Competition, Cooperation, Or Control? Tales From The British National Health Service

PROLOGUE: In July 1998 the British National Health Service (NHS) marked its fiftieth anniversary. The NHS brought together in one organization, for the first time, hospital, physician, and community health services—and also posed administrative and fiscal challenges that continue to plague it. Britain undertook the latest in a series of reforms after the New Labour party assumed power in 1997. This latest reform, which represents a “third way” between the poles of liberal and conservative, focuses more on collaboration and less on the competitive principles of the previous internal-market reforms of Britain's Conservative government. In this paper Julian Le Grand discusses “the evidence concerning the internal market's effectiveness,” building on a paper published in Health Affairs last July (Rudolf Klein, “Why Britain Is Reorganizing Its National Health Service—Yet Again”). Following Le Grand's paper is a series of Perspectives, focusing both on the NHS reforms and on another endeavor under way in Britain: an attempt to address inequalities in health, based on a study of the social determinants of health and poverty. This discussion has implications for other health care systems as they seek to improve their citizens' health in an era of cost constraints. Le Grand is Richard Titmuss Professor of Social Policy at the London School of Economics and holds a doctorate in economics from the University of Pennsylvania. He has served as an adviser to the World Bank and the European Commission, and is prominent in Britain as an advocate of the “third way.” ABSTRACT: The British National Health Service (NHS) recently underwent a massive social experiment, inspired in large part by the ideas of U.S. experts. This involved the creation of an internal or quasi-market, separating purchaser from provider and encouraging competition among providers. After reviewing the evidence concerning the impact of this experiment, I conclude that the impact in fact was minimal, partly because of the retention of central government control and partly because the experiment was based on an inadequate understanding of professional and managerial motivations. The paper draws out general lessons of the experiment for other market-oriented health care systems and examines whether the lessons are reflected in the new batch of NHS reforms initiated by the recently elected Labour Government.