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In 1942, the Beveridge report was introduced, which stated the fundamentals required for the application of the modern welfare state in the United Kingdom. Implemented by the Labour administration in 1948, schemes included the establishment of a National Health Service and the National Insurance system. The driving force of such initiatives was based on the ideology that the state should safeguard the health of all its citizens, particularly those with socio-economic needs, in the form of grants, pensions and other benefits (Greener, 2009).
The last few decades have experienced extraordinary growth in healthcare disbursements, internationally (Cohen, 2008). The UK demonstrates the scale of this increase quite evidently: in 1973, £3, 3634 million, encompassing both private and public healthcare, was spent on healthcare, an equivalent of £60 per person; however, by 2005, there was an almost 40-fold increase. Logically, in context, with the overall economic growth, throughout this period of time, an increase in expenditure on health care would be expected. However, this increase in spending has not been justified, as it has not been supplemented by a parallel decrease in demands on the healthcare systems (Cohen, 2008). These trends demonstrate that the availability of resources is unlikely to meet healthcare needs in order to maximise the quality of care to be delivered, resulting in necessary choices being made concerning the resources that are available (Powell, 2008).
Present day competition between the NHS, voluntary and private sectors are quite evident. The debates surrounding the future of the NHS, and what the impact will be on future privatisation of the healthcare system in the UK has been intensifying (Peedell, 2011). The main concerns, in regards to the implementation of a privatised healthcare system and the eradication of the welfare state, have been contentious amongst governmental bodies and members of the public (Gubb & Meller-Herbert 2009). Many argue from an economical and moral viewpoint that healthcare, with its upfront costs and significance to humankind should be left outside the domains of the normal markets. However, an alternative viewpoint is that in doing so, ignores valid reasons and bypasses possible values of a healthcare system being included within the domains of the market (Gubb & Meller-Herbert 2009). Policymakers in healthcare are faced with a pivotal challenge: to obtain an optimum balance between available markets and the alternatives. The markets can deliver real benefits, however, these can are totally dependent on an environment that is not only committed to allowing progression, but is also well regulated, accounting for any market failures that may take place (Powell & Miller 2013).
Globally, the most successful health systems demonstrate certain key areas that are required. Among these key areas are aspects such as: the presence of a political sector that can account for the exit of an inadequate or unnecessary service out of the market, and provide entry for improved choices. Additionally, information concerning the quality of care, cost and activity must be adequate and available to investors providing a free and transparent market, which allows them to seek alternative providers in the case of poor service delivery (Powell & Miller, 2013). Other vital features contributing to a successful healthcare system, include being able to respond to the market force, abiding by regulatory frameworks, ensuring minimum standards of quality and finance are met, and that capital markets can be retained (Gubb & Meller-Herbert 2009).
The reforms in the NHS over the last few years have been harnessed to reap the benefits of a successful market as described above, however challenging. Difficulties have arisen because the government still holds considerable control of funds raised through general taxes; moreover, other influences such as culture, regulatory frameworks, providers, competitive tendering and commissioning all impact on the success of the current reforms in the NHS (Powell & Miller 2013).
The complexities associated with the delivery of care in a hospital environment are further complicated when an economic perspective of ‘resource use' is applied (Douglas et al., 2001). As a behavioural science, economics utilises human behaviour as an underlying concept in order to understand how resources and demands can be met. It is an established fact that human behaviour is subjectively orientated and directed; thus an individual acts to promote their own interests. When this is accompanied by the need to fulfil unlimited human desires and demands, added to working with a limited availability of resources, these unlimited demands cannot be adequately be met (Greener, 2009). Thus a frequent problem faced by economists is to find a solution to unlimited demands with finite resources. A social mechanism to distribute these resources amongst society needs to be installed, providing a platform that will allow for the implementation of the greatest output from the productive inputs available.
It is extremely complex to view healthcare as a product or service, and thus determining its “market “value is one that is associated with many problems , due to the nature of this resource. The anticipated outcome, which cannot be assured, is dependent on many uncontrollable factors that are beyond the scope of the healthcare provider (Douglas et al., 2001). However, one can still adopt an economic analysis based on the central concept of the effective use of available resources. There are two basic premises which must be considered: firstly, to acknowledge that economics concerns resource allocation, and, secondly that effective use of available resources will be of paramount importance in resource use. In healthcare, this can be further realised by recognising the representatives of healthcare providers (Peedell, 2011).
A vital aspect of health economics is based on the understanding of the social conditions that affect resource allocation (Douglas et al., 2001). The “gold standard” is used in economics viewing the market as one that is “perfectly competitive”, it encompasses the following characteristics: that there are many buyers and sellers prompting the exchange of goods among market contenders ; a uniform product cannot be altered, (thus preventing individual producers from differentiating or altering the product to obtain a higher price); an absence of barriers, sustaining fluid movement into or out of the markets; the availability of perfect information and market conditions to all market contestants and finally a demarcated system of all property rights and tenures (Cohen, 2008).
This approach to market fairness and equality allows both consumers and producers to interact, allowing for any preferences concerning products to be revealed. However, in spite of these standards accounting for various aspects of the interactions that are required in successful resource allocation, the pathway is not as straightforward when applied to the healthcare sector (Propper et al., 2006). The assessment of resource allocation in the healthcare sector is one associated with complexities, as market features differ from those in a “perfectly competitive” market. Considered as an imperfect market, one must comprehend how the patients (consumers), healthcare providers (suppliers), and insurance companies (third party payers) perspectives will contrast to those of the consumers and producers in a competitive market (Douglas et al., 2001).
The primary concern in maintaining competence in resource use is an objective that all healthcare organisations should accept, irrespective of what the societal, political, insurer or patients' viewpoints is; thus, it is essential to maximise the use of available resources. Economics is primarily concerned with resource use, therefore, it can offer great assistance in healthcare decision making; although, new approaches to analysis are required when economics and healthcare are involved (Douglas et al., 2001).
Viewing healthcare from an economical perspective gives rise to concepts such as “privatisation”; a complex phenomenon which encompasses an array of ideas spanning law, politics, economics, and philosophy. The World Health Organisation defines privatisation in healthcare as “a process in which non-governmental actors, become increasingly involved in the financing and /or provision of healthcare services” (Maarse, 2006). It is essential to understand and grasp the concept that healthcare markets differ in numerous ways from competitive markets; each individual is provided with a slightly different product, the product is thus differentiated rendering total information as imperfect (Propper et al., 2006).
The perspectives of the different stakeholders in the “privatisation” of the National Health Service (NHS) in the United Kingdom vary considerably; principally, publically funded, it is a “public health service” (Maarse, 2006). However, it is also regarded by some individuals as a global “leader” in privatisation (Pollock, 2005). This raises the question of how the term “privatisation” is defined amongst these commentators. In 1986 Dunleavy defined privatisation as “strictly, the permanent reassigning of services and goods production, formerly carried out by public service bureaucracies to private firms or to other forms of non-public bodies” (Powell & Miller 2013). However, others view this term from a wider perspective and claim that it involves a decrease in state activity in one = area of subsidy, provision and regulation (Le Grand & Robinson, 1984).
In 2006, Maarse analysed privatisation from four different standpoints: management and operations, provisions, financing and investment (Powell & Miller 2013). Conversely, the sixteen cell-model proposed by Pollock and Miller, provides a three-dimensional perspective that examines the movements that take place between origin and destination cells, in this model. The initiative behind the implementation of such a model was to provide an insight into privatisation in a mixed economy of welfare (MEW) (Powell 2008).
It has been repeatedly claimed by various governmental bodies, inclusive of the Prime Minister, David Cameron, and the Health Secretary, Andrew Lansey, in response to widespread criticism, that privatisation of the NHS will not take place in England (BMJ 2009). This was further reinstated by the Department of Health which stated that, “Health Ministers have said they will never privatise the NHS”. The evidence, however, does not fully support these proposed claims of non-privatisation, as it seems that due to the policies contained in the Health and Social Care Bill, privatisation shall be an inevitable consequence (Peedell, 2011).
In spite of the concept of privatisation being made “official” in areas such as utilities, no British government has clearly stated that they wish for the “privatisation of the National Health Service”. However, previous governments such as the Conservatives (1979-1997) and Labour (1997-2010), have displayed greater support for the private sector (Gubb & Meller-Herbert, 2009). In a parliamentary debate on the new Health and Social Care Act (House of Common, 2012), various issues surrounding the privatisation of healthcare were raised. It was stated by certain members that “there is a crucial role for the private sector in supporting the delivery of NHS care”; although, concerns with opening up the NHS as a regulated market, and thus encouraging private-sector involvement were also highlighted (Powell & Miller 2013). Critics maintain that a greater private involvement involves the risk of putting profits before the interest of the NHS patients, encouraging resultant conflicts of interest between shareholders and patients (Powell & Miller 2013).
There are many factors contributing to the delivery of the quality of healthcare received by patients. An example, include epidemiology units in hospitals play an essential role in ensuring that precise and accurate information is recorded. These units contribute to understanding the uses and demands of resources and hence the economic impact of caring for the patients (Douglas et al., 2001). The overall focus of health economics is based on finding the most practical and coherent ways to assign scarce resources to healthcare services. Therefore, in times when the availability of resources does not match the demands of healthcare needs, priority setting is important. Moreover, using economics in this way allows for the provision of frameworks that account for broad policy level decisions and individual treatment decisions to be made (Cohen, 2008).