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«Edited by ANNE MASON Research Fellow, Centre for Health Economics University of York and ADRIAN TOWSE Director, Office of Health Economics Radcliffe ...»

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It also turned out that he advocated, and over 30 years developed, the right principles to be practical, making an outstanding contribution to making CBA a scientific method and an accepted and useful tool for improving health policy. AW did not need any ‘Paretian straitjacket’, but I think I share the conviction with BS that it is useful to have this available for CBA management consultants who do not have the integrity and intellectual standing of AW.

* Note the difference with CBA within environmental economics, where WTP is the gold standard, and where this method is much more developed.

ALAN WILLIAMS AND COST–BENEFIT ANALYSIS IN HEALTH CARE 25

Working closely with decision makers to help them to make decisions about the allocation of healthcare resources in the public interest is an important, but also a challenging, role. AW is a great example of how it can be done, and a role model for many of us who have tried.

REFERENCES Cooper M and AJ Culyer (eds) (1973) Health Economics: selected readings.

Harmondsworth: Penguin.

Gold MR, Siegel JE, Russell LB and Weinstein MC (1996) Cost-effectiveness in Health and Medicine. New York: Oxford University Press.

Jönsson B (1976) Cost–benefit Analysis in Public Health and Medical Care [dissertation] Lund University: Department of Economics.

Jönsson B (1977) Application of cost benefit analysis to health problems In: Halberstadt V and Culyer AJ (eds) Public Economics and Human Resources. Proceeding of the 31st Congress of the International Institute of Public Finance. Paris: Editions Cujas, pp. 193–202.

Sugden R and Williams A (1978) The Principles of Practical Cost-benefit Analysis.

Oxford: Oxford University Press.

Wildavsky A (1973) If planning is everything, maybe it’s nothing. Policy Sciences 4:

127–53.

Williams A (1974a) Measuring the effectiveness of health care systems. British Journal of Preventive and Social Medicine 28: 196–202.

Williams A (1974b) Need as a demand concept (with special reference to health).

In: Culyer AJ (ed.) Economic Policies and Social Goals. London: Martin Robertson, pp. 60–76.

Williams A (1974c) The cost|benefit approach. British Medical Bulletin 30: 252–6.

Williams A (1976) Cost-benefit Analysis in Public Health and Medical Care – comments on a thesis written by Bengt Jönsson. Lunds Universitet: Nationalekonomiska Institutionen. Meddelande 28 (mimeo, 13p). [Lund University: Department of Economics. Working paper 28 (mimeo 13p).] Williams A (1977) Health service planning. In: Artis M and Nobay A (eds) Studies in Modern Economic Analysis: the proceedings of the Association of University Teachers of Economics, Edinburgh 1976. Oxford: Basil Blackwell & Mott Ltd, pp. 301–35.

Williams A (1981) Welfare Economics and Health Status Measurement. In: J van der

Gaag J and Perlman M (eds) Health, Economics and Health Economics. Amsterdam:

North Holland Publishing, pp. 159–70 and reprinted in: Culyer AJ and Maynard A (eds) (1997) Being Reasonable about the Economics of Health: selected essays by Alan Williams. Cheltenham: Edward Elgar Publishing Limited, pp. 107–19.

CHAPTER 4

The public–private challenge inhealth care... Alan Maynard

INTRODUCTION

Alan Williams had a phenomenal capacity to teach and mentor, guiding generations of York and non-York colleagues along the paths of enlightenment, a process always based on his maxim: ‘Be reasonable! Do it my way!’. I was a grateful beneficiary of his teaching and mentoring over the decades we worked together in York.

He was all too aware of the limitations of finance and delivery in health care, but robust in his defence of a healthcare system based on the principle of need, defined with typical precision as capacity to benefit. At a time when that principle is under renewed challenge in healthcare systems across the world and as diverse as Australia, Canada, and Hong Kong, the purpose of this paper is to elaborate and extend the arguments that Williams deployed about conflicting ‘ideals’ and ‘actuals’ in the positions of those holding competing ideologies in the healthcare policy debate. The pertinence of this analysis is increased by the current confused policies of the British government, which, ever anxious to achieve greater efficiency in the use of increased NHS funding, has adopted some innovations whose purposes appear to be inconsistent with the provision of care on the basis of need.

SOCIAL WELFARE FUNCTIONS AND COMPETING IDEOLOGIES

Over 20 years ago, the Thatcher Government was challenging the UK’s National Health Service (NHS). The ‘social contract’ that had governed NHS politics since 1948 had broken down (Klein, 2001). Whereas previously there had been an unwritten concordat by which the medical profession was left to govern the delivery of health care which the government funded, the Thatcher

2728 THE IDEAS AND INFLUENCE OF ALAN WILLIAMS

administration increasingly demanded to see evidence of ‘value for money’.

This implied micromanagement of clinical activity and the doctors’ trade union, the British Medical Association, responded by demanding increased funding.





At the same time, and as part of the international and continuous cycle of healthcare reform, the Americans were debating the performance of their own healthcare system. At a conference in Washington DC in 1980, a York trio presented a paper including Williams’ description of the attitudes associated with differing ideological viewpoints (Culyer et al., 1981). Williams elaborated this subsequently with descriptions of the actual and idealised characteristics of the competing egalitarian and libertarian healthcare systems (Maynard, 1982; Maynard and Williams, 1984; Williams, 1988).

The three tables from these papers are shown next: attitudes associated with the two viewpoints (Table 4.1), the characteristics of an ideal healthcare system as advocated by adherents to the competing ideologies (Table 4.2), and the nature of the actual competing healthcare systems as critiqued by their opponents (Table 4.3). Adherents of each ideological position tend to criticise the actual performance (see Table 4.3) of their opponent with the idealised characteristics (see Table 4.2) of their own system, thereby fuelling rhetorical debate and avoiding addressing the resolution of well-established efficiency and equity deficiencies.

TABLE 4.1 ATTITUDES TYPICALLY ASSOCIATED WITH VIEWPOINTS A AND B

–  –  –

The crux of the distinction between the egalitarian and the libertarian perspectives is the differing maximand in their social welfare functions. The libertarians are concerned with freedom of choice, where health care is part of the reward system of society and access to care is determined by willingness and ability to pay. For the egalitarian, the primary focus of concern is equality of opportunity.

‘Equality is seen as the extension to the many of the freedom enjoyed by only the few’ (Culyer et al., 1981). Priorities in an egalitarian system are determined by social judgements about need, where need is defined as the patient’s relative ability to benefit in relation to opportunity cost (Williams, 1974).

With adherents of each system subscribing to different social welfare functions, might a ‘solution’ to their conflict be two co-existing healthcare systems, each serving its own supporters? Unfortunately this is not a viable solution for the egalitarians who view us all as one community with no one opting out. Enhancing the freedom of choice for some, by using market systems and letting individuals exploit their superior purchasing power to shift the distribution of health care in their direction, is inequitable: it gives a higher social priority to more affluent citizens and diminishes social welfare.

Adherents of the egalitarian ideology would welcome a mixed system only if elements of the libertarian system could be shown to enhance the performance of an NHS type. Would some mix of systems do better than either of the systems alone – and what is that mix? For example, can some form of ‘competitive market’ improve the achievement of NHS goals?

However before addressing such contemporary debates on the supply side issues, the ideological debate on the demand or financing side of the healthcare market will be reviewed.

34 THE IDEAS AND INFLUENCE OF ALAN WILLIAMS

IDEOLOGY AND THE DEMAND SIDE

The continuous and often repetitive reform debates in all healthcare systems often focus on the demand side of the healthcare market, ignoring the two primary certainties in life: death and the scarcity of resources. Depending on the state of the world economy, reformers from the left and right assert that systems are either ‘too expensive’ or ‘underfunded’. For example, expenditure in the US health systems and in private insurance systems generally inflates at two to three times that of the consumer price index (Colombo and Tapay,

2004) and the left proffer National Health Insurance as the solution (Emanuel and Fuchs, 2005). In ‘socialised’ healthcare systems, the problem is asserted to be ‘underfunding’ where libertarians typically advocate user charges as a ‘solution’ and the left advocates spending more, as in Blair’s UK reforms.

The drivers of expenditure in healthcare systems are technological advance, the ageing of the population and the effects of these factors and increasing gross domestic product (GDP) on public expectations. Market and socialised healthcare systems are quite poor at managing these pressures. Technology appraisal is slowly inserting economic evaluation into public decision making, but notions of opportunity cost and budget constraints remain poorly defined, thereby allowing innovations of marginal cost-effectiveness to be imposed on healthcare managers. The effects of ageing may be moderated by the predicted compression of morbidity (Fries et al., 1989), but the evidence of such effects is the subject of lively debate (Manton et al., 1997; Jacobzone et al., 2000).

Even if compression of morbidity is modest or absent, the cost ‘burden’ of this triumph of extending people’s lives may be modest. Those concerned with the effects of ageing and profit-driven technology marketeers propound, in their various ways, the nirvana of immortality when the evidence base for the majority of healthcare interventions is absent (BMJ Publishing Group, 2005) and many practices may be little more than expensive placebos!

Debates such as these about the drivers of expenditure do not drive public policy. Instead, special cases and well-marketed advocacy lead to a focus on how increased funding will be financed, raising ideological and distributional issues (see Boxes 4.1–4.3).

The libertarian perspective, currently epitomised by Bush in the USA, Howard in Australia and reform proposals in Hong Kong, prefer private insurance, user charges and medical savings accounts (MSAs). MSAs are family-based insurance systems that first emerged in Singapore and a number of large Chinese cities. Wage earners are obliged to contribute and usually subsidised to save in order to fund the healthcare costs of extended family members, i.e. the risk pool is small. These devices obviously advantage the affluent whose saving capacity is greater, and the tax subsidies augment inequalities. In Singapore MSAs fund only about 10% of total expenditure and there, and in mainland China, they have been shown to increase inequalities and brought few observable efficiency gains, instead often increasing provider

THE PUBLIC–PRIVATE CHALLENGE IN HEALTH CARE 35

BOX 4.1 FINANCING IN AUSTRALIA In Australia, the Howard Government has increased private insurance cover in by tax subsidies, by lifetime savings accounts, which ‘buy in’ the young at low levels of premium, and increased taxation of those who do not hold private healthcare insurance. His antipathy to Australian Medicare, a national system of healthcare provision, reduces the tax revenues by $A2.5 billion, which benefits the more affluent (Hall and Maynard, 2005). These policies are articulated in terms of ‘freedom’ and Howard’s lifelong antipathy to ‘socialised’ health care. It has helped him to be re-elected three times and will be difficult to reverse if an egalitarian government ever re-emerges.

BOX 4.2 FINANCING IN HONG KONG In Hong Kong, the healthcare spend is modest, consuming less than 6% of GDP.

Hospital care is provided in a mini-NHS, which is tax financed. Primary care is provided largely by the private sector, physicians make a fine living from work in this office-based and poorly regulated system, and access is based on ability to pay. The ‘communist’ government’s response to expenditure problems has been to advocate the increased use of private insurance and medical savings accounts (MSAs) (Health, Welfare and Food Bureau, 2004), primarily as tax levels are believed to be ‘too high’ (income tax is 14%). Income inequality in Hong Kong is considerable, and its perpetuation by the ‘communist’ libertarian government is seen as essential to maintain high levels of economic growth.

profits and the use of often unproven high technology (Yip and Hsiao, 1997;

Yi et al., 2005).

Perhaps unsurprisingly, Bush has implemented a version of MSAs in the USA.

Another familiar weapon in the libertarian armoury is the advocacy of user charges. This was the preferred policy in the USA in the 1980s and was supplanted by evidence-free optimism about ‘managed care’ in the 1990s.

While managed care may have moderated healthcare expenditure inflation in the mid-1990s with no apparent quality consequences, there was a ‘bounce back’ as providers used market power to countervail funders’ purchasing power, reviving high inflation rates. The policy response to this is the readoption of the failed policies of the 1980s, i.e. deductibles, co-insurance and manipulation of benefit package coverage.

36 THE IDEAS AND INFLUENCE OF ALAN WILLIAMS

Stoddart and his colleagues have reviewed the literature on user charges

several times. They reiterate each time their conclusions:

–  –  –



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