12 January 2007

Target outcomes, not institutions

James Johnson, the chairman of the British Medical Association, said that if the health service failed to break even this year, ministers would "look very carefully" at what should happen next. "Don't assume there's anything automatic about the system we have at the moment continuing in perpetuity," Mr Johnson said.
That excerpt is from an article titled One year to save NHS, from today’s ‘Daily Telegraph’ and refers to the UK’s National Health Service. I’m pleased that people are phrasing some of the debate in terms of outcomes: Mr Johnson later in the article says “If you get nine per cent of GDP spent on health and you still can't make it work, people will be saying: 'Do you want to carry on doing the same thing or should we be trying something fundamentally different?'”

Quite encouraging, but the rest of the argument seems to be about which sort of institutional arrangements can bring about desired, but unspecified, outcomes. There’s a widespread sense that the NHS is inefficient, but that tells us nothing about what would be better and it hardly constitutes proof that the NHS is inefficient.

The problem as I see it is that the politicians – if they ever do get round to tackling the vested interests benefiting from the current setup – will choose some new institutional structure. Only some years or decades later might be shown (or more likely, thought) that the new structure is better (or worse) than the NHS.

Here’s a better idea: specify those health outcomes that the Government, in its capacity as representative of the population, wishes to see and is prepared to raise revenue to generate. And instead of choosing a system that appears to work in other countries, or is favoured by other teams of experts, or that conjures up most funds from corporate interests to the ruling political party, let the institutional structures be determined by the targeted health outcomes, rather than vice versa. The UK Government should develop a range of health indicators, such as Quality Adjusted Life Years. It should then issue Health Care Bonds, following the pattern of Social Policy Bonds, and in effect contract out the achievement of these outcomes to the private sector. This need not mean the demise of public sector agencies, but it would mean their funding would be allocated by the private sector which, unlike in the NHS, has incentives to achieve broad, explicit, and publicly agreed, health outcomes.

Allocating scarce resources is something that markets do well, but government has an important role in setting such desirable goals as universal basic health provision, and in raising funds to achieve them. This role can only be played by government, and in fact democratic governments do it quite well. Social Policy Bonds would allow government and private sector each to do what they are best at doing. With health care, as with other social and environmental goals, outcomes are foremost. Discussion about systems, institutions, activities or inputs is wasteful and a distraction.

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