Health economist Professor Alan Maynard lets the political confections go where they may, exploring real NHS reform and finding good reasons to praise former health secretary Frank Dobson.

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The rumpus over the NHS bill has been time-consuming and expensive, using scarce resources urgently needed for patient care and managing productivity improvements.

Opponents of the bill have invested large amounts of energy in rousing the medical mafia and others to opposition. However, the opportunity cost of these negative tactics has driven out consideration of the real question: what to do with or without the bill?

Either:

1. the bill has to be moulded to enhance NHS performance, if it reaches the statute book; or

2. if it is dropped, how will the NHS be reformed?

Reform is non-negotiable: without significant change, the NHS will not survive.

Why a civilised society has a welfare state
The primary purpose of a welfare state and healthcare systems in particular is financial protection for the individual. In the USA, the need for medical care can bankrupt an individual.

In Europe, via NHS and social insurance systems, there is redistribution from the healthy to the sick, and thus no direct risk of healthcare-associated bankruptcy. This income protection is perhaps the most significant reform of the 20th century - and it should be carefully protected, as it is a clear demonstration of a civilised society

All about the dosh – no structural change
But how can this be done? Frank Dobson – Dobbo - when Secretary of State for Health (1997-99) said to his civil service officials at the end of his first day in the job “so it’s all about the dosh, right?”

Right! History has rather ignored the fact that in practice, Dobbo was one of the more successful NHS reformers. No structural change nonsense from him! He and such colleagues as Alan Langlands and Ken Calman gave us the National Institute for Clinical Excellence to cut postcode lotteries of care;, the Commission for Health Improvement (CHImp) to inspect standards of care; and National Service Frameworks to establish standards of care.

Also, before he was heaved out by Blair’s “modernisers”, Dobbo acquired funding pledges from the Treasury which increased NHS spending significantly. Though perhaps politically necessary, it was not Dobbo’s fault that New Labour committed in opposition to matching two years of Chancellor Kenneth Clarke’s Conservative spending plans beyond 1997. (Ken Clarke admitted that he would not have kept to his plans beyond 1997.)

The Nicholson Challenge: how to recycle £20 billion
The challenge now is how to fund increased care for an ageing population with new and hopefully cost-effective technologies. With little or no new dosh available to fund increasing demand, the emphasis is on “re-cycling” £20 billion over 4 years.

Government is pursuing the Dorrell-dubbed Nicholson Challenge in three ways: pay freezes, tariff reduction and innovation. How do these measure up in practice?

The pay freeze has been extended to 2015. This is an effective way of saving money. Together with pensions reform, it is reducing workforce income significantly. There is some leakage with incremental drift, but by and large, this is an effective policy.

How long it can be sustained is a nice issue. Can the Coalition approach the next election without significant pay increases being given to buy votes?

Payment by results (PbR) hospital tariffs are the means by which hospitals make PCTs (and in future, CCGs) bankrupt! To squeeze hospitals and ease pressures on PCTs, tariffs are being reduced.

Alongside this, to induce greater efficiency such as using day surgery for gall bladder removal, tariff bonuses are being introduced. This is a rather strange policy. Surely it would be better to pay lower tariffs to those who used overnight stays for such procedures?

PbR squeeze is saving cash. But how long before it induces even greater problems with hospital deficits and endangers the quality of patient care?

Into Robert Francis’s quality storm
The Francis Public Inquiry Report on the Mid-Staffordshire Hospital will undoubtedly create a “quality storm”, which will be costly. Will this reduce capacity to squeeze tariffs and undermine the push for savings and recycling dosh to a cash-strapped NHS?

The final area for savings is innovation. This is a wonderfully ambiguous term, and policy appears to be a “wheeze storm”, with no clear definition of policy goals and benchmark data to judge its success. It is characterised by the advocacy of faith-based policies in abundance.

Thus the NHS Confederation assert that 25 per cent of hospital patients could be discharged and cared for in the community. Sadly, there is no evidence for this. There has been lots of experimentation with early discharge schemes; but appalling failure to evaluate the costs and benefits of such programmes in a systematic way.
Faith is no substitute for evidence. To pursue such a policy is like jumping off a cliff without looking down first: is the distance you will fall 2 feet? Or 2,000 feet?

Another example of innovation is the call for integration of health and social care. It looks so logical, but (as can be seen from policy debates in the USA and the UK) we do not know how to do it cost-effectively. Presumably the successful creation of integrated care would require merging of budgets (primary-secondary-community / social care); the creation of evidence-based practice guidelines and reformed incentives to ensure teams delivered care efficiently.

How to get to that nirvana is not obvious!

Then there is “competition” - defined “as striving for custom amongst rival traders of the same commodity”. The Bonkers Brigade rejects competition because they see it as synonymous with privatisation. However, the Imperial (e.g. Carol Propper) and LSE (e.g. Cooper and McGuire) research showing competition is effective is of course about competition between public / NHS providers. See also Zack Cooper and colleagues’ new paper.

Thus competition is not necessarily the same as privatisation.

Competition may be effective. Is it cost-effective?
Furthermore, it is important to note that whilst competition is effective, it may not be cost-effective.

Private-based and NHS competition needs careful regulation. As Nick Timmins has argued, this is best done by the NHS Co-Operation and Competition Panel not being part of Monitor.

Saving the NHS (again)
The Nicholson challenge is unlikely to create £20 billion of savings. Innovation to improve productivity will take time and needs a much better evidence base. So what will happen?

Back to Dobbo: it will be all about dosh! The Coalition will have to buy votes by increasing NHS funding as it nears the election. This will not be easy if they indulge in a war with Iran - but avoidance of that will be a Challenge equal to Nicholson’s, given Britain’s ongoing pretensions of being a ”world power”.