8 Managed competition

Medical care the world over now stands on the brink of a huge expansion of investment in health care, in two possible directions: either to need-driven co-ordinated expansion of labour-intensive continuing care and health maintenance for whole populations, with episodic technical repair as a subordinate tool; or profit-driven independent expansion of capital-intensive technical repair, as an ultimately false alternative to continuing care, directed mainly at profitable subgroups of the population. These are mutually exclusive; no imaginable society can afford both, and the professional attitudes required are entirely different. Struggle between these two tendencies defines the true crisis in medical care.

There are many different views on the future of health services, but on one point everyone agrees; they are everywhere in crisis. With the curious exception of Cuba, there are no developed national systems of health care anywhere that are not now being subjected to fundamental revision.

Why is this so? According to conventional wisdom, the immediate cause is that scientific advance has priced medical care beyond the reasonable costs of public service. The advance of medical science continually expands what is possible, much faster than any government can afford to apply it to all who might benefit. Unless we find some way of reining in medical care, the entire Gross National Product will eventually be consumed by health services.

If you really think about it, this is unconvincing. All sciences expand, not just medical science. Has anyone announced a similar crisis in telecommunications, genetic engineering and biosynthesis, or computer games? The problem arises not because of the rapid progress of medical science, but because of the peculiar social relations within which medical science has hitherto been applied. These other rapidly expanding industries, all dependent on science, are extremely profitable, and therefore recognised to generate value. Their rapid growth may cause some problems, but we assume the new wealth they generate will ensure far more gains than losses; they pay for themselves. Public health services are different, precisely to the extent that they are freely available to all, not bought or sold, and therefore not profitable to trade.


Obviously, if health services have any positive output in net health gain, they must create value. Most people value their health more highly than any other quality except happiness, so if they believe they need medical care, in a market economy they give it high priority in personal spending. Research has shown clearly that to consumers, spending on personal medical care is a necessity, not a luxury, so that only food commands higher priority in the budgets of poor families .

Margaret Thatcher and Joe Stalin shared one philistine assumption. Both of them classed health services in the “non-productive sector” of the economy, like education, cultural institutions, and everything else not producing objects or services for sale. In this view, my lifetime of caring for the health of coal miners and their families in a free public service was an essentially parasitic activity of wealth consumption, not wealth production; whereas if I had performed the same tasks for rich Arabs visiting Harley Street, I would have been an economically useful wealth-creator. Almost the first serious school of economists were the physiocrats of pre-Revolutionary France, who believed that all real wealth was created by agriculture, all other value being ultimately derived from it. They were specially contemptuous of manufacturing industry, which in their view merely took agricultural products and manipulated them in various ways, without adding to their essential value. This absurd view was as natural to them, as the non-productive nature of all public service seems today to people who can perceive only lost opportunities for profitable trade.

At least until about ten years ago, market production and distribution of medical care resembling other typical developed commodity markets did not exist. If we take car production as a typical example, a developed commodity market consists of a diminishing number of giant multinational corporations serving world-wide markets, so rich that they often have more control over elected governments, than governments have to control corporations. Medical market economies were not of this nature, because for many different reasons, production of personal health gain was not suited to investment on anything like the same scale.

There were essentially three kinds of medical market. In economically undeveloped countries, medical care was sold by and bought from individual self-employed physicians and surgeons, specialists in cities but general practitioners in the countryside, working alone or with a few supporting staff. Doctors provided their own capital equipment, of which by far the largest component was their own personal investment in training. A few got very rich, but they were an insignificant part of the economy as a whole. In every economically developed country except the USA, though relics of this self-employed private medical shopkeeping remained, most medical care passed to salaried or contracted public medical services, created to humanise otherwise intolerable industrial systems, under pressure from socialist and trade union movements, either as powerful oppositions or in government.

The USA evolved a unique position. Her socialist and trade union movements were too weak to require any comprehensive care system covering the whole population, and medical care was left to be developed by doctors as self-employed entrepreneurs. As medical care came to require capital investment beyond the power of even the richest doctors, they acquired public investment, first from their communities, then from insurance companies, and finally from government, but medical trade remained under professional control.

By the 1980s, in all economically developed countries, health services were a gigantic industry, a rapidly growing and very significant part of the whole economy. Whereas everywhere else public investment went into public service, in the USA public investment subsidised private medical enterprise. This could not last; as self-employed entrepreneurs, US doctors grew too big for their boots and were ripe for take-over. And that’s where the world crisis in medical care began.


The international crisis in medical care was first recognised as important by health economists in the USA, the world’s richest country, with the world’s most extravagant, wasteful and unjustly distributed medical care system. In a classic paper in 1980, Dr Arnold Relman, editor of the world’s oldest medical journal, the New England Journal of Medicine, startled conservative Bostonians by drawing attention to a huge and in his opinion dangerous new force in the US economy, the medical-industrial complex . He estimated its total wealth as roughly twice as much as the US military-industrial complex which frightened General Eisenhower. It was growing faster than any other investment sector, was uniquely resistant to recession, and yielded exceptional rates of profit. A series of subsequent papers documented the irresistible progress of corporate managers, and ignominious retreat of both liberal and conservative professionals .

In this new economic formation, doctors neither controlled the productive process nor set its goals. The main players were the main payers; insurance companies, which financed virtually all medical care, corporate employers whose labour costs included insurance for medical care, and an increasing number of corporate employers of health professionals, such as Health Maintenance Organisations. US doctors had organised production to benefit themselves, resulting in large medical incomes and high costs, both directly to patients, and as tax-burdens on both citizens and (horror of horrors) corporate employers, supporting public programmes such as Medicare and Medicaid. US governments, which had for 60 years refused seriously to consider any of many well documented proposals for universal care systems, at last began to show serious interest in reform, not (of course) in a socialised direction, but toward corporate care on the same pattern as other industries.

This entailed defeating the medical profession as an independent sectional interest, so far as possible incorporating it in the new pattern of corporate care by offering an attractive package of high incomes and increased investment in new technology. However, like all other skilled workers eventually sucked into the capitalist system of production, these doctors, however well paid and extravagantly resourced, ceased to control the aims or nature of their work. The Clinton proposals for medical care reform are fundamentally of this nature. Doctors will lose their private control of what has at last had to be recognised as a public service. They will be replaced by powerful managements, with overall control of clinical as well as logistic policy decisions. These managers will not be elected by the people, but represent corporate interests, mainly the insurance companies which financed Clinton’s ascent to the presidency .


By the 1980s, despite mounting competition from Germany and Japan, the United States still had the world’s wealthiest and most rapidly expanding economy, and therefore its dominant culture. It also had the world’s most advanced medical science and technology, and in line with its other world records, the world’s most extravagant, unjust, and inefficient medical care system. Politicians responsible for health care systems in other developed countries were in difficulty. Their original reasons for consensus support for various kinds and degrees of socialised medical care had disappeared. Medical care was now real rather than illusory, entailing huge costs and even bigger potential profits if it could become another field of investment for commodity production; and alternative socialist societies, real or imagined, seemed about to disappear from history. Few politicians can afford distant vision. Having educated their voters to see no further than the next wage packet, their rhetoric and interests must become equally short-sighted. They have no time to design their own new societies, they need working models. Where else should they go to foresee their own future, but the United States?

Like Nye Bevan in 1948, most health care planners in 1994 think they have set their doctors’ feet on a new path entirely. They are led by Alain Enthoven, the US health economist called in by Margaret Thatcher to advise her on the future of the NHS in 1985 . Among the pilgrims to his shrine at Jackson’s Hole was health minister Kenneth Clarke when he was devising the NHS internal market. Health care systems the world over are now being “reformed” through some or other version of his concept of managed competition in health services, including Australia, Finland, France, Germany, Israel, Italy, the Netherlands, New Zealand, Spain, Sweden, and all the former communist command economies except Cuba . As for the poverty- stricken countries of the Third World, they have all been compelled by their creditors to abandon even the scanty public care provision they had to the market , with such immediately disastrous consequences that even the World Bank, principal author of their misfortunes, has had to admit overkill.

All of these except Sweden have justified their lurch from professional co-operation to professional competition by imminent bankruptcy of their health care systems. This was not possible in Sweden, because health care costs had already been falling for several years , so there the justification was just presumed better value for money through competition.


Alain Enthoven, architect of managed competition, started at the Pentagon under the wing of Robert MacNamara, formerly head of the Ford Motor Company. He developed his theory to rationalise the extravagant decisions of US generals in the Vietnam war . Already in 1963 his original mind perceived similarities between organised health care and organised slaughter :

Beyond its uniqueness and eclecticism, I would like to say that the art of weapons systems analysis, like the art of medicine, should be based on scientific method, using that term in its broadest sense.”

These similarities were real. Just as doctors wanted to do whatever science made possible, assuming that health must thereby improve, generals wanted whatever science made possible, assuming their war could thereby be won sooner and at lower cost. Congressmen knew that more money for higher powered medicine was only marginally more popular with voters than more money to help good people kill bad people faster and at lower cost. In both cases, it seemed reasonable to suspect that if strategic decisions could be shifted from self-perpetuating and self-serving professionals, into the hands of more objective, independent managers without personal axes to grind, and if the professionals could be compelled to compete with each other rather than scrub each others’ backs, better value for money must follow. The Pentagon agreed, and from 1961 to 1969, Enthoven was in high fashion.

Such was the essence of managed competition: Step 1, bring in new managers from outside the professional military (or medical) field; Step 2, break up the military (or medical) professionals into competing units, rewarding winners and penalising losers on the same lines as any free commercial market; Step 3, base as many management decisions as possible on rational analysis of relevant case-studies, wherever these are available. More cost-effective decisions must follow.

Note that managed competition, as presented by Enthoven, was never intended to reduce or even to restrain overall costs. On the contrary, use of documented case- studies tends if anything to accelerate technical innovation, and the costs of the Vietnam war escalated steeply throughout Enthoven’s period of influence at the Pentagon. His claim was merely that all military (or health) dollars, new or old, would be more efficiently and effectively spent.

Note also that Enthoven assumed as fundamental principles that no organisation could work efficiently unless its entire personnel competed on essentially commercial lines, that all organisations eventually used their power to achieve stability by sharing markets rather than competing for them, and that they had then to be compelled to restore competition in the interests of continued growth and innovation.


Enthoven’s success in commanding the world stage in health care planning is remarkable, not least because his equal eminence in the 1960s as intellectual leader of the Pentagon ended in failure. Application of his principles did not in fact result in the order-of-magnitude improvements in efficiency he had so confidently predicted, which were supposed to justify his infuriation of military professionals subjected to corporate management. Like all failed prophets, his own explanation was that his plans were never fully implemented.

Obviously, Enthoven has a talent for saying what powerful people wish to hear; that failure of a giant economy rich in technology to prevail over a small one already “bombed into the stone age”, could only be a failure of the military professionals, not a consequence of a fundamentally wrong political choice in going to war in the first place. In the same way, he now explains the failure of the same giant economy rich in medical science to provide a cost-effective health care system, as a failure of medical professionals running the health market, not a consequence of having a market in health care instead of a tax-based public service. Both possibilities, that the Vietnam war was wrong in every dimension, and that socialised public service may be more cost- effective than any market, were excluded from both his imagination, and the minds of his powerful clients.

This conviction that laissez-faire economics is a law of nature rather than a human concept is the source of all Enthoven’s errors, but even without this perception, they are obvious to anyone willing to look for them. His claim that his corporate administrators would compel professionals to take decisions “based on scientific method, using that term in its broadest sense” does not survive critical examination. Far from using scientific method in its broadest sense, he in fact misused it in precisely that narrow sense which brings science into disrepute; he continually failed to question or even to recognise his fundamental assumptions, he ignored the wider context of problems, and he used selected case-studies to illustrate and endorse conclusions he had already reached, instead of setting up objective controlled trials in representative areas to test his hypotheses. His aim was not in fact to prosecute a war, or to establish health care systems, on a basis of science, but in both cases to move from what he saw as self- serving intuitive behaviour by military or medical professionals, to more rational and objective decisions by independent business managers.

Though both doctors and soldiers use the products and some of the techniques of science, few are themselves scientists. War is a messy business, and so is clinical medicine. To use a possibly confusing analogy, these are both fields in which “gardening is real, and botany is bogus”. Evidence about what is actually going on is scarce, and the apparent quality of what there is tends to be deceptive; the tidier and less ambiguous it seems, the less likely it is to be in any way representative of what actually happens. In both cases, there is a permanent and potentially fruitful tension between workers in the field, who value experience more than theory, and planners at staff HQ or in the laboratory, who value theory more than empirical experience. “Practice without theory is blind, theory without practice is sterile”; the temptation to ignore either side of this equation must always be resisted, and the true glory of medical professionalism has been its steady progress toward combination of theory and practice in everyday work, from top to bottom of the care system.

Speaking to European health planners and economists at an OECD conference in 1990 , Enthoven was disarmingly frank:

“What can Europeans learn from Americans about the financing and organisation of medical care? The obvious answer is “not much”. We Americans are spending nearly 12%, going on 15%, of Gross National Product on health care, while most European countries are spending an apparently stabilised 6 to 9%. The Western European democracies have achieved essentially universal coverage, but some 35 million Americans – 17.5% of the population under 65 years of age – have no financial protection against medical expenses, public or private.

He went on to say that the main lessons Europeans should learn was not from US successes, but from their mistakes, and that what was actually needed was convergence by all national care systems toward his own preferred rational model, managed competition. The only mistake he seemed able to recognise in the USA was not that a competitive market in health care still existed which West European countries had long ago discarded, but that the US medical market was still run by the medical profession in its own interest. Even for Europe, his remedy was essentially the same; end medical autonomy, put corporate managers in charge, and expose all health workers to the full force of market competition.


When Margaret Thatcher brought her new generation of young Tories to power in 1979, her social programme was simple; limit government to the minimum required to make business secure, let businessmen enrich themselves as much and as quickly as possible, and have faith that the rest would follow. Their hero was Adam Smith, an extremely complex, thoughtful, and humble genius, with a talent for going straight to the heart of things, but wonderfully tempered by doubt. Whether or not she ever bothered to read what he actually wrote, Thatcher would have agreed with his opinion of the social functions of government in 1762:

Till there be property there can be no government, the very end of which is to secure wealth, and to defend the rich from the poor

By the time Karl Marx drew attention to the same thing in the 1840s, it was no longer possible for rulers to declare their aims so frankly. Largely because the industrial working class was becoming a major political force in its own right rather than a subordinate mass ally for liberal capitalists, this simple view of the functions of government had to be modified, co-opting some of the objectives of working people, including education, housing, sanitation and health. The overall context remained the same – to secure wealth in its unequal distribution – but the modifying additions had different meanings for workers and for masters. For workers they were an absolute gain, hopefully expanding indefinitely to a more civilised future. For masters they were a burden, justified only by the greater industrial efficiency possible with a more literate and healthier workforce, and by the greater cultural dominance possible if government by the few could appear to care for the many.

By the eve of the First World War, an end to rule by the few seemed not only possible but imminent, so this was a time of rapid growth in social legislation everywhere but the United States, where the threat was still small. It accelerated in 1917, reached USA in the 1931 economic crash (Franklin Roosevelt caught up with Bismarck and Lloyd George in 1935), and enormously increased after 1945, when an ostensibly socialist state was transiently recognised throughout Europe as the main instrument of Hitler’s defeat. Welfare states were not only an absolute gain for the mass of the people, but seemed essential to survival of capitalism as a competing world model of society. Few then doubted that from then on, there would always be another society which capitalism had to be better than.

Margaret Thatcher and her young Tories were among the first to recognise the end of this era. They recognised the internal weakness of socialist states which could get beyond primitive industrialisation only by adopting the market philosophies they had despised, led by communists who feared their own most powerful ideas; and that the downfall of “actually existing socialism” would drain out such blood as democratic socialist parties elsewhere possessed. Confident she could cope with the opposition, she set out to cut government back to its original primitive functions, to deregulate society, and allow mass unemployment to destroy Trade Union power. Note that Adam Smith said the government’s job was to secure wealth, not to augment it. Production was not a task for government, but simply one way of making money for business, which should be left alone to pursue profit by any and every means, from which public good was bound to come. Her vigorous views stemmed directly from Nobel prize-winning Chicago economist Milton Friedmann, who boldly pronounced that:

“New trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their shareholders as possible.

Unfortunately for British manufacturing industry and from three to five million unemployed workers, more profit could be made by being clever with property or other people’s money, than by producing anything useful. In the short term, more people appeared to gain than to lose; assisted by selling off national assets and by winning a war too small to lose, Mrs Thatcher won her next election by a thumping majority.


Despite Thatcher’s zeal for privatisation, and loathing for all things socialist, even she recognised the huge popularity of the NHS, and particularly of its most socialist features – available to all, free at time of need, given according to need not ability to pay, and so on; the social justice bit was what everyone liked best. Up to 1987, despite many suggestions from New Right think tanks for retreat to marketed care, Mrs Thatcher would have none of it. She had promised the NHS would be safe in her hands, so she left it alone. But in 1987 the NHS ran out of money, acute hospital beds began closing on a greater scale than ever before, and individual cases of children denied necessary life-saving surgery reached the headlines. Something had to be done.

Faced by mounting evidence that the NHS was grossly underfunded, under cross- examination by a hard-nosed BBC interviewer, without consulting any of her cabinet colleagues, Mrs Thatcher promised to set up a personal review of the NHS, to find a better method of financing. She set it up, and for the next 12 months it continued to meet in secret. None of its discussions, nor any of the evidence or options it considered, have been published, but they certainly included all the favourite nostrums of the New Right – state-assisted private insurance, voucher schemes, and so on. None of them would, in the opinion of the Treasury, raise money so cheaply and efficiently as taxation. The review therefore failed in its original proclaimed purpose; no better method of financing could be found than from taxes, but the Conservatives were the low-tax Party.

Meanwhile the NHS staggered from one crisis to the next. The BMA estimated that even to keep the NHS running more or less as it was, funding needed to rise by about 50%, from 6% of GNP to about 9%. This would still be far below US levels, but about average for Western Europe.

In 1988 the NHS Review published its conclusions. The problem, it decided, lay not in funding, but the structure of the NHS, which was inherently wasteful. The trouble with the NHS was that it was run inefficiently, by the medical profession and for the medical profession. Its technical interventions, such as kidney dialysis or coronary bypass surgery, were lagging further and further behind the best of US and West European care not because of underfunding, but because doctors and nurses were not really trying. This was bound to be so, because they lacked the spur of competition, the material incentives of success and penalties of failure in the market. This disease could not be cured by throwing money at it (despite or possibly because of their special respect for money, Conservatives seem always to assume it must be thrown, rather than spent prudently). The NHS must be restructured as a managed market.

On all available evidence, the least costly, least inefficient, least irrational, least socially unjust health service in the world was to be remodelled on untested hypotheses generated by experience of the world’s most costly, most inefficient, most irrational, and most unjust health service. It is still hard to understand how anyone who knew anything of the NHS either at administrative or clinical level could possibly have believed in this extraordinary idea, but well-educated collaborators were in fact easily found, as soon as word got round about career prospects in apparently permanently Conservatised society. Managed competition suddenly set high value on anyone able to understand health accountancy and balance sheets in clinical terms, and willing to reconcile scientific culture with boardroom barbarism. Those with academic reputations to protect were allowed to express reservations, so long as they conceded the possibility that managed competition might work and deserved a trial.

Though market reforms of the NHS were opposed by 77% of voters in 1990 , and have become even less popular as they have moved from theory to practice, opposition from opinion-forming media was almost entirely negative. Return to the past was ruled out, and though the commercialised future on offer was deplored, no other future was considered seriously possible. Consumerism, the common philosophy of all received wisdom from Left to Right, stood in apparent opposition to commercial interests, but seemed to concede that only market production and distribution could ensure high quality service. Having accepted managed competition as inevitable in principle, all we had from guardians of the old consensus was agonised hand-wringing over consequences, without serious discussion of alternatives.

Even without a fully developed alternative social programme, Thatcher’s ruthless indifference to the social effects of compelling everyone to become either a winner or a loser eventually threatened to make the Conservative Party as unelectable in the 21st century as similar policies did in the 1940s. Thatcher was traded in for Major, in the hope that greed was now sufficiently re-established as prime mover of society, to look after itself. Helped by another small and unloseable war in the Persian Gulf, this confidence was not misplaced; the Party of Greed survived the 1991 general election.


Since they threw overboard their apparently redundant baggage of social conscience, British Conservatives have adopted the simple faith of their counterparts in the United States: consumer decisions in the market must always prove wiser, in the long run, than decisions by politicians the consumers elect. Leaders may think they know better, but in the end, the best choice is whatever is most profitable, because it suits most consumers in the market. The solution to all social problems is fully to expose them to market forces. Since in the Conservative view society and the market are more or less interchangeable terms (anyone not in the market is outside society), market decisions must be democratic, because they maximise involvement of consumers; everyone has to buy, but each year fewer people bother to vote. Any attempt to limit the natural behaviour of the market must, therefore, be an infringement of freedom and democracy, and all socialists must by definition be anti-democratic.

Even in the USA, this set of beliefs leads straight into profound contradictions, of which the most politically important is that it drops all pretence that society is led for its own good by a cultured and socially responsible elite, revealing “a gang of intelligent dwarfs who can be hired for anything”.

It also contradicts Enthoven’s managed competition, which openly admits manipulation of “natural” market behaviour. As virtually all socialists now concede that there must be at least some place for the market in some areas of production and distribution, the critical difference between the Conservative and Labour Parties is evidently not over the existence of markets or whether they need regulation, but in whose interest the regulations will be devised and applied – the few who live by owning, or the many who live by working?

It’s all about the distribution of power and social direction of investment and accountability. Certainly, health professionals must be made fully accountable for their work, and in general they now accept this, some gladly and believing it long overdue, others grudgingly. But who should they be accountable to? In a public service, surely to the public, their elected representatives, or both; not to accountants or managers, and certainly not to Conservative Central Office. Doctors and nurses working in the NHS have been made internally accountable to management as never before, but the NHS is now losing all external accountability to elected government, local or national. Managers of self-governing Trusts are now accountable only to themselves and to safe nominees appointed by the Minister – the supreme example of the QUANGOs originally denounced by Margaret Thatcher, and then multiplied by her as never before. The important meetings of the NHS Policy Board, of Health Authorities, and of self-governing hospital Trusts, are all held in secret without media coverage, and their unelected members are well paid, appointed for conformity to the new corporate ethos, and fired if they depart from it .


Thatcher’s original simplistic assumptions have been difficult to sustain in the real world, where politicians must still get themselves re-elected. Competition has to mean losers as well as winners. To let the market rip means allowing more and more units to close, despite deep roots in the communities they serve, with corresponding local loyalties and social efficiencies unattainable by any corporate business. Torn between the thrift of the co-operative public service they reject, and the spiralling inefficiencies of the competitive market they revere, the government has now lost all sense of direction, staggering from one crisis to the next, counting on its new army of NHS public relations officers to turn stink into fragrance.

Take for example Guy’s Hospital, flagship of the first wave of self-governing Trusts . Despite opposition by a nine-to-one vote of all staff and a majority of consultants and local GPs , its appointed management committee was cajoled into applying for Trust status in 1991. By the end of its first quarter, the Trust had overspent by £555,000. After four months in post, the finance director left his job with a reported severance package of £200,000 plus a BMW car, and continued payment of his annual salary of £70,000 until the end of his 3-year contract, while the Trust considered an unforeseen debt of £6.8 million and imposed 400 job cuts. In 1993, Conservative ex- minister of health Barney Hayhoe was brought in as Chairman of the now merged Guy’s & St. Thomas’s Trust. Finally, in February 1994, minister Virginia Bottomley announced to the House of Commons that the flagship was scuttled. All its acute facilities would close, moving to St. Thomas’ Hospital. Guy’s would “become a high quality health and academic campus, serving local patients’ needs; training tomorrow’s doctors, dentists, and nurses; and exploring the boundaries of medicine”. She was confident none of the charities now paying for the third and final phase of a £140 million treatment and research centre at Guy’s would want their money back. One week later £30 million of the £44 million promised by charities had been withdrawn, leaving a £96 million bill for the taxpayer for what Dr Robert Knight, chairman of Guy’s medical committee, described as “the NHS’s most prestigious white elephant”.

Apologists for the “reforms” concentrate on their proclaimed good intentions, merely to get better value for money, both for patients and taxpayers. No one, not even this government, disputes that the NHS is the cheapest of all national care systems, or that in the past decade, mostly before reform, the average cost of treating in-patients and day-care patients fell by 31% , but to the most ardent “reformers” this only indicates how much more might be saved if they really bared their teeth. Appointed to curb professional autonomy, Mr Eric Caines, chief personnel officer for the NHS, declared war on the medical and nursing professions, their power to dictate the pace and direction of clinical policy, and to obstruct changes he considered essential to improve efficiency. The reforms ended all national agreements on pay and conditions with the NHS unions and professional organisations. Local pay flexibility, said Mr Caines, would be his “weapon for breaking 40 years of habit and tradition and seeing how far back we can push all the boundaries”. He did “not expect to get results until the present system begins to come apart”. This seems to have frightened his friends even more than his enemies . In 1993 he resigned, to teach the next generation of NHS administrators as a professor of health service management, claiming the only reason health minister Virginia Bottomley was unable to stem the “lemming-like rush by all and sundry, particularly the BMA and the Labour Party, to condemn the NHS reforms” was “her instinct to douse rather than stoke up conflagrations, [preventing] her from pressing her arguments to their conclusions and demonstrating the will to carry these conclusions through into action”. Were it not for political cowardice, he claimed, at least 20% of NHS staff, 200,000 people, could be sacked without any adverse effect on patient care.

Shadow Secretary for Health David Blunkett put his finger exactly on what is happening to the “reformed” NHS, at an MPU/SHA conference in 1993 :

The truth is, the Tories do not know where they are going on any of their health service changes… The health service was effectively hi-jacked by those who have an interest in ever-greater investment in technology rather than basic measures… Virginia Bottomley is only the good news queen and [does] not take any responsibility for the activities of the NHS on the ground. Already we cannot get questions answered in the House about Trusts and GP fundholding practices, because they are responsible for their own activity


All these ugly developments are obvious consequences of remodelling the NHS in the image of industrial commodity production for profit. Though this is certainly unpopular, it may still seem acceptable if it seems to assure a larger gross product. Few but the very rich regard capitalism as a beautiful or even pleasant society, but as an efficient generator of material wealth it has not yet faced a serious competitor.

This assurance of material advance, sufficient to outweigh the spiritual losses it entails, is why though all opinion polls show a large and growing majority, of every voting persuasion, against any sort of commercialisation of the NHS, the market “reforms” have so far been tolerated by enough people to get Conservative governments re- elected. Though there is no evidence yet that the new NHS produces more or better clinical interventions at lower cost than the old NHS, most academic NHS-watchers, Public Health physicians, and health economists seem either to believe it may eventually do so, or that their careers might suffer if they did not pretend so to believe. Few British health economists seem able to endorse Galbraith’s forthright statement that economics cannot stand as a value-free socially neutral science, and will remain fundamentally dishonest until it returns to its original designation as political economy.

Their hopes stay afloat chiefly because of recent developments in surgical and medical treatment, which seem specially well suited to mass production using industrial techniques. About three quarters of all NHS costs are for labour. Industrialised care, replacing a large, broadly-skilled medical and nursing workforce by a much smaller force of specialised technicians, might greatly reduce NHS costs while at the same time giving a much larger output of apparently effective clinical interventions. If this trend toward technological cures could be combined with withdrawal of the NHS from continuing responsibility for people needing labour-intensive care rather than repair, Mrs Thatcher’s original problem of ever-increasing NHS costs might be partially solved.


The second part of this strategy is already in place. The NHS is withdrawing from the largest areas of continuing care. In 1994, there are three-quarters of a million people over 85, most of whom are unable to live independently. By the year 2000 this will reach one million, and by 2020, 1.3 million – an 80% rise over the next 30 years. These projections were known in the early 1980s, when the then government Chief Medical Officer warned that between 1980 and 2000, the number of people aged 85+ would double. As per-capita NHS costs for this age group were nine times more than for people of working age, the NHS faced a truly colossal impending burden of care for which it was in no way prepared . The Conservative response to this has not been to increase provision, but to transfer responsibility so far as possible from the NHS, where it was free and funded from taxation, to carers at home and to Local Government, where it was funded by patients and families, assisted by means-tested Social Security payments, and where shortfalls could be blamed on Local Government. Between 1990 and 1992, 35,000 geriatric hospital beds were closed. Over the same period 9,000 more day-care places, over 45,000 more residential community care places, and some improved home services were added, all from Local Government budgets supplemented by Social Security, so that public subsidies for community care rose from £10m to £1,700m a year. Local Authority budgets are compelled by law to spend 85% of their community care budgets in the private sector. Step by step, Conservative governments have withdrawn care of the elderly and chronic sick from the scope of NHS responsibility.

Nobody wants to die in a thinly-disguised workhouse smelling of stale urine and disinfectant, a fair description of most of the “chronic” care available from Local Authorities under Part 3 of the National Assistance Act well into the 1970s, the “Golden Age” of the NHS. Care for the chronic sick, disabled, and elderly within the community, and if possible in their own homes, is what all of us want for ourselves and for society as a whole. But from bitter experience of high promise but poor delivery in shifting care of mental illness from hospitals to community, we are rightly suspicious of similar proposals for community care of other chronic disorders requiring more care than cure. After all, why were hospitals invented in the first place? Because care of equivalent standard was far cheaper in hospital than at home. As we all know, and even this government admits, its principal aim is to save money, and wherever it has to be spent, to make sure it reaches the pockets of entrepreneurs. We are therefore bound to suspect that the community care that will replace hospital care will either be of a much lower standard, or increasingly funded by patients and their families.

This government is embarked on a grand strategy of shifting NHS resources so far as possible away from continuing care, toward exclusive responsibility for episodic cure; to fixing what can be fixed quickly and at reasonable cost by doctors with nursing support, but abandoning responsibility for continuing care by nurses with medical support. According to the Department of Health, it no longer bothers to collect central data on the number of continuing care beds in the NHS, but in 1993 the Guardian obtained its own data from two NHS Health Regions and found that 40% of such beds had been closed since 1988. Another study by the Alzheimer’s disease Society found that 56% of a sample of 48 NHS Health Districts nationally had cut such beds between 1990 and 1993, with an average reduction of 35% .

Anyone who doubts that any government would dare to do this without an election mandate should consider the contest in February 1994 between Leeds Health Authority and the NHS ombudsman, William Reid . In 1990 a 55-year old man was admitted to hospital with a severe stroke, leaving him incontinent of urine and faeces, unable to communicate, walk, or feed himself. The hospital discharged him to a private nursing home in 1991, on the grounds that it had done all that was possible to cure him, and had no continuing obligation to care for him. Like most other Health Authorities, Leeds HA no longer had any long-stay beds, nor had it any contract with private nursing homes to provide them. His family had to meet the difference between Social Security benefits and the cost of the private nursing home, which came to £6,000 a year.

The ombudsman found in favour of the patient and his relatives, and ordered Leeds HA to meet all past and future costs of care. After a similar case two years ago against Cambridge HA, in which the ombudsman also found in favour of the patient, the then Minister refused to revise guidelines for chronic care, so hospitals continued to close long-stay beds. This time junior Health Minister Baroness Cumberledge had to admit that “There is a clear obligation on Health Authorities to pay for continuing health care of seriously ill patients”, an admission which Philip Hunt, director of the National Association of Health Authorities and Trusts, described as having “absolutely enormous” cost implications for the NHS. Note that this momentous decision to reaffirm what virtually everyone must have assumed was the traditional responsibility of the NHS ever since 1948, and which no Party ever dared openly to question or test at the polls, depended on the continued independence and integrity of just one man, the NHS ombudsman. The Leeds and Cambridge HAs were pursuing government policy so far as they could, and will no doubt do so again if the Minister can find some way round this ruling.