© 2008 delmar cengage learning. chapter 20 taking medicine to market: competition in britain and...

© 2008 Delmar Cengage Learning.

Chapter 20

Taking Medicine to Market: Competition in Britain and the United States

Daniel Ehlke


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British National Health Service: Antecedents

• Insurance Act of 1911– Introduced state-sponsored health insurance

coverage to “workingmen”

• Benefits were strictly circumscribed– Covering only the workers, and not their

families– Hospital care was also not funded under the

program


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• Emergency Medical Service during World War II– Brought many aspects of hospital care under

the supervision of the State


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• Wartime Beveridge Report– Envisioned broad government involvement in

social welfare following the war– Including some form of national health care

system


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Creation of the NHS

• Proponents of a national health service:– Sought to tackle several structural problems of

the health care system to date

• Hospital care and provision of primary care was of very uneven quality across the British Isles


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Creation of the NHS

• Medical profession was riven by divisions between GPs and specialists

• Many citizens did not have access to quality health care


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Creation of the NHS

• Three-tier system was established:– Representing compromises with key interest

groups

• Basic public health responsibilities remained with local government– Had long shouldered the burden of hospital

care as well


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Creation of the NHS

• Hospital sector was nationalized– Hospital-based specialists becoming direct

employees of the State

• General practitioners – Allowed to remain “independent contractors”

who owned their own practices• Salaries were largely set by officials in London


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Early Years of the NHS

• NHS almost immediately went far over early budget projections– Not unlike Medicare and Medicaid in the early

years of those programs


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• Issue of financing the service was not definitively settled until the 1950s– When it was determined that funding should

come out of general tax revenues and insurance contributions


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• Care remained largely free at the point of service– Though some fees were soon introduced


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The Road to Reform

• By 1970s– Britain was in the economic doldrums– Government thus had trouble funding all of its

commitments• Including the NHS


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The Road to Reform

• Thatcher government– Entered office in 1979 with a vision toward

injecting market principles into large parts of the welfare state in an effort to make it more efficient

• Nonetheless– NHS left largely untouched until the 1980s


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Taking the NHS to Market

• Griffiths Report (1983)– Stressed need to introduce a business ethic

into a startlingly fragmented NHS

• Health spending in the 1980s– Did not keep pace with demand– System was seen to be in need of major repair


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Taking the NHS to Market

• While pledging to keep the tax (state) financing of the system intact:– Thatcher almost unilaterally applied features of

the “managed care” phenomenon originally outlined by American economist Alain Enthoven


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Managing Medical Markets

• Thatcher government constructed “internal market” within the NHS– Giving “fundholding” GPs greater

independence– Proving for a much-vaunted “provider-

purchaser split” within the state-run structure– Thus introducing a quasi-market to a heavily

managed system


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Managing Medical Markets

• Opposite process attempted in the U.S.– Quasi-competitive market system was

“disciplined” through the introduction of “managed care”

– HMOs and the private sector broadly attempted to tame the market where Clinton et. al. failed


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Lessons of Reform

• Health care reform – Still playing itself out across the NHS, with

mixed results– While health care “consumers” have perhaps

been empowered• Many providers express dissatisfaction


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Lessons of Reform

• Extensive management appears necessary to keep costs down– Health spending in the U.K. has risen

somewhat dramatically during recent episode of reform

• Course of reform highly contingent on what kinds of policy framework exists in the first place


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Chapter 20 Summary

• National Health Service – Preceded by gradual state expansion into a

fragmentary early health sector

• NHS popular over time– But later seen to be in state of “crisis”


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Chapter 20 Summary

• Market reforms in Britain – Sought to inject principles of free enterprise

into a system still run by the state– In U.S. the goal was to manage an already-

competitive system

• Lessons of reform on both sides of the Atlantic

© 2008 delmar cengage learning. chapter 20 taking medicine to market: competition in britain and...

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