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
    +2

    Comment number 39.

    But this is absurd ! The Comp Comm complaining about the limited competition allowed against the virtual monopoly NHS! He's having a laugh, surely.

    The obvious solution, if the CC is so concerned, is to break up the NHS completely, and open it out to anyone who wants to provide health services.

    (And by the way, where pray does the CC get it's precise figures from?)

    Sorry, but this is all blx.

  • rate this
    +5

    Comment number 38.

    I note that while £200m sounds alot, they don't put it into context - why? How much does the total private sector health care amount to. £1billion, £10billion....? i'm a cynic and observe that usually the choice of whether to quote numbers or percentages depends on which will make the case look best.

  • rate this
    -14

    Comment number 37.

    Whether you opt for private or publicly funded healthcare, do not forget to give thanks and ask forgiveness from the greatest healer of all, the Lord.

  • rate this
    +16

    Comment number 36.

    35: Christopher Reeve's last years shows how the American system really is no good even if you are Rich. Poor fellow lost everything because his medical insurance RAN OUT.

    So, I wouldn't rush to bin the NHS if I were you ........

  • rate this
    +21

    Comment number 35.

    The notion that competition is good for a public service is illusory.
    All politicians want the NHS dismantled in favour of an American get what you can afford system. This is fine if you are rich but if you're poor you will be condemned to a low or none existent service.
    Money could be saved if NHS management were chopped & the money spent on huge salaries & pensions put into health care instead.

  • rate this
    0

    Comment number 34.

    31: How odd. On Harley Street you can pay anything from £50 to £200 and up for a consultation.
    There is also a French Charity there who provide free consultations on referral for (mainly) African nationals...... Further oddly, one of their Doctors only speaks French ! (nice chap though)

  • rate this
    +1

    Comment number 33.

    "The idea that the private sector is more efficient is an outright lie"

    If you let the private sector rip you off, it will. Some European countries have a better health service than us and the private sector involvement is vital in that, it is just that their governments aren't totally naive when setting the parameters of the relationship.

  • rate this
    +12

    Comment number 32.

    . . . non-NHS facilities should only be permitted if they are owned by Not For Profit, or Mutual Organisations. The market forces that usually drive commercial companies should not be allowed to influence medical and health care . . . and that should also apply to care homes and other similar establishments

  • rate this
    +9

    Comment number 31.

    Private practice is controlled by insurance companies. I am a retired doctor. My fees have not altered for 30 years. Premiums have risen exponentially. Some companies (eg BUPA) set up doctor ‘partnerships’ based only on fees doctors charge. If a doctor won’t join the ‘partnership’ he is deemed ‘not to be recognised’. Recognised for lowering fees not being good competent and safe!

  • rate this
    +3

    Comment number 30.

    @24untio
    If it's not illegal, you can spend your money on anything you want. Big house, flashy car, Bahamas holiday, health insurance. Unlike the first 3, health insurance helps you, as they are part funding the NHS you use, but not using it themselves. I just get the chance to moan at the cost of car and house insurance. Probably you do too.

  • rate this
    0

    Comment number 29.

    28: You would love the Jewelers who are still open down my way.
    Half price sales on gold and silver jewelry !
    The shops still get more than if they binned their stock for scrap value..
    Tinned Beans, fish and a Tin Helmet, good investments.
    And I didn't even mention the India Stock market crash. dominos falling !

  • rate this
    0

    Comment number 28.

    Perversely, it would be eliminating the competition of state-sponsored healthcare, meaning more qualified staff being available to the private sector.

  • rate this
    0

    Comment number 27.

    I have only limited experience of seeing the costs involved in health care but i dont personally see the problem here.

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

    In other areas its called insider trading or lobbying and will never be stopped.

  • rate this
    0

    Comment number 26.

    And we don't get to comment on the African Miners strike ?
    Apparently they want a 60% pay rise (only taking them to $12000 pa equivalent).
    What a world !
    It's curious how many BBCforum posts originate from America....

  • rate this
    +1

    Comment number 25.

    How many beeb employees have private health care schemes and how are they funded?

  • rate this
    +3

    Comment number 24.

    If you've got the money to be able to pay for private healthcare then quite frankly you can cry me a river about how much it is costing you. There are people in this country struggling to put food on the table so take your middle class problems and get on with it. :)

  • rate this
    +23

    Comment number 23.

    I'd much rather of had a new MRI machine and some more staff at our local hospital rather than a fancy £2m state of the art new entrance!

    All they seem to be doing is building useless features rather than more wards!

    When I go into hospital I want to be treated for my condition, not sit and enjoy a Panini & Latte in the 'Pretentious View' cafe!

    That's the private health care model isn't it?

  • rate this
    0

    Comment number 22.

    stimulate competition within the NHS

    How does that work, there is so little private competition & in fact the NHS provides the greatest competition because it is free at point of use.

    Health competition in UK is a fallacy, it is like the executives of Tescos working part time at Sainsburys.

    "Competition" & "choice" are essentially politically abused words to facilitate idealistic policy

  • rate this
    +1

    Comment number 21.

    "You pays your money you takes your choice" Private means just that.

  • rate this
    0

    Comment number 20.

    No.
    The NHS is free at point of service so the prices in the UK are low because of this. If this stopped being the case we'd move closer the the USA. In 2012 the Ave. cost of health insurance for a family of 4 was $15,745.

 

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