How the secretary
of state for health proposes to abolish the NHS in England
Allyson M Pollock, professor and director, Graham Kirkwood, research fellowCite this as: BMJ 2011;342:d1695
Allyson M Pollock,
professor , David Price, senior research fellow
Centre for Health
Sciences, Barts and The London School of Medicine and Dentistry, Queen Mary’s
College, University of London , London
E1 2AT , UK
Correspondence to: A M
Pollock allyson.pollock@gmail.com
Allyson Pollock and David Price examine the proposed
statutory changes to the NHS and raise concerns that the government’s role
could be reduced to that of payer
The coalition government’s
Health and Social Care Bill 2010-11 heralds the most controversial reform in
the history of the NHS in England.1 2 3 The government plans to replace the NHS
system of public funding and mainly public provision and public administration
with a competitive market of corporate providers in which government finances
but does not provide healthcare.4
Primary care trusts and
strategic health authorities are to be abolished and replaced by general
practice commissioning consortiums, which all practices must join. As
incorporated bodies, consortiums will not be directly controlled by the
secretary of state for health and may enter into commercial contracts with “any
willing provider” for all health services and will set terms and conditions of
staff. They will have extraordinary discretionary powers to define entitlement
to NHS provision and charge patients. Direct management and control of NHS
providers will cease as foundation trust status becomes mandatory for all
trusts. Provider regulation will be overseen by a market regulator, Monitor.
Since 1948 the government
has had a duty to provide comprehensive healthcare free at the point of
delivery. This duty is underpinned by structures, systems, and mechanisms that
promote fairness and efficiency in resource allocation and facilitate planning
of services according to geographical healthcare needs through risk pooling and
service integration. These mechanisms have been eroded by a succession of major
regulatory changes, including revision of funding and responsibility for
provision of long term care; creation of an internal market; introduction of
private providers and capital through the private finance initiative,
independent treatment centres, foundation trusts, and the 2004 general practice
contract; and creation of a tariff system of payment for providers.5 We examine
the proposed statutory protections of the duty to promote and provide
comprehensive care in the bill.
Duty to
provide a comprehensive public service
Although the bill retains
the secretary of state’s duty to promote a comprehensive service, the duty to
provide a comprehensive health service in England is abolished.4 It is replaced
with a duty to “act with a view to securing” comprehensive services. The health
secretary’s general powers of direction over NHS bodies and providers are also
abolished, and the focus of his or her role will shift to public health
functions, which become the responsibility of local authorities.
Section 9 abolishes the duty
on the health secretary to “provide [certain health services] throughout England England
The NHS Commissioning Board
must “ensure that . . . commissioning consortia—(a) together cover the whole of
England, and (b) do not coincide or overlap” (section 21, 14A, 2) but the board
will not have a power of general direction over the health services for which
consortiums contract or patients’ entitlements. The secretary of state’s
influence is indirect, exercised through an annual “mandate” that will set out
the objectives of the independent NHS Commissioning Board (section19). The
economic regulator, Monitor, also has no duty to ensure provision for all
residents. Its main duty will be to “protect and promote the interests of
people who use health services . . . by promoting competition.”
The commissioning
consortiums’ duty to arrange for health service provision applies to their
enrolled population. In contrast to primary care trusts, the populations of
consortiums will be drawn from the patient lists of member general practices
rather than all residents living within a defined geographical area (section 9,
3, 1A). Practice boundaries may be abolished as part of patient choice, which
means that “practices can accept patients regardless of where they live,
effectively allowing patients to choose their commissioner,”6 or commissioners
to choose their patients. If this happens, practices and consortiums will be
able to compete (and advertise) for patients from across the whole country just
as private healthcare corporations and health insurers do now.
The bill makes consortiums
responsible for services such as emergency care with respect to “persons who
have a prescribed connection with the consortium’s area” (section 9, 3, 1B) and
requires that they must specify their “area” in their constitutions (schedule
2, section 2), but responsibilities and services for people who are not
enrolled with them are not defined. Pooled funds will provide a mechanism for
compensating commissioners and providers for these unspecified responsibilities
with respect to the unenrolled populations.
Provider of last resort
Because the secretary of
state will no longer be able to ensure comprehensive, universal cover to all
residents in geographically defined areas, the legislators have drafted a
safety net whereby local authorities can be required to undertake NHS
functions. Under section 8 (2B, 3c) of the bill, the health secretary can
require councils to provide “services or facilities for the prevention, diagnosis
or treatment of illness.” Local authorities alone have a duty to provide for
geographical populations. Healthcare services that consortiums and market
providers deem will threaten their financial viability can therefore be
transferred out of the NHS in much the same way as long term care and
continuing care responsibilities were transferred out in 1996. Patients who
cannot get access to general practices or services of commissioning consortiums
may have to default to local authorities, which would become the provider of
last resort, and the core functions of the health secretary will shift to the
chargeable local authority sector.7
Equity of access
The secretary of state has
no duty to promote equity of access apart from a vague duty to “have regard to
the need to reduce inequalities between the people of England
Duty to provide services free of charge
There are new mechanisms to
introduce charges and privately funded healthcare. The secretary of state’s
duty to provide free services that are “part of the health service in England,”
except where charges are expressly allowed (section 1, 4), is undermined
because the power under the Health and Medicines Act 1988 to impose charges is
transferred from the secretary of state to consortiums (section 22).
Consortiums will determine which services are part of the health service and
which are chargeable (section 9), and they have been given a general power to
charge (section 7, 2h).
The cap on foundation
trusts’ generation of income from private care will be abolished (section 150).
They will be able to charge for hospital accommodation7 and, without reference
to Monitor, amend their primary purpose of providing services to the NHS
(section 146). The government has signalled elsewhere that the introduction of
personal health budgets is “a high priority,”8 and pilots show they are linked
to top-up charges.9
Mechanisms for allocating resources
The funds allocated to
primary care trusts are determined by using formulas adjusted for area based
population and needs. However, the budgets of consortiums will be allocated on
the basis of aggregated general practice lists rather than geographical
population.8
To mitigate the risks of
adverse selection (risks that some consortiums will attract sicker and more
expensive patients) the bill proposes a risk equalisation mechanism in which
consortiums can establish a pooled fund to off-set costs in consortiums that
have different proportions of high and low risk patients.10 However, the
absence of individual risk data and robust resource allocation methods is
problematic,11 12 as are the high transaction costs associated with risk
equalisation funds.
Commissioning budgets based
on membership resemble European sickness funds, in which members share costs
among themselves rather than across the whole society.13 Sickness funds are
associated with unequal risk bearing among pools, risk selection, patient
charges, and supplementary insurance. Compensatory risk equalisation mechanisms
are inefficient, expensive,14 and increase risk selection because funds avoid
high risk patients on financial grounds.15
Abolition of direct control over NHS provision
Greater corporate
involvement in primary care
Although the NHS
Commissioning Board will have a duty to “secure the provision of primary
medical services throughout England” (schedule 4, part 5) “to the extent that
it considers necessary” (schedule 4, part 4), consortiums will become budget
holders and determine which primary services they contract, from whom, and at what
cost. Patients may therefore be exposed to a plurality of primary care
contractors for different services. All general practices will be required to
join a commissioning consortium. Various bodies can apply to become a
commissioning consortium, including foundation trusts and for-profit
organisations that run general practices.
Increasingly, general
practice and commissioning functions will be operated and managed by for-profit
companies, 23 of which (including Virgin, Care UK, and Chilvers McCrae) reportedly
already run 227 general practices.16 Professional autonomy will be eroded if,
for example, referral management centres run by corporate providers are used to
ensure referral and prescribing practices conform to corporate budgets
(schedule 12, 1) and the needs of shareholders. These centres are currently
rejecting one in eight general practitioner referrals17 and seem to operate
along the lines of “prior authorisation” arrangements in the United States UK ’s recently
established “referral facilitation service” in Hounslow, London
Abolition of NHS trusts
From 1 April 2014, all NHS
hospital and community trusts are required to become foundation trusts.
Foundation trusts may enter into joint ventures with and distribute surpluses
to for-profit companies and raise commercial loans without restriction. The NHS
Commissioning Board and general practice consortiums will also have powers to
form and invest in commercial companies (schedule 4, part 10).
Provider regulation will be
overseen by Monitor, whose primary duty will be to promote competition.
Controversially, regulation by Monitor and the Quality Care Commission will be
chiefly through commercial licensing and contracting (box 1)18 and limited by a
duty of “maximising the autonomy of individual commissioners and providers and
minimising the obligations placed upon them.”8 Regulators are required not to
impose “unnecessary burdens” and regulation can be dispensed with as more
providers enter the market place.7 The “necessity” of public regulation can be
challenged by corporations in the courts. Proposals by the European Commission
to introduce such tests to health services created Europe-wide controversy in
2004 and had to be withdrawn because they were deemed to conflict with public
health policies such as controls over market access.19 However, conflict
between competition policy and the health secretary’s duty to promote a
comprehensive service will be resolved not by parliament but by Monitor, “in
the manner it considers best” (section 55).
The government proposes to
regulate providers through commercial contracts:
“The Government’s approach
is that where specific control mechanisms are needed for providers, these
should in general take effect through regulatory licensing and clinically-led
contracting, rather than hierarchical management by regions or the centre.”18
Most economists agree health
services cannot be sufficiently controlled through market regulation because
the complexity and unpredictability of treatment makes it impossible to set out
all eventualities in a contract.
This problem of incomplete
contracts was first described by the founding father of health economics and
Nobel laureate, Kenneth Arrow.31 He argued in 1963 that producers of healthcare
services will always have more information than purchasers, who will never be
able fully to evaluate the likely consequences of different services and so
will never be completely certain that they have chosen the best provider or
that the outcome is optimal.
When market contracts are
used to regulate providers and commissioners, managers have an incentive to
exploit the information deficit on the part of patients and government by
reducing service quality in order to maximise profits.
According to Arrow,
incomplete contracts can explain why “the association of profit-making with the
supply of medical services arouses antagonism and suspicion on the part of
patients and referring physicians.”
Section 52 of the bill
proposes new competition duties that will allow remaining public controls over
health services to be challenged by multinational companies and investors
anywhere in the world.20 Trade rules outlaw public policies that prevent,
restrict, or distort competition in trade within the UK or the European Union
such as setting prices, public subsidies for teaching and research, and
controls designed to ensure fair distribution of resources. Rules on free
movement of capital could undermine powers that the government proposes to
reserve for protection of service continuity.21 One company, Circle, the first
to take over a foundation trust, is already using competition rules to
challenge a primary care trust’s decision to restrict the volume and range of
services under the commercial contracts for NHS elective surgery.22
Freedom to create surpluses from care budget
The bill explicitly
authorises the creation of surpluses from the patient care budget and their
distribution to staff and shareholders as part of financial incentive or bonus
schemes (section 23). Surpluses can be generated by selecting patients or
services, denial of care, or reductions in staff terms and conditions,
responsibility for which will be transferred to corporate bodies. The secretary
of state cannot be held to account for diversion of NHS funds from patient care
to staff or investors.
The end of the NHS?
The government proposes a
commercial system in which the NHS is reduced to the role of government payer,
equivalent to Medicare and Medicaid schemes in the US
In order to create a
commercial market the government has repealed the health secretary’s duty to
provide or secure the provision of comprehensive care and has abolished the
structures and mechanisms which follow from this duty. It has granted new
powers and financial incentives to corporate commissioners and investors to
redefine eligibility and entitlement for NHS funded care, select out profitable
patients and services, and introduce regressive funding through patient charges
and private healthcare (box
2
Investor-run commissioners
and providers will be free to
Invest in and form companies
Use commercial contracts to
bring in commercial providers
Define the range of services
to be provided and patient entitlements under the NHS
Charge for some elements
that are currently NHS services and for health services they determine are no
longer covered by the NHS
Generate and distribute
surpluses to shareholders, investors, and employees by underspending the
patient care budget
Use competition law to
challenge public policies that impair their profitability and freedom to
operate
Contract out all NHS
services to a range of private providers
Select patients and services
Determine staff terms and
conditions
In box 3England
Restore the duty of the
secretary of state for health to provide or secure the provision of
comprehensive healthcare throughout England
Impose a duty on general
practice commissioning consortiums to provide comprehensive healthcare for all
residents in geographically defined areas and fund them accordingly and on the
basis of need
Impose a duty on the NHS
Commissioning Board to retain and further develop a system of resource
allocation based on the healthcare needs of all residents of geographically
coterminous areas
Withdraw the power granted
to commissioners to charge for healthcare services and reserve the power to the
health secretary
Remove health services from
jurisdiction of competition law
Require the health secretary
to ensure continuity of patient care through administrative and financial
integration of provider services under the jurisdiction of geographically
defined consortiums (as in Scotland
and Wales
Impose a duty on the health
secretary to protect professional autonomy and increase direct public
accountability
Impose a duty on the health
secretary to abolish financial incentives to create and distribute surpluses by
underspending patient care budgets
Notes
Cite this as: BMJ
2011;342:d1695
Footnotes
Contributors and sources:
AMP and DP have studied, taught, and reported widely on health system reform in
the UK
Competing interests: All
authors have completed the unified competing interest form at
www.icmje.org/coi_disclosure.pdf (available on request from the corresponding
author) and declare no support from any organisation for the submitted work; no
financial relationships with any organisation that might have an interest in
the submitted work in the previous three years; and no other relationships or
activities that could appear to have influenced the submitted work.
Provenance and peer review: Not commissioned;
externally peer reviewed.
Previous Section
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