Rectifying Health Care Costs - No More NHS

I have mentioned that, over time, I would post some ideas on how to make structural reforms to the UK. I have already covered education, and the next big area of government expenditure I want to cover is that of healthcare. The solution I have outlined is radical, which may not surprise regular readers of this blog (who seem to be rapidly increasing in numbers).

The National Health Service in the UK has taken on the status of being untouchable. As such, I write this in the knowledge that such a system as I am proposing will only be considered in extremis. However, extremis is what the UK is now potentially facing, so I will detail a new system on the basis of putting the idea 'out there' in the hope that it might provide inspiration, or at least help people consider that there are other ways of running a health service.

Like any system, the one that I am proposing only makes sense as a complete entity, so I would ask that you stay with the idea to the end. Do not rush to judgement at the early stages, as the system is not what it seems at first. As for my post on education reform, the system offers a market based solution, and aims to remove as much government control from healthcare as possible.

I will not detail the many criticisms of the healthcare system here, except to say that the arguments normally revolve around the bureaucratic nature of the system, cost, efficiency and quality of care. A particular criticism of the moment is the use of top-down targets, which distort priorities and outcomes. My aim is that my proposed system will address all of these issues.

I will start with a shocking statement. The system I am proposing will cost people money for their treatments. However, before recoiling in shock, you should be aware that nobody will be denied treatment.

To best explain the system, I will start with an individual who thinks that they might be ill. We will call the patient Fred. Up until today, Fred has been very healthy, and has therefore never utilised the health system, so he has not even registered with GP (doctor). Unfortunately, Fred has not been feeling well.

His first task is to therefore find a doctor. He goes online and searches for a doctor and finds a directory of all the doctors in his area. The directory lists the details for the doctors along with ratings for each of the doctors. There are two kinds of ratings; rating from patients, and ratings from consultants, both of which are shown as stars. The search also includes the hourly rate that the doctors charge, and whether the doctor is taking on new patients. Fred is a middle income manager, so he chooses a doctor with middle level hourly rates, and a good rating from his patients and consultants. He telephones the doctor's surgery and makes an appointment. In order to confirm his appointment he needs to present his government health card to the surgery, and enter a PIN to confirm his registration.

Having popped into the surgery with his health card, he is now registered with the doctor. A couple of days later he has an appointment with his doctor. The time that he enters the doctor's office is taken through his swiping his health card, and entering his personal PIN. He sits down with his doctor. The doctor conducts an examination of Fred, and concludes that he does have a problem. He is concerned, but not overly concerned. He thinks the best option for treatment is a course of drugs but, if that does not work, he will require some minor surgery.

The doctor prescribes the drugs, and Fred enters his PIN before the doctor can issue the prescription. The doctor updates the notes on the computer in front of him. At the end of the consultation, Fred swipes his card, and enters his PIN again. His time spent with the doctor is recorded. He is then taken to a room, where he is left alone with a computer. The computer asks him to rate the service that the doctor has provided.

At this point, you may be puzzled. What is going on here, and how is this different from private medical care? The difference is explained below.

When Fred chose his Doctor, he selected the doctor in part on the hourly rate that he charged. When Fred registered with the doctor, he accepted the hourly rate as part of the registration. This acceptance was recorded, and he then opened a government health account. In doing so he was making a commitment that up to a maximum of 5% of his income would be deducted each month to pay off his medical bills (achieved through the taxation system). The cost of the visit to the doctor was entered into this account, one of several health accounts. The following month, up to 5% of his income will be taken to pay for the visit. Each subsequent month the same will happen until the account is paid down. Also included in this account is the cost of medicine and diagnostic tests. As such, in this case, Fred will also have the cost of the medicine added to this account. We will call this account, Basic Medicine.

A week later, Fred is feeling no better, so arranges to return to the doctor. As before the same procedure is undertaken with the swipe and the recording, and the cost will be added to the Basic Medicine account. However, this time the doctor knows that he must use a consultant to further examine Fred. He ends the consultation, and Fred is sent to the surgery administration. The doctor has informed the administration of the surgery what kind of consultant is needed, and the administration makes a search on an online market for consultants. They enter Fred's postcode, and the search produces results for the nearest 20 consultants to Fred. Each consultant has two ratings, a doctor's rating and a patient rating, along with an hourly charge and earliest available appointment. The administrator asks Fred to select the consultant that he would like to use. The administrator makes a small flat fee charge for helping Fred use the system.

Fred decides that a consultant near to home is his priority, and selects a consultant with the best rating, at a roughly middle cost, that is near to him. He enters his PIN, and the contract with the consultant goes through, and the administrator helps Fred book an appointment At this point the administrator forwards the patient record to the selected consultant electronically. There is no centralised IT system for patient records, but all records must be available in a proscribed format (for technical people, an XML schema). As before, the costs of the visit are transferred to Fred's Basic Medicine account and Fred is asked to make a rating on the service of the doctor.

A few days later, Fred goes to see the consultant. Fred swipes his card at the start of the consultation, and enters his PIN. The consultant examines Fred and decides that Fred needs some minor surgery. At the end of the session, he writes up the results of the examination, tests and so forth, and forwards these electronically to Fred's doctor. In addition, he rates the decision of the Doctor to send Fred to see him. In this case, it was a necessary visit, so he rates the doctor highly. In addition, Fred is asked to enter his rating of the consultant in a private space for this purpose.

Once the doctor has seen the record from the consultant another appointment with Fred is made. At this stage, the doctor needs to help Fred to arrange the hospital that will be used for the surgery, and the doctor must be involved in this decision. However, before the appointment, the details of the required surgery, and the patients notes will be sent to the nearest 5 hospitals (or providers of the necessary surgery) to Fred's postcode. Fred's name and location will not be provided at this stage, such that local hospitals are unaware that Fred lives near to them. Each will be requested to give a quotation on the surgery. Included in the quote will be the total cost, the earliest date available, the surgeon available and so forth.

The quotation will be based upon the cost of the procedure itself, the cost of a hospital bed per night. In addition a quote will be given for managing likely complications, and the cost of additional days residency in the hospital. These will be calculated into the costs and will be weighted in the calculation according to likelihood. i.e. if a particular complication is very rare, then the cost of treatment will only be added in as a tiny fraction of the total quoted cost. This is one of the few areas of complexity within the system, and would require monitoring of statistics for the outcome and complications for different kinds of treatments. The aim will be to offer a final quote that includes loading for extended stays, and additional treatments, calculated as a final single figure. However, the actual bill will provided to the government will be based upon the full cost of what actually was undertaken, in accordance with the quote.

In addition to the 5 nearest hospitals Fred's doctor will also have the option of requesting a quote from two other hospitals. If the doctor believes that good treatment for the condition can only be obtained out of the area, then this will allow him to find other options. In addition, the doctor will be allowed to exclude up to one hospital if the doctor believes that their standards are poor. When excluding a hospital, the doctor will be required to give a reason why, so that the provider is made aware of their poor reputation.

The doctor can then select from the three providers of the lowest cost quotations, provided that there is no more than 10% differential between the costs of the cheapest and most expensive. If the differential is greater, then the system will automatically broaden the geographic spread, widening it until such time as 3 quotes are available within the the 10% range (the doctor will not need to actively do this, as the doctor should only finally see the results when 3 quotations meet the criterion). At the end of the process, Fred should be presented with three choices based upon geographic search, and up to two choices of hospitals selected by his doctor.

At this point, Fred has a real choice. Each hospital will have an availability date, and he will also be able to see a rating for the hospital for the procedure made by doctors, a rating made by patients, and the final cost of the procedure. Fred then needs to make a choice of hospital for the procedure. Fred can then select the hospital that best reflects his needs. He will be made aware that 25% of the cost of the procedure, and 100% of the costs of the hospital bed, will be allocated to his government health account. This will be allocated to the Major Procedure account, that will allow for up to 3% of his income to be taken each month to repay the cost of treatment.

We will jump forward in time, and Fred has been treated and (happily) with a successful outcome. Fred will then be asked to rate the treatment and hospital, as will his doctor. The costs of the entire process will all be deposited in his government health account, and over the coming months he will find that he is paying 8% of his total income into repaying the healthcare costs.

So what is the advantages of the system. The first advantage is that the system encourages everyone to consider a combination of quality of care and cost of care. It allows the users a wide choice of care according to their own priorities and needs. Furthermore, whether employed or unemployed, there is 100% availability of healthcare, and few would argue that a burden of a few percent of income for healthcare would be unreasonable, even taken from unemployment benefits or a pension.

However, within this scenario, there are several elements that are still missing. The first of these is Accident and Emergency treatment. This is a situation in which a patient does not have a choice. In this case, the only solution is direct government funding, and fixed fees for the system. In this case up to 2% of income would be used to repay treatment and a fixed fee will be applied for any entry into the A&E system. This will require a third account, the A&E account, making the total that can be taken from a person's income 10%. Due to the nature of the system, the government will need to directly contract with hospitals to provide A&E services.

Who would provide for the hospitals, or how will they operate?

The hospitals can be provided by any means. They could operate as charitable trusts, or as private concerns, or any format that can be imagined. Because of the system of choice, and doctors and patient ratings, only hospitals that provide good quality care cost effectively will survive. For example, if a hospital is providing poor care, then the doctor will reject it from the list of hospitals provided to the patient. If the standards of care given by nurses are poor, or if the hospital is not clean, providing poor quality food, then patients will give it a poor rating, reducing demand for its services.

What check on costs will there be?

One government check on costs will be to have a system close to that of NICE (National Institute for Health and Clinical Excellence). They will have a role of determining what might be funded within the system.

What of children?

The accounts of children will be allocated to their parents and, where the parents are not together the costs will be evenly split between the two parents.

What of preventative medicine?

Each individual within the system will be allowed one free health check per year without cost. Certain preventative checks, determined by NICE, will be offered free of charge to encourage uptake.

What of Medicines?

One of the few benefits of the current system is that the massive purchasing power of the NHS allows for cheap purchase of medicine through central control. As such, central purchasing will be retained in this area - the only centralised control in the system.

Won't this hurt the poor?

One of the benefits of this system is that a maximum of 10% if income will be taken from any individual. Even if the individual is on benefits, this is a very small price to pay. Furthermore, because of the system being capped at a percentage of income, the more wealthy the person, the more likely they are to pay for the treatment they have benefited from. If a person is on low income, and they undergo a major procedure, it may be that they never pay down their account. On the other hand, a high earner will be more likely to pay down their account. In this way, everyone makes a contribution, but it is likely that high earners will, on balance, pay more on average.

What is the role of government?

Government is subsidising healthcare, and collecting the remaining fees.

Should government have any role?

If we were to take a purely libertarian stance, no. However, health care is perhaps the one area where even libertarians might be nervous of a completely free market. Few want to see people lacking treatment, and dying for lack of healthcare.

What of dentistry?

The same system applies, and an additional 2% of income can be used to pay for the costs. However, each dentist can not undertake the work they suggest, but will play a role similar to that of the doctor in selecting treatment. As such, each individual will have a dentist for prescribing treatment, and will use another dentist for enactment of treatment. The system will therefore be the same as the system for selecting hospitals.

What of the rating systems?

One of the keys to a successful market is information and choice. The purpose behind the rating system is information. This is one area that would be under central control, as all users of the system need to have an input into one unified system, so that all ratings can be aggregated. This is a relatively simple system to achieve, and can be cost effectively deployed over the Internet. One of the keys to the system is that each rating needs to be anonymous, and each individual can only rate one event on one occasion (to avoid vindictive ratings).

Who is providing all the IT?

Each medical provider will have complete freedom over the system they use, provided that they can offer the information necessary for the operation of the system securely and with the data in a common format.

How could it be implemented?

The only complication in implementation is ensuring that everyone is prepared to provide data in an appropriate format. For provision of hospitals, the simple solutions is to take the existing hospitals and make them independent charitable trusts. From that point forward the market will then adapt to meet the demands of both patients and doctors. There need be no further intervention.

What if people have to travel for treatment? Won't they complain?

This is a question of explaining the benefits of the system to people. At the outset, there will be problems, complaints, news reports about the 'terrible hardships' this caused x,y, and z person. This is all about explaining that no system can be perfect and asking for patience whilst the system beds in, and patience until the benefits can be felt. The system will certainly improve standards over time, such that having to travel to get decent care will diminish as a problem over time, though will never be eliminated.

You've missed out a lot. What about, say, midwife services?

There are many elements not dealt with in detail. I am only establishing guiding principles here. Apply the principles laid out, and I think you will answer this question yourself.

Conclusion

As for my proposal for education reform I do not suggest that this is a finalised system. It is an idea, a framework, and nothing more. The purpose of the system, just like education, is to create a system that is both cost effective and provides good quality. In an ideal world, there would be no government role, but this offers a compromise between a state funded and private system.

In this system, everyone has their interests aligned towards quality and cost. A doctor can only propose a cost effective hospital, and a patient will need to decide what their priority is - locations, cost, availability over time, and quality of care. In such a system, over time, the healthcare system will shape itself to the needs of patients, but will shape itself in a way that offers cost effective care without sacrificing quality. Most importantly, paying for the care will not cause individuals hardship, as the maximum payment is !0% of income per month, or 12% if dentistry is included.

My reason, as for education reform, for such a system is to alter the structure of the UK, with an aim of making it more effective in the allocation of state expenditure. In this system, the state would still be required to offer subsidy, but that money would be used more efficiently and effectively, and with a vastly reduced bureaucratic cost. Furthermore the quality outcome would be improved for this reduced cost.

As before, comments on the system will be welcome. I hope that, at least, such a system motivates you to question the current centralised system.