Miliband’s attack on profit is an attack on patients

Either Ed Miliband is struggling to understand the basics or his ideology is spiralling out of control.

The latest Labour pledge:

Labour would cap the amount of profit private firms can make from the NHS, Ed Miliband will say as he launches the party’s election campaign.

He will pledge to halt the “drive to privatisation” he claims has taken place in the health service since 2010.

The future of the NHS is “on the ballot paper” and only Labour can guarantee the funding it needs, he will say.

Under his plans, private firms will have to reimburse the NHS if they exceed a 5% profit cap on contracts.

Companies make profit by keeping costs as low as possible while producing a product or service that people want (and ideally choose) to consume. Apologies for the simplicity, but apparently Ed needs it.

Pledging to fix levels of profit that a company can make ruins any motivation for the company to bring costs down. Given the NHS’s current financial situation, Miliband should not be so quick to toss aside the importance of efficiency gains.

Nor should he be ignorant of private firm’s impacts on patient outcomes.

Private firms are hardly private when working for the NHS; they are still under the jurisdiction of NHS bureaucracy and are often dependent on public funds for their operations. But where private firms and independent sector treatment centres do differ from the public sector is in their record on patient outcomes. Research from 2011 showed that ISTC surgery patients are healthier and experience less severe recovery conditions than patients undergoing the same surgeries with NHS providers.

Furthermore, Circle’s management of Hitchingbrooke Hospital turned a failing trust into one of the highest ranked hospitals for patient happiness and cut waiting times drastically; their recent failings were not a result of bad healthcare but rather bad business.

One of the reasons Circle reneged on its government contract is because it’s a struggle to make efficiency gains under NHS regulations as they currently exist; if Labour gets its way, this will become nearly impossible.

Miliband’s attack on privatization and profit is an ideological attack on buzzwords; unfortunately, his crackdown could have real affects on patient outcomes.

To describe drug pricing as free market is simply ignorance

Suzanne Moore has a very powerful piece about the meningitis B vaccine and its pricing. Sadly, the core of her argument is also entirely wrong:

Second, and maybe not so emotional, is that this is actually the market in all its gloriously free form. It is a choice. The market can charge what it likes for vaccinations against meningitis, as it will do for Ebola or malaria if these are developed. Cancer drugs, retrovirals, the new anti-rheumotoids: they are all expensive. There is something utterly immoral about the market holding not just the NHS to ransom, but the sick and the suffering around the globe. These untramelled market forces must be challenged.

There is nothing remotely free market about the pricing of drugs. For those who develop such drugs are granted a legal monopoly upon them for 20 years. We call this monopoly a “patent” and legal monopolies are not part of that “free market”. Indeed, the existence of such legal monopolies such as patents and copyrights is a flat out admission that the free market, the market unadorned, does not deal well or cope with every problem. The art is in working out when this is so and what should be done at that point.

The most obvious two examples of when the unadorned market does not cope well are pollution and public goods. Yes, Coase pointed out when there are indeed private solutions to pollution: but equally his analysis pointed out when they will not work. Public goods are, by definition, non-rivalrous and non-excludable. Knowledge is an obvious example. That once knowledge has been attained we cannot stop someone from using it, nor does their use diminish the amount other can use, poses an economic problem. It means that it’s terribly difficult to make a profit from having uncovered that knowledge.

We’re also pretty sure that people respond to incentives: thus, less profit from uncovering knowledge will lead to less knowledge being uncovered. And we like knowledge being uncovered, it’s one of the things that makes us all generally richer over time. So, we deliberately construct these time limited monopolies in order that people who uncover knowledge can profit and thus have the incentive to do that grunt work to uncover it.

This is not, by any means at all, a free market. It’s that flat out admission that the free market does not work in all circumstances.

And this is, of course, what happens in drug development. Getting a new vaccine through testing (please note, this is not an argument about the original research, whether that was government funded or not) costs in the $300 million to $500 million range. Someone, somewhere, has to spend that much. We can indeed do this in different ways, none of them will be free market ways because of that simple public goods problem. Once we know how to make the vaccine it is terribly cheap to reproduce. Almost all of the cost is in working out how to make it.

And thus we come to the argument about how much should that monopoly holder be able to charge for access to that new drug. We can’t just say “a reasonable return on manufacturing costs” because that is ignoring the very problem that led to the construction of the legal monopoly of the patent in the first place. We also can’t say that they “deserve” some amount of money, possibly equal to the human misery and suffering that won’t happen as a result of the roll out of the vaccine. There is no “deserve” here. Nor can we say that bugger them, that suffering is so great that we’ll just nick their $500 million. For what we’re actually trying to achieve is to leave people with the incentives to go and spend the next $500 million on developing the next vaccine.

We are not weighing in the balance the amount the capitalist b’stards are trying to charge against the joys of wiping out meningitis B. We are, in these price negotiations, trying to work out how much profit we let them make on this vaccine so as to incentivise the development of all the future vaccines that might ever be developed. This is a rather difficult question.

And it really is a difficult question. Which is, of course, why we really do try to use markets where they work even acceptably if not perfectly. Simply because using non-market methods is so damn difficult.

Unite’s interesting little report on NHS privatisation and tax

Unite, the union, has released a small little reportette on the tax positions of those firms that either have or are bidding for contracts to deliver health care services to the NHS. The so called “privatisation” of the NHS. Apparently it would be very bad if people who provided these services did not pay lots of tax. You know, in the manner that the NHS itself pays lots of tax.

Given that the report is written by Richard Murphy we know that there’s going to be logical problems contained within it. It’s just that we need to work out which mistake he’s made this time rather than wonder whether there is one. and here’s quite a doozy:

If a willingness to pay the right amount of tax, at the right rate, at the right time and in the right place is the best indication that there is of corporate social responsibility then there is, unfortunately, little evidence from the ten companies surveyed to produce this report that many of the suppliers of private services to the NHS are committed to this ideal.

Admittedly, this conclusion is not helped by the fact that eight of these ten companies are at present making losses, and so pay little or no tax at present, and may not do so for some time to come.

The error, of course, being failing to consider the implications of those providers making losses. Those providers are expending more resources to deliver health care than the NHS pays for delivering said health care. This must be so, this is the source of those losses. That is, the NHS is getting more health care than it is paying for: the taxpayer is getting more health care than it is paying for.

Quite how this is something we should object to is unknown. But then this is a feature of Murphy reports, the assumption that we’re supposed to be outraged at the taxpayer getting a good deal.

Wilkinson and Pickett are, yes, still wrong

This would simply be laughable if it weren’t for the fact that it’s so dangerous. Richard Wilkinson and Kate Pickett are, once again, telling us that it’s all inequality that fuels our woes. And yet they’ve entirely misunderstood the statistic that they’re using to prove that this is so. And to add to the embarrassement Wilkinson at least is supposed to be a demographer, meaning that he really is supposed to know how badly he’s cocking things up here.

Yes, we’re being rather fierce here but rightly so:

New statistics from the ONS have revealed that women in the most deprived areas of England can expect to have 19 fewer years of healthy life than those in the most advantaged areas. For men, the figure isn’t much better, with a gap of over 18 years. To put that into perspective, those born in the poorest parts of England can now expect to live the same, or fewer, healthy years as someone born in war-torn Liberia, Ethiopia or Rwanda. And a third of people in England won’t reach 60 in good health.

Those statistics are here. And the first part of the paragraph is correct. Ages at death in poorer areas, health before death in poorer areas, are lower/worse than they are in richer areas.

But this has absolutely nothing at all to do with life expectancy at time of birth. Simply because no one at all is even attempting to measure life expectancy at birth. What people are measuring is age at death, health before death, in certain areas.

The difference is, and you may have noticed this, people actually move around during their lives. Further, it is not (necessarily) true that income inequality leads to health inequality. For it is also true, as we’ve pointed out many a time before, that health inequality can and will lead to income inequality. That ghastly disease that cripples someone in their 40s is going to have an impact on their income during the remainder of their life. We cannot therefore look at income inequality and claim that it causes health inequality. Simply because there are two processes at work.

Further, we cannot look at lifespans in an area and insist that these reflect the life chances of those born in that area. Take, as an example, a retirement town like Bournemouth (say, any other will do). People often retire there at, say, 65. Can we then look at average lifespan in Bournemouth and correlate it to that of someone born in Bournemouth? No, of course we can’t: for the average lifespan in Bournemouth is going to be boosted by including large numbers of people who only impact the numbers after they’ve survived to age 65. And, obviously, those rich enough to be able to move for their retirement.

This migration over lifetimes will lead to selection: the richer will go to richer areas (if nothing else on the grounds that they can afford the property prices) and the poorer will go to poorer areas. At least part of what is being measured is therefore the effects of this selection, not the life chances of those born in these areas. As such we simply cannot accept the conclusions they are making from this data.

And as up at the top, Wilkinson at least is supposed to be a demographer and he really is supposed to know all of this. It astonishes that they keep pushing this obviously incorrect line.

These statistics are compiled on the basis of LSOAs, lower super output areas. There’s some 32,844 of these in England. That is, each LSOA is a unit of roughly 1,500 people give or take a bit. So, how many people die in the same 1,500 people strong grouping that they are born in? The geographical area inhabited by that same 1,500 people? Moving three streets over on marriage would take you out of such a small area.

Quite, somewhere between not very many and none these days. These statistics are simply valueless in trying to prove what Wilkinson and Pickett want to torture them into showing.

Polly Toynbee explains why the NHS should be privatised

Not, admittedly, what we would expect to hear from Polly but the case she makes for the privatisation of the NHS is logically perfect:

Ration life! Limit the value of a good year of human life to £13,000 to spend on any one drug, says a report from Prof Karl Claxton of York University. Spend more, and other patients die for lack of funds.

That’s the crunch point in NHS funding, according to health economists at York University, inventors of the original notion of measuring health spending by Qaly – a quality adjusted life year. If all health spending was put through this rigorous analysis of ensuring every pound bought the best value, there would be a remarkable shift in NHS priorities. Mental health would score highest, not lowest, in spending, as each pound can buy the most effective diminution of intense suffering. Suicides are rising, most among young men in deprived areas – deaths that could be preventable at reasonably low cost. Instead, a minor operation may take priority, as headline waiting time targets matter more politically.

During a period of the steepest cuts per capita the NHS has ever known, the government has weakened attempts to ration rationally.

Politics, being politics, means that the NHS is being run irrationally. The solution is therefore to remove the NHS from being run by politics. That part of national life which is not run by politics is known as “the private sector”.

Thus the NHS should be privatised. QED.

And do remember, it’s not us telling you this, that’s Polly Toynbee saying it.