Healthcare reform must tackle funding

The coalition government's healthcare reforms are in the news once again. My take on the proposals hasn't changed a great deal since I wrote the following for The Spectator last year:

They might help a little here and there, they might be an improvement on the status quo, but they are probably not going to prove worth the effort. To put it bluntly, they don’t go far enough. They won’t help cost control in any meaningful way, because they don’t allow competition on price or abolish collective pay bargaining. They won’t do much to encourage choice or innovation, because they leave the public sector dominant and perpetuate onerous, central regulation. And crucially, they fail to put the patient in charge of their own care in any meaningful way, which is surely the key to delivering a tangible change in the patient experience.

Today, former health secretary Alan Milburn weighs into the debate with an article in The Times (£). He writes:

The Health and Social Care Bill is a patchwork quilt of complexity, compromise and confusion. It is incapable of giving the NHS the clarity and direction it needs. It is a roadblock to meaningful reform.

He goes on to make a number of points that I more or less agree with. Health and social care should be better integrated, rather than being forced into artificial silos that suit planners instead of patients. Control should be decentralised. Payment should be by results. The private sector should play a greater role. And patients should become active participants in their healthcare, rather than mere passive recipients.

All good stuff. But Milburn's final point exposes a contradiction in his thinking. Early in his article, he rules out demand-side reform of the way British healthcare is funded. Later, he says: "Studies in both the US and the UK show that where people have direct financial control over their own health budgets levels of patient satisfaction rise and levels of public spending fall." Milburn suggests that hundreds of thousands of patients should get their own personal budgets, "so that they can buy the services that are right for them". But why stop there? Why not extend the same logic to all patients?

This, ultimately, is the key to successful health reforms: put patients in charge of the money. Not bureaucrats, not doctors, but patients. Once you do that, the door is open to genuine choice and competition, which will raise up standards and drive down costs - as well as instilling a much-enhanced sense of personal responsibility. No amount of supply-side tinkering - however worthy or well-intentioned - can have anything like the same effect.

We need this principle to be spread as far and wide in the healthcare system as possible. As long as NHS funding comes from the top down, it will necessarily remain a centrally-planned, command and control institution, with all of the inherent defects that entails.

I've outlined my own, radical vision for the future of healthcare here.