Britons 'pay too much for private healthcare'

David Cameron at Salford Royal Hospital

The thrust of government health policies for the best part of 20 years has been to encourage greater participation of the private sector in the NHS and to stimulate competition within the NHS.

Successive prime ministers from Tony Blair to David Cameron have tended to argue that everything would be alright in the NHS if only it could be as efficient and customer-friendly as the private sector.

Which is why it is somewhat resonant (ahem) that the Competition Commission has this morning produced what will be seen as a damning indictment of the purely private part of Britain's healthcare provision.

The watchdog says there is inadequate competition inside the private health market and that private health providers are ripping off consumers to the tune of between £173m and £193m a year (which the watchdog describes as a "conservative estimate" of the detriment).

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It recommends forced sales of private hospitals”

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The commission says that private operators of hospitals in many areas face inadequate competition. It identified 101 hospitals outside London with too much market power. And in London, it concluded that the US's HCA Inc - which is the world's biggest private healthcare group - is too strong. HCA has eight market-leading hospitals and other facilities in central London.

The watchdog says private health insurers are paying too much for the services provided by these private hospitals. Which matters because 80% of all private healthcare is funded by insurance policies, sold by the likes of Bupa and AXA PPP.

The watchdog complains that far too little information is provided to consumers on the performance of private hospitals and consultants. Which makes it impossible for those seeking treatment to shop around in a proper way.

And it dislikes the incentives the hospitals give to consultants - cash or access to consulting rooms and secretarial support - for making referrals to them. These incentives encourage consultants to recommend hospitals to patients on the basis of what suits the consultants, not what is in the interest of patients, says the commission.

What would be the remedies?

Woman talking to a doctor About the same number of people have private health insurance as in 1995

Well, it recommends forced sales of hospitals where this would improve competition - and its preliminary view is that these divestitures should be by HCA in London and by BMI and Spire elsewhere.

Such mandated disposals would be fatuous where a hospital has a total local monopoly, in that this would simply transfer ownership of the monopoly. So it wants to limit the pricing power of the bigger hospital groups by forcing them to negotiate deals with insurers on a hospital-by-hospital basis, rather than nationally.

The commission proposes publication of useful information on the performance of private hospitals and consultants, similar to information that is gradually being provided in the NHS.

And it suggests a ban on most incentives for consultants designed to encourage them to recommend particular hospitals.

The thrust of these reforms can be seen as trying to alter the balance of power away from the private hospital providers and towards the insurers and consumers.

What is striking is that the profitability of the hospital groups has risen sharply over the past few years, and - according to the commission - the return they make on their investment is more than double the cost of that investment. (In the jargon, return on equity is well over twice the weighted average cost of capital.)

All of which is symptomatic of inadequate competition.

But perhaps as relevantly, the private health insurance market is the same size as it was in 1995, by number of people covered - which the insurers put down to the rising cost of what they have to pay for medical services and then have to pass on to customers in higher premiums.

So the commission's proposed reforms seem designed to give the insurers more muscle in negotiations with the hospital groups.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 19.

    Okay, Rent seeking Private Finance Initiatives, over twice the original population the NHS is funded for, multitudes of new conditions to treat.
    And of course, Health Care Tourism from the old Third World, Europe and of all places, America ! Land of the most extortionate private health care.
    Drugs companies charge too much and are greedy.
    Any how, Stock Market crashing, that'll upset the Insur

  • rate this

    Comment number 18.

    The real issue here is that the NHS is paying too much for private healthcare through PFI and outsourcing, and the patients are suffering for it.

    The idea that the private sector is more efficient is an outright lie but there's a hell of a lot of money resting on people believing it so it gets constantly pushed.

  • rate this

    Comment number 17.

    The NHS has protected us from knowing the actual cost of healthcare.

    Those who take their pets to a vet know that healthcare has a real cost. All vets suffer from customers complaining about the cost.

  • rate this

    Comment number 16.

    The GP service has deteriorated greatly over the years.
    When you pay for private health care the gulf in the quality of service, information and care is evident and it can be seen how far we have fallen.
    A consultation in a private hospital can be for 1 hour by a consultant as opposed to a 5 minute talk by a GP who has to go onto the internet to get his information.

  • rate this

    Comment number 15.

    Private Health Care is simply an insurance.

    In economic terms it's income exceeds it's outgoings (or for the HMRC reverse that!)

    That makes it profitable and a good investment... Using NHS expertise !

    The NHS however is devoid of intellectual investment and is collapsing under incompetent management.

    It is quite clear where the 'investors' or Govt pals want the NHS to go!

  • rate this

    Comment number 14.

    A year ago I cancelled my private medical insurance (provided by my employer) to save tax. However a recent experience with a family member highlighted gross inefficiencies within the NHS, particularly in supply chain management. Unless the NHS can learn and implement efficient management systems (where the private sector often excel), I may have to reconsider the need for private cover.

  • rate this

    Comment number 13.

    Britons 'pay too much for private healthcare'

    'I couldn't give two monkeys.' I use the NHS and love it! Food queues and all :)

  • rate this

    Comment number 12.

    UK business is largely based on cheating the customer, why would the sick be any better treated?

  • rate this

    Comment number 11.

    We have a free NHS service that caters for everyone regardless of their needs. If you are not happy to use the service that you pay for then you should expect to pay extortionate fees for private service, im sure their are many willing to take your cash. What happened to this great idea of exporting NHS hospitals overseas and running them on a private basis. Seemed like a good idea to me.

  • rate this

    Comment number 10.

    Is he going to support the Tony Blair Kickstarter ?

  • rate this

    Comment number 9.

    Expert Opinion

    Do we pay too much for healthcare, not really?

    Best way forward is too pay the Doctors a lot more, some are on a paltry £80k-100k, well pay them twice as much so
    Double the nurses salaries so they are motivated , we will get the best of them
    Thus no going private
    No person in that field of expertise should be getting less than 50k an certainly doctors should at least be on £150k

  • rate this

    Comment number 8.

    What is needed is some sort of national business model with strong government regulation, then as health care is so important the premiums could be collected by the government so the process would be accountable and not open to profiteering...
    We could call it maybe somthing like a NATIONAL HEALTH SERVICE
    what do you think?

  • rate this

    Comment number 7.

    Wouldn't the incentives fall under the Bribery Act or tax rules as payment in kind? Shouldn't people be looking into this as well, not just identifying it?

  • rate this

    Comment number 6.

    I’m sure if the current government had a free hand the NHS would already be in private hands. The other issues are consultants pay and the relationship between them and the private sector.

  • rate this

    Comment number 5.

    The NHS is typical of an organisation where the practitioners and patients are treated with contempt whilst executives and directors engineer higher earnings, bonuses and pension deals.

    To make the NHS work effectively that money needs to be prioritised at the front where practitioners and patients benefit.

    Get rid of the executives & directors, let Matrons run their hospitals.

    Save £billions

  • rate this

    Comment number 4.

    Private health care wouldn't be too bad if after a period of paying in it got cheaper instead of unaffordable when you most need it.
    Young and healthy fine you probably don't need it
    Old and poor / average income you cannot afford it
    Old and wealthy just the ticket.
    No wonder the Govt are keen on it, the younger poorer help subsidize it for the older rich.

  • rate this

    Comment number 3.

    Is the company offering the healthcare making huge profits? If the answer is yes, then yes, people are paying too much. Private, means, for profit. The only counter against high prices on an essential service such as this is competition. The notion a regulator can artificially simulate that competitive role is complete bunk. The same applies to central banks trying to set rates of course.

  • rate this

    Comment number 2.

    Healthcare, Private or NHS, is nothing to do with helping sick people, it's all about raking in cash for those with a vested interest.

  • rate this

    Comment number 1.

    I think I remember a report of people in the UK going to India for private healthcare, a lot of industries seem to be doing this sort of thing too!


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