The UK Labour Party is banking on health to win back voters.
Its members and sympathisers will join the Keep our NHS Public demonstration to parliament on 4 March.
But as the by-election in the Cumbrian constituency of Copeland last week showed, Labour’s claim that it alone can maintain the health service free at point of use isn’t electorally decisive.
It was the first time the main opposition party lost a seat to the governing one in more than 50 years.
Either the Conservatives are neutralising Labour’s message or that message is being communicated badly.
The third explanation is that the population as a whole doesn’t attach as much importance to health as the party does.
It’s probably a combination of all three.
The economics of health is clearer.
Everyone is born and everyone dies. In between, everyone gets sick.
Inescapably, resources have to be devoted to healthcare.
And if you don’t pay for health as a taxpayer, you have to pay for it as a customer. This creates the opportunity for insurers.
So the choice is simple: either tax people to pay for healthcare or charge them insurance premiums, though of course you can do both.
Taxing everyone to pay for a service that some use more than others can be divisive. The young can resent the old; the healthy resent the sick and those that can afford to buy healthcare resent the ones who can’t.
Politics affects everything in a tax-financed healthcare system.
Insurance-based models have different problems. Health becomes a way of making profit. Unless there are subsidies, the old, the sick and the poor get worse treatment on average.
Insurance-based models encourage waste and resource misallocation.
And it tends to push up the pay of medical practitioners.
That’s why practically everyone with experience of a health system that is essentially financed through insurance almost always wishes that they had a tax-based system. And some in the UK argue for health insurance for at least part of healthcare.
No one has yet proved a health system financed through taxation is less effective than one based on insurance or the other way around. And no one ever will.
The storm about the financing of the NHS, which is reaching a new intensity this month, will never end.
A new approach is needed. That’s to focus on the key economic issue health that every industry faces. And that involves understanding how value is created in health; not how much it costs and how it should be financed.
In health, doctors and other healthcare professionals interact constructively with patients. What’s created are healthier and happier people.
Health and happiness – the value created in health — are subjective and can’t be properly measured. And the inputs – human energy and skill working with the subjective insights of patients – are equally intangible.
The priority is maximising value creation in the tens of millions of interactions taking place in the UK health industry every year.
The requires ensuring the processes supporting constructive interaction – and this is more than the physical infrastructure – are as widely available as possible at the lowest possible cost.
Obstacles to such interactions should be minimised or removed.
The biggest is the lack of information. Most healthcare professionals spend most of their time diagnosing problems. This would become far easier if complete information about patients were instantly available.
That requires a credible database for all those using NHS services. And the best way to ensure the database is accurate is by encouraging people to have their health regularly checked.
In other words, primary healthcare provided free at point of use increases efficiency.
This conclusion, which can be reached through logical reasoning, flies in the face of everything conventional economists believe. For them, only the market driven by prices can optimise efficiency, technical and social.
Once the NHS’s information is as good as it can be, individual insurance becomes largely redundant. Those with serious health risks would become uninsurable (unless they are rich enough to pay the high premiums and the high costs of treatment involved).
Those with none won’t opt for it. Why pay for something that you don’t need?
The NHS would be able to focus resources on those with serious health risks. That would involve securing earlier and more effective treatment.
No insurance company would be able to compete with the capacity of the NHS, owner of complete health information about the whole population, to quantify risks.
Some with non-serious conditions or risks might choose private treatment and supporting insurance. But the majority wouldn’t.
Of course, there’s more to health than services. There’s buildings, equipment and technology. Hospitals need cleaners as well as doctors.
But as Economics2030 argues, you maximise value creation by ensuring the supporting processes are freely provided and — at the very least — on a non-profit basis.
Focussing on value-creation in health and what’s needed to increase it offers valuable insights about what’s to be done about the NHS this spring.
They might help end the sterile debate about its future and counter the mood of resigned pessimism engulfing an industry that should be a source of both pride and hope.