The NHS: Mother Nature Is Not An Economist

Today’s episode of Sunday Morning Live featured Kelvin MacKenzie taking part in a discussion about the NHS. His position was that we should all pay £20 for a GP appointment. His justification is that it would reduce wasted appointments [3] and make us all value the service more. His position makes no mention of any other systemic problems in the NHS so presumably he rates this particular problem as a major one. This view isn’t so unique.

Although I understand the specific reasoning for this argument, it fails to take account of healthcare as a whole and how it fits into society as a system. The position fails to see the big picture, preferring to focus on a very narrow principal.

The first error is in not understanding what GP visits are. Imagine that we lived in an ideal world that had an ideal healthcare system. In that system we would all probably have routine GP visits at regular intervals, say every month, whether they are necessary or not. Those visits would be a screening process. The vast majority of visits would find nothing interesting, but such a system would do a great  deal to counter serious illness as it would detect instances of serious illnesses early on. Of course we don’t live in an idea world and so don’t have the resources to do this continuous screening [1]. Instead we use the first-come-first-served approach to self-ration the available resources, but while this modifies the load-baring part of the process, it doesn’t change the underlying mechanism: GP appointments are a screening process.

Like all screening processes it’s a numbers game. So let’s say you have 20 appointments, 19 of which turn out to be irrelevant, but 1 of which needs serious intervention. Let’s assume MacKenzie’s idea works and government implement a cost on GP appointments that reduces them to, say, 50%. Now, we get 10 appointments instead of 20. (This fact then gets trumpeted all over the media by spin doctors as evidence of how their clients policies ‘worked’.) So what is the probability of that 10 containing the 1 individual who needs medical intervention? Is it 50:50? Actually, that would be optimistic. If the individual that needs help is in the group that doesn’t book an appointment they could miss out on important early medical intervention. As a result their situation could well get worse, ultimately leading to unavoidable and more serious intervention. In the more cynical analysis this will reduce that individual’s contribution to GDP for obvious reasons. Further, there’ll be secondary impact’s on friends and family. If you add up the economic impact of all that you’ll find the money we saved on those 10 GP has indirectly cost us far more. As a result the NHS bill goes up… and they blame immigrants or something. Or insist that the NHS is ‘inefficient’ and needs to be privatized.

The fundamental reasoning flaw in all of this is in applying an economic selective pressure to something that obeys no standard economics principals. The economy is dependent on the effects of health, but healthcare is not dependent on the effects of the economy in any simple way. And, further, the ways in which it is dependent on the economy are often counter to normal market economics principals:

1) Healthcare is a product no-one wants

The law of supply and demand [4] is that the more scarce something is the more people want it and the more they will pay for it. An extension of this is that if people can get things for free they will want them more if the are more expensive. Generally this may well hold, but there are plenty if situations (enough to render the idea irrelevant) in which it falls apart [2]. Take, for example, chemotherapy. It’s very expensive, but no-one wants it. Free or otherwise. You want it if you have cancer, but…

2) Illness isn’t distributed by economic laws.

…whether or not you get cancer is not tethered to any economic principal. If nature gives you cancer, you want chemotherapy, free or otherwise. If you don’t get it you don’t want it. Further, rich people don’t get expensive, trendy diseases while poor people get cheap, common ones. There are some things we all get, which is why most people would like free pain killers. Although it’s not so clear cut because…

3) Health is inversely correlated to wealth

…some illnesses occur more at lower socioeconomic levels. Those out of work are more likely to suffer illnesses. Those who work night shift in a factory are more likely to suffer long term illnesses than those working at a desk. This is why in the above example a 50:50 chance of finding the individual in need of help in that group of 10 GP appointments is optimistic. Those who are less likely to want to spend the £20 are the ones more likely to need the appointment. The economic selective pressure is biasing the load-baring part of the process making the screening process less effective.

4) We aren’t all Doctors

I can decide if I need a fridge. I can decide if I need some food. I can decide if I need a mortgage. On the other hand the vast majority of people aren’t qualified to decide if they need medical intervention. That’s why we have doctors. If we lived in a world with different laws of biology in which severity of an illness was self-evident to the sufferer then self selection for GP appointments might make sense, but we don’t live in that world. Some illnesses are very sever and have almost no symptoms. Still other’s have terrible symptoms but are mostly harmless and generally left to pass on their own. Although some might see people skipping appointments as a problem a far bigger threat, both to people’s quality of life and the economic bottom line, is people not going to the doctors when they should. Apparently harmless illnesses can turn out to be dangerous ones that, if untreated, can get much worse (and, for the cynically minded, more expensive).

5) People’s health is an externality

Health can be influenced by the actions of industry. It is natural behaviour for any private firm to disregard the negative impact of its activities. These are technically called ‘externalities’. It’s almost a cliche, so I don’t think I even need to explain.

6) Markets don’t solve problems: They satisfy people that they have been solved.

Many believe that once you open up healthcare to market forces that, by definition, entities competing in that market will have a vested interest in solving the problem of bad health. I think this show’s a very dangerous misunderstanding of market systems. Firstly if they did solve the problem of bad health there’d be no market, but this in of itself is not such an issue because market systems don’t have to be self-sustaining (a market can destroy itself if it’s profitable in the short run.) Market systems, in reality anyway, deal mostly with perceptions. This is because competing firms don’t have to solve any real problem, they just have to make their customers believe that there needs have been satisfied. In the fictional world modeled by economists believing that your needs have been satisfied and your needs having been satisfied are the same thing. This is because humans are modeled as ‘rational’ agents. Rational, as it is defined in economics theory, means having flawless knowledge of all products, all future events and an unlimited ability to make instantaneous cost benefit calculations based on that flawless knowledge. It’s true. Look it up.

As I have pointed out before if you want evidence of all of this you only need look at the US. The idea of paying at the point of use is how the US healthcare system works (convoluted through a financialised insurance industry, which introduces other problems and inefficiencies). Their healthcare system costs them, per capita, twice ours, and yet the US scores alongside developing countries for healthcare outcomes. Meanwhile the NHS, even with all the people missing appointments and wastage, scores far higher. In fact it routinely scores highest throughout the world. It’s worth considering that, given the recency of national healthcare systems that makes the NHS one of the most successful public projects ever created.

[1] Actually, I suspect we may well have the resources, it’s just that we tend to focus then in wasteful activities.

[2] One of the reasons that economists failed to see the economic collapse in 2008 is that they didn’t see that the laws of supply and demand invert with assets.

[3] Apparently lots of people believe that visiting a GP, or even just making appointments, is a leisure activity. I suspect that the ratio of missed appointments is related to waiting times, which itself is negatively linked to staffing. Fewer staff, longer waiting times, more chance of not needing the appointment anymore.

[4] Economists accept that this is a law but have never bothered to demonstrated it.


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