been to reduce the differences in the financial capacity of the English Regions. By 1986-87 all Regions, except North East and North West Thames, will be within 4 per cent of their RAWP target incomes. However, equalising financial capacity does not necessarily lead to equalisation of access to health care or equalisation of health status between the Regions. RAWP is merely one policy instrument for reducing inequalities in health and health care and the NHS is yet to complement it with other instruments which will ensure the achievement of equity and efficiency targets. The family practitioner services (FPS) budget finances primary care (i.e., the services of general practitioners (GPs), the cost of the drugs they prescribe, and the services of pharmacists, dentists and opticians working outside hospitals). This budget is ‘open-ended’ and demand determined, i.e., expenditure is determined by the practices of GPs and other practitioners contracted to the FPS to provide services for patients. Furthermore, no attempt is made within the budgetary process to distribute FPS services across England in relation to ‘need’. As a consequence, the pattern of provision is very unequal with practitioners locating in pleasant areas (e.g., the South West) rather than deprived inner city areas where facilities are poor. The meagre attempts to make this distribution by physical (e.g., ‘negative direction’, i.e., closing over-doctored areas to new entrants) rather than by financial means have had little success. Local authority (government) social services (LASS) are financed from local taxes and central government grants. Local government is controlled extensively by central government. The LASS budget is cash limited and there is an element of equalisation of financial capacity by central government in that their grants for LASS, the rate support grant, has a ‘needs’ element in it. The separation of these budgets and the different incentive structures affecting the behaviour of the managers of these compartments of the NHS lead to outcomes which may not be efficient. The hospital manager can shift patients and costs from the HCHS budget to the FPS and LASS shortening length of stay and discharging patients into the community. He can discharge poor elderly patients into private
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sector nursing and residential homes and shift the cost of this care from the HCHS budget and to the social security budget. Mentally ill and mentally handicapped patients can be shifted in a similar manner. The general practitioner can indulge in supplier reduced demand, his income is not affected very much by leisure maximisation behaviour, and shift patients out of his surgery and onto the HCHS budget to get consultant diagnoses and investigations in pathology and radiology departments. There is a very large variation geographically in referral rates and little attempt to identify and enforce efficient practices. The GP refers the patient to hospital and the costs of such referrals are then met fully by the HCHS budget. The absence of evaluative results means that managers do not know the efficient characteristics of practice across the component parts of the NHS. Indeed, the cost and utilisation data in the NHS are so poor that it is impossible to identify the cost of, for instance, a hernia procedure, let alone the variation in such costs across consultants, Districts and Regions. Routine utilisation data have been available for decades but only recently have they been used for system-wide monitoring. The continued absence of outcome data makes even this process monitoring of limited use given its ambiguity in relation to identifying efficient input-outcome relationships. The consequence of the current financial arrangements for the constituent parts of the NHS is that there is no incentive to achieve across system or within compartment efficiency in the Service. Those managers in the cash limited parts of the NHS (i.e., HCHS and LASS) have an incentive to stay within budget but whether the means they use to achieve this end are efficient is unknown due to lack of evaluation. No manager has an incentive to provide client group care at least cost to the whole system: there is control of budgets in some parts of the NHS but no systematic evaluation of costs and outcomes or trade-offs in these parameters at the margin [3]. (c) Financing health care providers The perverse incentives in the structure of the NHS are complemented by the effects of the remuneration system on the behaviour of health care providers, in particular doctors. The NHS consultant is the leader of a team of junior staff and it is his role to delegate work and maintain the output and the quality of the health care offered by his ‘firm’. Each firm is relatively independent having internal rules for the division of labour which are determined independently by the consultant. The consultant (specialist) is appointed generally in his late 30s after an apprenticeship in a firm and after having acquired further (Royal College membership) qualifications. The consultant is paid a salary and appointed for life, i.e., until retirement at age 60 (women) or 65 (men). If his contract is full-time he can earn up to 10 per cent of his salary from private sector work. If the contract is part-time the doctor can do as much private work as he likes. Both contracts, full-time (and the 10 per cent rule) and part-time, tend to be monitored very little. About 1 in 3
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consultants are given distinction awards by a group of their peers. The most generous of these awards (the A+) can double the consultant’s salary. The effects of these arrangements are not well evaluated. There are a few consultants who behave in a deviant fashion consuming on the job leisure (e.g., having low activity rates). Given existing conventions and contracts there is little the employer can do to remedy such deviance. The consultant’s contract is held by the Region (RHA) but the consultant is paid and works for the District (DHA). The contract of employment is so vague that it is difficult to prove a breach. Another form of deviance is private sector work. The full-time NHS consultant can only earn 10 per cent from private work but adherence to these rules is not monitored in many Districts. Part-time NHS consultants can practice ‘NHS absence and private sector income maximisation’. However, the Thatcher Government has sought to improve the monitoring of the public-private margin, in particular the use of NHS facilities for private work. This has led to the identification of some contractual deviations. It is difficult to determine the extent of consultant deviance with regard to their contract. Casual empiricism indicates that the large majority of the consultant workforce work long hours providing good quality care. However, until the consultants’ work is monitored and evaluated more carefully, such a conclusion will not be possible to verify. The general practitioner derives his income from a variety of sources. About 45 per cent of his income comes from capitation fees, the average size of the GP’s list is about 2100 people. In addition to these capitation fees there are fees per item of service, mostly for preventive care such as cervical cytology, immunisation and vaccination, and payments relate to seniority and trainee status. The target net income is &25080 but it is not unusual for a GP to be earning f30 000 per year by the age of 30. The GP contract was revised in the 1960s and since then its attractiveness compared to hospital work has increased because of its relative financial advantages and because access to general practice is open, whilst access to hospital employment is constrained by HCHS cash limits. As a consequence of this the stock of GPs has been increasing annually by 1.8 per cent in recent years and the openended (demand determined) FPS budget has been growing rapidly too. Despite the increase in the size of the GP stock and the larger FPS expenditure, the nature of the services provided by GPs is largely unknown. GPs are self-employed and have contracts to provide health care for their patients. The nature of their contract is extremely vague: “To render to patients all necessary and appropriate personal medical services of a type usually provided by general medical practitioners.”
No attempt has been made to define the terms of this contractual obligation or investigate what services are in fact offered by GPs, i.e., this statement is nonsense. This ignorance about the processes of general practice has not prevented trade union (i.e., the British Medical Association) organisations asserting that it is ‘good
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value for money’. However this assertion cannot be proved because of the absence of even the most routine collection and monitoring of data about input and process. Most Family Practitioner Committees (FPCs) which employ GPs are not computerised and until this omission is remedied in two or three years, rigourous evaluation of the services provided by GPs will not be possible. Until these data are available only casual empiricism is available and, as in the hospital sector, this gives the impression of adequacy for the majority of practitioners but great variations in practice and clear evidence of some inefficient and inadequate practices. The methods by which NHS practitioners, hospital and primary care, are remunerated are complex and little has been done to evaluate their effects on process or outcome. Routine data about process have been collected for the hospital system but its analysis is limited even if increasing. Few routine data have been collected about general practice. When such data are available and incorporated into the evaluation of practitioners it is likely that the conventions of job security will be amended and replaced by contract review.
Financing the National
Health Service: recent innovations
An awareness of some of the problems set out in the preceding section is gradually permeating official policy making and leading to policy makers using more aggressively their market powers as buyers. This awareness manifests itself in the Government’s desire to improve the management of the NHS and the recognition of the fact that to do this, information, including price signals, will have to be improved. One paradox of these policies is that the rhetoric of the Government continues to assert that the NHS is ‘over-administered’. In fact its management costs are very low (less than 5 per cent of revenue) and consequently improvements in management are made more difficult to achieve. Indeed the strict (socialist) manpower controls of the present Government has led to a ‘boom’ in private consultancy businesses working to assist NHS managers. The management innovations in the NHS have taken place against a background of little change in the finance of public and private health care systems. The Conservative Government has maintained the sources of finance: nearly 97 per cent coming from taxation (including social insurance contributions). The private sector after an initial boom in the 1979-81 period has stagnated in the face of a major cost containment problem. It is now growing at 4 or 5 per cent a year and its prosperity depends to a considerable extent on the NHS not cutting the waiting time for cold surgery. The reduction in such NHS waiting times would be popular electorally and it is possible that short-term vote maximisation may damage the prosperity of the private sector seriously. Against this background both public and private managers are seeking to improve their control of the costs, quantities and quality of the health care they provide. In the public sector management reform has been shaped by the Griffiths report [4]. As a result of this report the system of ‘consensus’ team management introduced in 1974 has been replaced by a single general manager at the national
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(Department of Health), the regional, to the district and the unit (hospital or group of hospitals) levels. These managers are responsible for the achievement of their organisation’s objectives and they are all employed on short-term (3 to 5 year) contracts. The possibility of employment termination concentrates the mind of the manager in a wonderful fashion. However, efficient management requires better information about the NHS. This need is leading to several reforms. After careful planning by a committee chaired by Edith Kiirner, RHAs and DHAs will, in the next 3 years, reform their information systems to generate substantial improvements in the collection and monitoring of information about processes e.g. length of stay, and characteristics of admissions. The Korner reforms [5] will improve considerably, when implemented, the information about hospital processes. Some process data have already been made available in computer packages. John Yates and his colleagues at the Health Services Management Centre of Birmingham University have created packages which enable the manager to identify his unit’s inputs and processes in relation to the national average. These ‘performance indicators’ enable managers to identify and investigate their location in the national distribution. However, location in the tail of the distribution does not necessarily mean that practice is inefficient [6]. Both the Yates and the Department of Health’s set of performance indicators (p.i.s) enable managers to question practice but such data do not enable them to identify efficient practices. Such behaviour necessitates the production of input-outcome information and the pressure now is to supplement p.i.s with outcome information, in particular information about which procedures generate those desirable outcomes, additional life years and improved quality of life. Slowly quality adjusted life year (QALY) data are being generated within the NHS [6-81 and in North America [9]. In order to incorporate process and QALY data into the management process it is nessary to produce better cost data. To provide these data a variety of budgeting experiments are underway. The clinical accountability, service, planning and evaluation (CASPE) project located in half a dozen sites [lo] seeks to introduce ward budgets with shadow prices and empower ward teams to manage the budgets. Perhaps the most significant effect of the CASPE experiments is that they oblige the ward labour force (doctors and nurses) to agree who will do what, when. Such “contracts” can then form the basis for service delivery and the monitoring of performance. The incentives to cost minimise are limited because ward “savings” tend to be “clawed back” by the hospital management and the rewards for economy are limited. Like all such experiments, these are also limited to costs and processes as outcome data are so poor. In addition to these experiments the Department of Health has hired management consultants to introduce clinical budgeting systems in 5 test NHS districts. The success of these seems to be mixed but all DHA and RHA have to introduce management budgets before the end of the decade. Such budgets, when introduced, will be most useful if activities and outcomes can be costed but most NHS authorities are a long way away from this “nirvana” and their progress towards it is constrained by the lack of management resources, both in terms of quality and quantity.
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Independently of the drive to improve information about processes and costs in particular, the Government is seeking to compare Service costs with market costs. By the end of 1986 most health authorities will have gone out to tender for cleaning, catering and laundry services, i.e., public (NHS) and private bids are made for these contracts and the Authority generally accepts the lowest. The effects of this process have been salutary. Scarce NHS management resources have been used to examine a sector of the Service not scrutinised effectively for years. Not surprisingly “in house” bids (NHS) have often been at levels lower than existing costs. Private sector costs have also been cheaper because whilst these contractors pay basic public sector (Whitley Council) pay rates, they pay no bonuses or other fringe benefits and substitute capital for labour. By June 1986 the Government claimed savings of f52 million from this contracting out process. Another possible change to NHS financing is the review of the budget allocation (RAWP) process. The Government began its review in 1986 and is in a hurry to conclude its report by Christmas. This unseemly rush may lead to foolish decisions because of the absence of research results about the working of the existing RAWP or possible reformulations of it. With low levels of public expenditure growth, the RAWP system is generating severe problems in the greater London area, in which are located many marginal Parliamentary constituencies which the Government must hold to retain office after the next election. In part, these problems are the result of a long established and unnecessary concentration of teaching hospitals in the London area. One important element in the debate about RAWP is the critique of its logic to equalise access to health care by equalising financial capacity. If Yorkshire Region has a high score on the lung cancer standardised mortality ratio (SMR), it will attract additional funds. But these funds cannot be spent in a way to reduce that SMR, they can only be used to mitigate the effects of tobacco induced lung cancer. Consequently it may be sensible to replace or complement SMRs with data about avoidable morbidity or avoidable mortality, i.e., the RAWP process should direct resources to those areas which can use them efficiently to reduce ill health. Such arguments and competing proposals which advocate the use of competing measures of social deprivation [e.g. 11,121 require careful evaluation which is unlikely to be possible within the time period of the present review. Maybe the best measure of social deprivation would be income status or receipt of income maintenance (social security) payments. The preoccupation of the policy makers with the hospital sector appears to be changing as the emphasis shifts to the primary care sector. A Government discussion document on primary care [13] and a review of community nursing [14] contain some radical proposals. The former proposes to increase “consumer power” by requiring practitioners to provide more information about their practices, possibly with limited advertising. Also it is proposed to increase the GPs’ dependence on capitation payments, to about 70 per cent of average income, so that doctors will suffer a greater income loss if they lose patients. Additionally, it is proposed to define “good practice” and pay on allowance to those providing good quality care. These outline proposals are being elaborated in a public debate about remedying the deficiencies of the primary care system [15-171.
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Financing the National
Health Service: the future
In addition to these evolving innovations in the internal incentive system of the NHS, there are a number of radical proposals. The logic of the contracting out of catering, cleaning and laundry services is the extension of such mechanisms to portering, diagnostic services (e.g., pathology and radiology), and the curing and caring services. The present practices disadvantage Labour Party orientated trade unions whilst such extensions would threaten the incomes and employment of more Conservative voters. If contracting out saves money such reduced expenditure means that providers’ incomes and jobs are reduced and the implications of this are not lost on the competing political parties. Such considerations may inhibit all radical reforms. Another radical proposal is that of Enthoven [18] who envisages a District Health Authority (DHA) which buys all health care but provides none. The DHA would be publicly financed and give patients access regardless of willingness and ability to pay as happens now in the NHS. The Authority would buy its services from public or private providers on a short term, fixed price contractual basis. Such an innovation would provide a very sharp incentive for providers to be efficient because the consequence of inefficiency could be unemployment. This Enthoven proposal may not remedy the inefficiencies generated by the compartmentalisation of the NHS. An alternative proposal [19] envisages the general practitioner (GP) as budget holder for the whole health care system. Patients would select their GP and the practitioner would be responsible for providing all necessary health care during the life of the doctor-patient contract, The GP would ‘buyin’ care from hospitals and other providers on a contractual basis and any surpluses of patient payment revenue over health care expenditure would be his and his partners to spend. This proposal is similar to some types of Health Maintenance Organisation in the United States. In the United States it has been shown that HMOs provide a very strong incentive for providers to be economical: in general HMOs seem to be up to 40 per cent cheaper than fee per item of service systems of health care delivery [20,21]. However, economy in the use of resources may disadvantage some patients and, not surprisingly given the relative incentive structures of HMOs and fee per item of service payment system, it has now been shown that HMOs disadvantage the ill poor in terms of greater morbidity and a greater risk of death
M * Clearlythe
internal market or creating competitive market mechanisms with private or State financed health care systems has costs and benefits and any choice must be informed by an evaluation of these attributes in relation to policy goals. The attractions of extending market mechanisms to improve resource allocation in the NHS seem considerable but it is essential that such innovations are evaluated carefully. Unfortunately, one of the most inefficient traditions of the NHS is “to do” rather than “to do and to evaluate”. Another unfortunate NHS tradition is security of tenure for doctors in hospital and primary care. It is likely that this security of income and employment will be removed with short term rolling contracts being reviewed to ensure efficient physician behaviour.
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Conclusions The management of NHS resources is slowly improving. The path leading to the greater efficiency of scarce resources is impeded by powerful pressure groups and inadequate evaluation of existing practices and future options. The Thatcher Administration has created an environment of conservative “continuous revolution” in the NHS and the system’s uncertainties are making change easier to implement. In particular the buying power of the financing agencies within the NHS is being reorganised and used to countervail the power of providers. Slowly market mechanisms which may improve the performance of the NHS are being identified and explored, if cautiously. The collectivist objectives of the British NHS may yet be achieved more fully by arrangements long espoused by economists. Members of the economics profession must continue to be good Maoists if the costs and benefits of their proposals are to effect decision making. For as Mao Tse Tung argued: “If we have a correct theory but merely prate about it, pigeonhole it and do not put it into practice, then that theory, however good, is of no significance” [23].
References 1 Maynard, A. and Ludbrook, A., Applying the resource allocation fomulae to the constituent parts of the UK, Lancet, i (1980) 85-87. 2 Birch, S. and Maynard, A., Applying the resource allocation formulae to the constituent parts of the UK - revisited, Public Money, 6 (1986) 2154-2155. 3 Maynard, A., Budgeting in health care systems, Effective Health Care, 2 (1984) 41-50. 4 Department of Health and Social Security, The Management of the National Health Service, the Griffiths report, London, 1983. 5 Department of Health and Social Security, Steering Group on Health Services Information: First Report, HMSO, London, 1982. 6 Williams, A., Economics of coronary artery bypass grafting, British Medical Journal, 291 (1985) 326-329. 7 Williams, A., Screening for risk of coronary heart disease: is it worthwhile? Paper presented to a conference in Edinburgh, November, Centre for Health Economics, University of York, 1985. 8 Gudex, C., QALYs and their use in the health service, Discussion paper, Centre for Health Economics, University of York, 1986. 9 Torrance, G., Measurement of health state utilities for economic appraisal: a review, Journal of Health Economics, 5 (1986) l-30. 10 Wickings, I., Coles, J.M., Flux, R. and Howard, L., Review of clinical budgeting and cost experiments, British Medical Journal, 286 (1983) 575-578. 11 Jarman, B., Identification of underprivileged areas, British Medical Journal, 286 (1986) 1705-1707. 12 Townsend, P., Phillimore, P. and Beattie, A., Inequalities in Health in the Northern Region, Northern Regional Health Authority, Newcastle upon Tyne, 1986. 13 Department of Health and Social Security, Primary Health Care: an agenda for discussion, HMSO, London, 1986. 14 Department of Health and Social Security, Neighbourhood Nursing: a focus for care, HMSO, London, lY86. 15 Gray, D., Marinker, M. and Maynard, A., The doctor, the patient and their contract: I. The general practitioner’s contract: why change it? British Medical Journal, 292 (1986) 1313-1315. 16 Gray, D., Marinker, M. and Maynard, A., The doctor, the patient and their contract: II. A good practice allowance: is it feasible? British Medical Journal, 292 (1986) 1374-1376.
340 17 Gray, D., Marinker, M. and Maynard, A., The doctor, the patient and their contract: III. Alternative contracts: are they viable? British Medical Journal, 292 (1986) 1438-1440. 18 Enthoven, A.C., Reflections on the management of the NHS. Nuffield Provincial Hospitals Trust, Occasional Paper 5, London, 1985. 19 Maynard, A., Performance incentives. In G. Teeling-Smith (ed.), Health, Education and General Practice, Office of Health Economics, London, 1985. 20 Luft, H., Health Maintenance Organizations, Wiley, New York, 1980. 21 Manning, W.G., Lecbowitz, A., Goldberg, G.A., Rogers, W.H. and Newhouse, J.P., A controlled trial on the effect of prepaid group practice on use of services, The New England Journal of Medicine, 310 (1984) 1505-1510. 22 Ware, J., Brook, R., Rogers, W.H., Keeler, E.D., Davies, A., Sherbourne, G., Goldberg, G.A., Camp, P. and Newhouse, J.P., Health insurance: comparison of health outcomes at Health Maintenance Organization with those of fee per item of service care, Lancet, i (1986) 1017-1022. 23 Mao Tse-Tung, Quotations from Chairman Mao Tse-Tung, Peking, 1986.
Health Policy, 6 (1986) 329-340 Elsevier HPE 00122
Financing services
the U.K. national
health
Alan Maynard Centre for Health Economics, Accepted
for publication
University
20 September
of York, England
1986
Summary In this article a short description is given of the national health services in the United Kingdom. It is observed that the ways of financing the services have changed only marginally over the decades. Furthermore, it is pointed out that not much is really known about the efffciency of health care provision in the NHS. lt is clear, however, that there are many adverse incentives in financing and payment errangements. A number of recent innovations to overcome the W probfems are being discussed as well as a number of ideas to change organisational structures and incentive systems. One of the more promising ways seems to be to reorgenise buying power of the financing agencies within the NHS and use this to countervail the power of providers. financing national health service; incentive structures
Introduction Although there has been much rhetoric produced by politicians of competing parties about the reform of the National Health Service, the substance of the Service has remained largely unaltered since 1948: the system is publicly financed and publicly provided. Since 1979 when the Conservatives under Margaret Thatcher formed the Government, the rhetoric about the NHS has intensified and the case for ‘privatisation’ has been advanced by some factions within the Administration. Despite this Mrs. Thatcher stated in 1982, and this was reiterated in the 1983 election manifesto, that the “NHS was safe”, and that:
Address fur correspondence: Prof. Alan Maynard, Ph.D., Director, Centre for Health Economics, University of York, Heslington, York YOl SDD, U.K.
016%8510/86/$03.50 0 1986 Elsevier Science Publishers B.V. (Biomedical Division)
330 “the principle that adequate health care should be provided for all, regardless of their ability to pay, must be the foundation of any arrangements for financing the health service” (Mrs. Thatcher, speech at the Conservative Party Conference, Brighton, October 8th, 1982).
It is against this background that this paper seeks to examine the financing of the National Health Service and the small private health care sector. The existing structure of health service finance is set out in section 1 and this system is best described as being characterised by passive use by public and private agencies of buying power and little evaluation of inputs, processes and outcomes. In the next section service developments, public and private, introduced since 1979 in particular are examined and this might be described as more active use of buying power, with still too little consideration of the evaluation of innovations. In the final substantive section, the forecast scenario in which there is active use of buying power within and without the NHS is analysed, and an era of more vigorous evaluation of input-output relationships is anticipated.
Financing the National
Health Service: the existing system
(a) The source of funds The National Health Service’s budget in 1985/86 is nearly 220 billion and is financed largely out of general taxation. Eighty-six (86) per cent of total expenditure is financed out of general taxation and the rest of the budget is financed out of national (social) insurance contributions (11 per cent of the total) and user charges (co-payments). The personal social services (PSS) which are managed by local government complement the NHS with a variety of services (e.g., residential care for the elderly, the mentally ill and handicapped and children, social work services and other inputs for community care) are also largely publicly financed with 84 per cent of finance being derived from local taxes (the rate, a property tax) and central government grants. A further 14 per cent of PSS finance is derived from user charges. The importance of these sources of finance have changed only marginally over the decades. NHS user charges are derived largely from prescription charges (22.20 per item in 1986) and dental charges: in some places the latter service has been privatised de facto with practitioners charging full cost fees. However, these charges are very selective with exemptions for children, expectant mothers, the elderly and the poor. The result of these rules is that, for instance, only 17 per cent of prescriptions are now paid for by consumers directly (another 6 per cent pay for their drugs with an annual bulk purchase contract or ticket). The shrinking capacity of these user charges to generate revenue may induce the present Government to contemplate new charges (e.g., charges for each visit to a GP) to maintain the relative size of user charges to the finance of the NHS. The private health care sector is financed with resources from the public and private sectors. The private acute sector provides cold, elective surgery in 9800 private sector beds and about 2500 NHS pay beds (private sector beds in NHS
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hospitals). This is financed, usually with zero co-payments and deductibles, by notfor-profit and a small number of for-profit insurers. The largest insurer is the British United Provident Association (BUPA) which has nearly 60 per cent of the market. The total size of this market is small, f462 million from insurance and another 30 per cent of self-finance, i.e. about f600 million in total. However, although small in relation to the total NHS, it is quite large in relation to NHS cold surgery alone: about 1 in 8 cold surgical interventions in England are now carried out in the private sector and financed with non-NHS funds. The other substantial private care sector is that providing residential and nursing home care for the elderly in particular. Those of the elderly with limited resources (less than 23000 in capital) can acquire social security to finance their accommodation. This public finance of private care grew rapidly until 1985 when the central government set limits on these payments. (b) Financing the constituent parts of the NHS There are four National Health Services in the United Kingdom: one each in England, Scotland, Wales and Northern Ireland. Each NHS has an independent budget and is controlled by national bodies in each of the constituent parts of the U.K.: the Department of Health and Social Security in London controls the English NHS, the Scottish Home and Health Department in Edinburgh controls the Scottish NHS, the Welsh Office controls the Welsh NHS, and a separate Ministry of Health controls the NHS in Northern Ireland. Each of these National Health Services have slightly different organisations for the provision of health care and each nation has a resource allocation formula which is slightly different from its neighbours. The level of resource endowment between the 4 countries is very unequal with the Scats and the Irish having had higher resource endowments for generations. Indeed, if the hospital budgets of the 4 countries are aggregated and divided according to the English resource allocation working party (RAWP) budget formula, the Scats would lose over 19 per cent and the Irish would lose nearly 27 per cent of their respective budgets. As can be seen from Table 1, these inequalities seem to be increasing rather than declining [1,2]. The price of retaining the Celtic fringe nations in the English Union is high for the Table 1 The effects of redistributing the Revenue Hospital Budgets (using RAWP)”
England Wales Scotland N. Ireland
1977-78
1984-85
1985-86
+ 2.21 + 1.56 -14.94 - 13.65
+ 4.07 + 1.88 -19.57 -26.99
+ 4.11 + 0.32 -19.32 -26.94
a All data are percentages and indicate the gains (+) and losses (-) arising from the application of the Resource Allocation Working Party (RAWP) formula to the HCHS current budgets of the four countries. Taken from Refs. 1 and 2.
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English who would get an increase in their budget of over 4 per cent if the U.K.NHS budget was ‘RAWPed’. Each of the individual National Health Services is compartmentalised to some degree. The English NHS is divided into 3 sectors. The hospital and community health services (HCHS) budget is cash limited and divided amongst the 14 constituent Regional Health Authorities (RHAs) of the English NHS by a formula (RAWP) based on population weighted by standardised mortality ratios (SMRs). The SMR weighting is used in an attempt to direct resources to Regions with greater need (higher mortality). Similar formulae are used in Scotland, Wales and Northern Ireland. The revenue of the 14 Regional Health Authorities (RHAs) in England is determined by the RAWP formula. Each RHA has discretion as to how it distributes resources amongst their constituent District Health Authorities. Some use the RAWP formula at the sub-regional level and others augment with other indicators of social deprivation (e.g., socio-economic group profiles). The effect of RAWP since its implementation in 1977 has been to reduce the differences in the financial capacity of the English Regions. By 1986-87 all Regions, except North East and North West Thames, will be within 4 per cent of their RAWP target incomes. However, equalising financial capacity does not necessarily lead to equalisation of access to health care or equalisation of health status between the Regions. RAWP is merely one policy instrument for reducing inequalities in health and health care and the NHS is yet to complement it with other instruments which will ensure the achievement of equity and efficiency targets. The family practitioner services (FPS) budget finances primary care (i.e., the services of general practitioners (GPs), the cost of the drugs they prescribe, and the services of pharmacists, dentists and opticians working outside hospitals). This budget is ‘open-ended’ and demand determined, i.e., expenditure is determined by the practices of GPs and other practitioners contracted to the FPS to provide services for patients. Furthermore, no attempt is made within the budgetary process to distribute FPS services across England in relation to ‘need’. As a consequence, the pattern of provision is very unequal with practitioners locating in pleasant areas (e.g., the South West) rather than deprived inner city areas where facilities are poor. The meagre attempts to make this distribution by physical (e.g., ‘negative direction’, i.e., closing over-doctored areas to new entrants) rather than by financial means have had little success. Local authority (government) social services (LASS) are financed from local taxes and central government grants. Local government is controlled extensively by central government. The LASS budget is cash limited and there is an element of equalisation of financial capacity by central government in that their grants for LASS, the rate support grant, has a ‘needs’ element in it. The separation of these budgets and the different incentive structures affecting the behaviour of the managers of these compartments of the NHS lead to outcomes which may not be efficient. The hospital manager can shift patients and costs from the HCHS budget to the FPS and LASS shortening length of stay and discharging patients into the community. He can discharge poor elderly patients into private
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sector nursing and residential homes and shift the cost of this care from the HCHS budget and to the social security budget. Mentally ill and mentally handicapped patients can be shifted in a similar manner. The general practitioner can indulge in supplier reduced demand, his income is not affected very much by leisure maximisation behaviour, and shift patients out of his surgery and onto the HCHS budget to get consultant diagnoses and investigations in pathology and radiology departments. There is a very large variation geographically in referral rates and little attempt to identify and enforce efficient practices. The GP refers the patient to hospital and the costs of such referrals are then met fully by the HCHS budget. The absence of evaluative results means that managers do not know the efficient characteristics of practice across the component parts of the NHS. Indeed, the cost and utilisation data in the NHS are so poor that it is impossible to identify the cost of, for instance, a hernia procedure, let alone the variation in such costs across consultants, Districts and Regions. Routine utilisation data have been available for decades but only recently have they been used for system-wide monitoring. The continued absence of outcome data makes even this process monitoring of limited use given its ambiguity in relation to identifying efficient input-outcome relationships. The consequence of the current financial arrangements for the constituent parts of the NHS is that there is no incentive to achieve across system or within compartment efficiency in the Service. Those managers in the cash limited parts of the NHS (i.e., HCHS and LASS) have an incentive to stay within budget but whether the means they use to achieve this end are efficient is unknown due to lack of evaluation. No manager has an incentive to provide client group care at least cost to the whole system: there is control of budgets in some parts of the NHS but no systematic evaluation of costs and outcomes or trade-offs in these parameters at the margin [3]. (c) Financing health care providers The perverse incentives in the structure of the NHS are complemented by the effects of the remuneration system on the behaviour of health care providers, in particular doctors. The NHS consultant is the leader of a team of junior staff and it is his role to delegate work and maintain the output and the quality of the health care offered by his ‘firm’. Each firm is relatively independent having internal rules for the division of labour which are determined independently by the consultant. The consultant (specialist) is appointed generally in his late 30s after an apprenticeship in a firm and after having acquired further (Royal College membership) qualifications. The consultant is paid a salary and appointed for life, i.e., until retirement at age 60 (women) or 65 (men). If his contract is full-time he can earn up to 10 per cent of his salary from private sector work. If the contract is part-time the doctor can do as much private work as he likes. Both contracts, full-time (and the 10 per cent rule) and part-time, tend to be monitored very little. About 1 in 3
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consultants are given distinction awards by a group of their peers. The most generous of these awards (the A+) can double the consultant’s salary. The effects of these arrangements are not well evaluated. There are a few consultants who behave in a deviant fashion consuming on the job leisure (e.g., having low activity rates). Given existing conventions and contracts there is little the employer can do to remedy such deviance. The consultant’s contract is held by the Region (RHA) but the consultant is paid and works for the District (DHA). The contract of employment is so vague that it is difficult to prove a breach. Another form of deviance is private sector work. The full-time NHS consultant can only earn 10 per cent from private work but adherence to these rules is not monitored in many Districts. Part-time NHS consultants can practice ‘NHS absence and private sector income maximisation’. However, the Thatcher Government has sought to improve the monitoring of the public-private margin, in particular the use of NHS facilities for private work. This has led to the identification of some contractual deviations. It is difficult to determine the extent of consultant deviance with regard to their contract. Casual empiricism indicates that the large majority of the consultant workforce work long hours providing good quality care. However, until the consultants’ work is monitored and evaluated more carefully, such a conclusion will not be possible to verify. The general practitioner derives his income from a variety of sources. About 45 per cent of his income comes from capitation fees, the average size of the GP’s list is about 2100 people. In addition to these capitation fees there are fees per item of service, mostly for preventive care such as cervical cytology, immunisation and vaccination, and payments relate to seniority and trainee status. The target net income is &25080 but it is not unusual for a GP to be earning f30 000 per year by the age of 30. The GP contract was revised in the 1960s and since then its attractiveness compared to hospital work has increased because of its relative financial advantages and because access to general practice is open, whilst access to hospital employment is constrained by HCHS cash limits. As a consequence of this the stock of GPs has been increasing annually by 1.8 per cent in recent years and the openended (demand determined) FPS budget has been growing rapidly too. Despite the increase in the size of the GP stock and the larger FPS expenditure, the nature of the services provided by GPs is largely unknown. GPs are self-employed and have contracts to provide health care for their patients. The nature of their contract is extremely vague: “To render to patients all necessary and appropriate personal medical services of a type usually provided by general medical practitioners.”
No attempt has been made to define the terms of this contractual obligation or investigate what services are in fact offered by GPs, i.e., this statement is nonsense. This ignorance about the processes of general practice has not prevented trade union (i.e., the British Medical Association) organisations asserting that it is ‘good
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value for money’. However this assertion cannot be proved because of the absence of even the most routine collection and monitoring of data about input and process. Most Family Practitioner Committees (FPCs) which employ GPs are not computerised and until this omission is remedied in two or three years, rigourous evaluation of the services provided by GPs will not be possible. Until these data are available only casual empiricism is available and, as in the hospital sector, this gives the impression of adequacy for the majority of practitioners but great variations in practice and clear evidence of some inefficient and inadequate practices. The methods by which NHS practitioners, hospital and primary care, are remunerated are complex and little has been done to evaluate their effects on process or outcome. Routine data about process have been collected for the hospital system but its analysis is limited even if increasing. Few routine data have been collected about general practice. When such data are available and incorporated into the evaluation of practitioners it is likely that the conventions of job security will be amended and replaced by contract review.
Financing the National
Health Service: recent innovations
An awareness of some of the problems set out in the preceding section is gradually permeating official policy making and leading to policy makers using more aggressively their market powers as buyers. This awareness manifests itself in the Government’s desire to improve the management of the NHS and the recognition of the fact that to do this, information, including price signals, will have to be improved. One paradox of these policies is that the rhetoric of the Government continues to assert that the NHS is ‘over-administered’. In fact its management costs are very low (less than 5 per cent of revenue) and consequently improvements in management are made more difficult to achieve. Indeed the strict (socialist) manpower controls of the present Government has led to a ‘boom’ in private consultancy businesses working to assist NHS managers. The management innovations in the NHS have taken place against a background of little change in the finance of public and private health care systems. The Conservative Government has maintained the sources of finance: nearly 97 per cent coming from taxation (including social insurance contributions). The private sector after an initial boom in the 1979-81 period has stagnated in the face of a major cost containment problem. It is now growing at 4 or 5 per cent a year and its prosperity depends to a considerable extent on the NHS not cutting the waiting time for cold surgery. The reduction in such NHS waiting times would be popular electorally and it is possible that short-term vote maximisation may damage the prosperity of the private sector seriously. Against this background both public and private managers are seeking to improve their control of the costs, quantities and quality of the health care they provide. In the public sector management reform has been shaped by the Griffiths report [4]. As a result of this report the system of ‘consensus’ team management introduced in 1974 has been replaced by a single general manager at the national
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(Department of Health), the regional, to the district and the unit (hospital or group of hospitals) levels. These managers are responsible for the achievement of their organisation’s objectives and they are all employed on short-term (3 to 5 year) contracts. The possibility of employment termination concentrates the mind of the manager in a wonderful fashion. However, efficient management requires better information about the NHS. This need is leading to several reforms. After careful planning by a committee chaired by Edith Kiirner, RHAs and DHAs will, in the next 3 years, reform their information systems to generate substantial improvements in the collection and monitoring of information about processes e.g. length of stay, and characteristics of admissions. The Korner reforms [5] will improve considerably, when implemented, the information about hospital processes. Some process data have already been made available in computer packages. John Yates and his colleagues at the Health Services Management Centre of Birmingham University have created packages which enable the manager to identify his unit’s inputs and processes in relation to the national average. These ‘performance indicators’ enable managers to identify and investigate their location in the national distribution. However, location in the tail of the distribution does not necessarily mean that practice is inefficient [6]. Both the Yates and the Department of Health’s set of performance indicators (p.i.s) enable managers to question practice but such data do not enable them to identify efficient practices. Such behaviour necessitates the production of input-outcome information and the pressure now is to supplement p.i.s with outcome information, in particular information about which procedures generate those desirable outcomes, additional life years and improved quality of life. Slowly quality adjusted life year (QALY) data are being generated within the NHS [6-81 and in North America [9]. In order to incorporate process and QALY data into the management process it is nessary to produce better cost data. To provide these data a variety of budgeting experiments are underway. The clinical accountability, service, planning and evaluation (CASPE) project located in half a dozen sites [lo] seeks to introduce ward budgets with shadow prices and empower ward teams to manage the budgets. Perhaps the most significant effect of the CASPE experiments is that they oblige the ward labour force (doctors and nurses) to agree who will do what, when. Such “contracts” can then form the basis for service delivery and the monitoring of performance. The incentives to cost minimise are limited because ward “savings” tend to be “clawed back” by the hospital management and the rewards for economy are limited. Like all such experiments, these are also limited to costs and processes as outcome data are so poor. In addition to these experiments the Department of Health has hired management consultants to introduce clinical budgeting systems in 5 test NHS districts. The success of these seems to be mixed but all DHA and RHA have to introduce management budgets before the end of the decade. Such budgets, when introduced, will be most useful if activities and outcomes can be costed but most NHS authorities are a long way away from this “nirvana” and their progress towards it is constrained by the lack of management resources, both in terms of quality and quantity.
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Independently of the drive to improve information about processes and costs in particular, the Government is seeking to compare Service costs with market costs. By the end of 1986 most health authorities will have gone out to tender for cleaning, catering and laundry services, i.e., public (NHS) and private bids are made for these contracts and the Authority generally accepts the lowest. The effects of this process have been salutary. Scarce NHS management resources have been used to examine a sector of the Service not scrutinised effectively for years. Not surprisingly “in house” bids (NHS) have often been at levels lower than existing costs. Private sector costs have also been cheaper because whilst these contractors pay basic public sector (Whitley Council) pay rates, they pay no bonuses or other fringe benefits and substitute capital for labour. By June 1986 the Government claimed savings of f52 million from this contracting out process. Another possible change to NHS financing is the review of the budget allocation (RAWP) process. The Government began its review in 1986 and is in a hurry to conclude its report by Christmas. This unseemly rush may lead to foolish decisions because of the absence of research results about the working of the existing RAWP or possible reformulations of it. With low levels of public expenditure growth, the RAWP system is generating severe problems in the greater London area, in which are located many marginal Parliamentary constituencies which the Government must hold to retain office after the next election. In part, these problems are the result of a long established and unnecessary concentration of teaching hospitals in the London area. One important element in the debate about RAWP is the critique of its logic to equalise access to health care by equalising financial capacity. If Yorkshire Region has a high score on the lung cancer standardised mortality ratio (SMR), it will attract additional funds. But these funds cannot be spent in a way to reduce that SMR, they can only be used to mitigate the effects of tobacco induced lung cancer. Consequently it may be sensible to replace or complement SMRs with data about avoidable morbidity or avoidable mortality, i.e., the RAWP process should direct resources to those areas which can use them efficiently to reduce ill health. Such arguments and competing proposals which advocate the use of competing measures of social deprivation [e.g. 11,121 require careful evaluation which is unlikely to be possible within the time period of the present review. Maybe the best measure of social deprivation would be income status or receipt of income maintenance (social security) payments. The preoccupation of the policy makers with the hospital sector appears to be changing as the emphasis shifts to the primary care sector. A Government discussion document on primary care [13] and a review of community nursing [14] contain some radical proposals. The former proposes to increase “consumer power” by requiring practitioners to provide more information about their practices, possibly with limited advertising. Also it is proposed to increase the GPs’ dependence on capitation payments, to about 70 per cent of average income, so that doctors will suffer a greater income loss if they lose patients. Additionally, it is proposed to define “good practice” and pay on allowance to those providing good quality care. These outline proposals are being elaborated in a public debate about remedying the deficiencies of the primary care system [15-171.
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Financing the National
Health Service: the future
In addition to these evolving innovations in the internal incentive system of the NHS, there are a number of radical proposals. The logic of the contracting out of catering, cleaning and laundry services is the extension of such mechanisms to portering, diagnostic services (e.g., pathology and radiology), and the curing and caring services. The present practices disadvantage Labour Party orientated trade unions whilst such extensions would threaten the incomes and employment of more Conservative voters. If contracting out saves money such reduced expenditure means that providers’ incomes and jobs are reduced and the implications of this are not lost on the competing political parties. Such considerations may inhibit all radical reforms. Another radical proposal is that of Enthoven [18] who envisages a District Health Authority (DHA) which buys all health care but provides none. The DHA would be publicly financed and give patients access regardless of willingness and ability to pay as happens now in the NHS. The Authority would buy its services from public or private providers on a short term, fixed price contractual basis. Such an innovation would provide a very sharp incentive for providers to be efficient because the consequence of inefficiency could be unemployment. This Enthoven proposal may not remedy the inefficiencies generated by the compartmentalisation of the NHS. An alternative proposal [19] envisages the general practitioner (GP) as budget holder for the whole health care system. Patients would select their GP and the practitioner would be responsible for providing all necessary health care during the life of the doctor-patient contract, The GP would ‘buyin’ care from hospitals and other providers on a contractual basis and any surpluses of patient payment revenue over health care expenditure would be his and his partners to spend. This proposal is similar to some types of Health Maintenance Organisation in the United States. In the United States it has been shown that HMOs provide a very strong incentive for providers to be economical: in general HMOs seem to be up to 40 per cent cheaper than fee per item of service systems of health care delivery [20,21]. However, economy in the use of resources may disadvantage some patients and, not surprisingly given the relative incentive structures of HMOs and fee per item of service payment system, it has now been shown that HMOs disadvantage the ill poor in terms of greater morbidity and a greater risk of death
M * Clearlythe
internal market or creating competitive market mechanisms with private or State financed health care systems has costs and benefits and any choice must be informed by an evaluation of these attributes in relation to policy goals. The attractions of extending market mechanisms to improve resource allocation in the NHS seem considerable but it is essential that such innovations are evaluated carefully. Unfortunately, one of the most inefficient traditions of the NHS is “to do” rather than “to do and to evaluate”. Another unfortunate NHS tradition is security of tenure for doctors in hospital and primary care. It is likely that this security of income and employment will be removed with short term rolling contracts being reviewed to ensure efficient physician behaviour.
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Conclusions The management of NHS resources is slowly improving. The path leading to the greater efficiency of scarce resources is impeded by powerful pressure groups and inadequate evaluation of existing practices and future options. The Thatcher Administration has created an environment of conservative “continuous revolution” in the NHS and the system’s uncertainties are making change easier to implement. In particular the buying power of the financing agencies within the NHS is being reorganised and used to countervail the power of providers. Slowly market mechanisms which may improve the performance of the NHS are being identified and explored, if cautiously. The collectivist objectives of the British NHS may yet be achieved more fully by arrangements long espoused by economists. Members of the economics profession must continue to be good Maoists if the costs and benefits of their proposals are to effect decision making. For as Mao Tse Tung argued: “If we have a correct theory but merely prate about it, pigeonhole it and do not put it into practice, then that theory, however good, is of no significance” [23].
References 1 Maynard, A. and Ludbrook, A., Applying the resource allocation fomulae to the constituent parts of the UK, Lancet, i (1980) 85-87. 2 Birch, S. and Maynard, A., Applying the resource allocation formulae to the constituent parts of the UK - revisited, Public Money, 6 (1986) 2154-2155. 3 Maynard, A., Budgeting in health care systems, Effective Health Care, 2 (1984) 41-50. 4 Department of Health and Social Security, The Management of the National Health Service, the Griffiths report, London, 1983. 5 Department of Health and Social Security, Steering Group on Health Services Information: First Report, HMSO, London, 1982. 6 Williams, A., Economics of coronary artery bypass grafting, British Medical Journal, 291 (1985) 326-329. 7 Williams, A., Screening for risk of coronary heart disease: is it worthwhile? Paper presented to a conference in Edinburgh, November, Centre for Health Economics, University of York, 1985. 8 Gudex, C., QALYs and their use in the health service, Discussion paper, Centre for Health Economics, University of York, 1986. 9 Torrance, G., Measurement of health state utilities for economic appraisal: a review, Journal of Health Economics, 5 (1986) l-30. 10 Wickings, I., Coles, J.M., Flux, R. and Howard, L., Review of clinical budgeting and cost experiments, British Medical Journal, 286 (1983) 575-578. 11 Jarman, B., Identification of underprivileged areas, British Medical Journal, 286 (1986) 1705-1707. 12 Townsend, P., Phillimore, P. and Beattie, A., Inequalities in Health in the Northern Region, Northern Regional Health Authority, Newcastle upon Tyne, 1986. 13 Department of Health and Social Security, Primary Health Care: an agenda for discussion, HMSO, London, 1986. 14 Department of Health and Social Security, Neighbourhood Nursing: a focus for care, HMSO, London, lY86. 15 Gray, D., Marinker, M. and Maynard, A., The doctor, the patient and their contract: I. The general practitioner’s contract: why change it? British Medical Journal, 292 (1986) 1313-1315. 16 Gray, D., Marinker, M. and Maynard, A., The doctor, the patient and their contract: II. A good practice allowance: is it feasible? British Medical Journal, 292 (1986) 1374-1376.
340 17 Gray, D., Marinker, M. and Maynard, A., The doctor, the patient and their contract: III. Alternative contracts: are they viable? British Medical Journal, 292 (1986) 1438-1440. 18 Enthoven, A.C., Reflections on the management of the NHS. Nuffield Provincial Hospitals Trust, Occasional Paper 5, London, 1985. 19 Maynard, A., Performance incentives. In G. Teeling-Smith (ed.), Health, Education and General Practice, Office of Health Economics, London, 1985. 20 Luft, H., Health Maintenance Organizations, Wiley, New York, 1980. 21 Manning, W.G., Lecbowitz, A., Goldberg, G.A., Rogers, W.H. and Newhouse, J.P., A controlled trial on the effect of prepaid group practice on use of services, The New England Journal of Medicine, 310 (1984) 1505-1510. 22 Ware, J., Brook, R., Rogers, W.H., Keeler, E.D., Davies, A., Sherbourne, G., Goldberg, G.A., Camp, P. and Newhouse, J.P., Health insurance: comparison of health outcomes at Health Maintenance Organization with those of fee per item of service care, Lancet, i (1986) 1017-1022. 23 Mao Tse-Tung, Quotations from Chairman Mao Tse-Tung, Peking, 1986.