A market can be defined as any set of arrangements which allows buyers and sellers to communicate and thus arrange exchange of goods, services or resources. A free market is where such exchange occurs without interference from the government. Information is a vital ingredient for any market. Both buyers and sellers need to have access to sufficient information to allow them to make rational decisions.
Therefore a market for health care has to involve two main groups: the buyers and the sellers, who interact to trade health care. A buyer would be someone who was ill or who wanted medical treatment of any kind. The sellers would be those people who could provide medical and health care services.
The NHS internal market was a result of the 1990 Community Care Act introduced by the Conservative Government. The first wave of NHS Trusts came into existence in 1991 and by 1995, all health was provided by trusts. Healthcare academics largely agree that that the 1991 internal market was not entirely successful, and new market reforms introduced by the New Labour Government attempt to address this.
New Labour has introduced the idea of ‘earned autonomy’, which healthcare trusts can acquire by virtue of their success. There is now much more use of the private sector in healthcare (for example, the private finance initiative – ironically originally a bastion of Conservative economic policy).
Advantages:
● the principle of the NHS internal market is to make the NHS leaner and meaner by introducing business practices to the NHS.
● in theory, the use of markets within the NHS means the principle of competition forces services and their providers to sharpen their act.
● commercial wastage and bureaucracy will be reduced and overlapping and duplicated services which are expensive and superfluous to run will be removed
● New Labour would argue that the reforms it has introduced to the NHS internal market are evidence of joined-up thinking. For instance, it plans for all NHS trusts to become foundation trusts by 2012 and in order to do so they must all achieve a standard of excellence
Disadvantages:
● the government has to interfere in the NHS internal market because of the natural tendency of markets towards huge conglomerates and political pressure from voters who see the NHS as an essential part of the fabric of British society.
Therefore by definition the NHS internal market cannot be a free one
● identical standards of excellence cannot be achievable across the country due to geographical and microeconomic differences
● In a significant proportion of the country competition is not possible because there is only one hospital within travelling distance for the local population, and which the local population are therefore forced to use
● the all round improvement of standards, giving most support to the weakest and not the strongest forms of service provides the best results for the NHS as a whole. The reward of winners (such as ‘earned autonomy’) might work in the real market place but not in the public sector where success is its own reward.
● Competition fails in the public sector because there can be no ‘market’ for patients unless there is over-capacity (that is to say, a significant choice of places to go). In theory if the best NHS services could attract people in the same way as many shops do then others would fail and close. However there are already not enough resources in the NHS and therefore obviously no over-capacity
● markets naturally tend towards monopolies (large companies taking over smaller ones – or smaller companies going out of business), a trend which has its own implications for the way in which health care is provided
● While the principle of earned autonomy may mean that some service users may receive a privileged service, many more service users will be forced to resort to failing services (for example when a foundation hospital providing excellence of care has no free beds remaining due to its ‘success’)
SOURCES:
BBC News online
Health Matters Magazine
Office of Health Economics
The Guardian
