How will the Tories reform the NHS?
Authors: Alan Maynard
Journal: Journal of the Royal Society of Medicine (2010)

How will the Tories reform the NHS?
The answer to this simple question is difficult because the Tories, like their Labour predecessors in 1997, are being quite conservative about their intentions. While they have pledged ring-fencing of funding and made proposals about public health and hospital tariffs, moderation rather than radicalization has characterized their policy statements. This is a reflection of competing factions in the party wrestling for control of the agenda, the Blair-like policy of 1997, where they do not want to be committed to particular reforms. The policies offered by the Shadow Secretary of State Andrew Lansley are moderate and supportive of a public healthcare system. Lansley is reflecting Cameron's desire to maintain and improve the NHS. However, the ways in which this will be done are ultimately likely to be as radical as Thatcher's reforms of 1989–1991.


There are three strands to Tory policy, each reflecting the potentially radical nature of Tory policy if elected with a significant majority: 


An ‘independent’ board to set strategy;


More information;


Competition.






An independent board
This proposal is reminiscent of the Griffiths reform in 19831 where the intention was to establish a board of independent-minded business men (e.g. Sir Len Peach of IBM in the 1980s) to determine strategy and monitor performance.

There is obviously a tension between such a proposal and the accountability of the Secretary of State to Parliament. However, it is consistent with the notion of ‘competition’, which is dealt with below, as the Board can be seen as the mechanism by which competition policy is applied nationally to alter the public–private mix in healthcare provision. The Board would be supported by the Competition Panel and a reformed and merged regulator Care Quality Commission-Monitor. The focus of these regulatory mechanisms would be to create a ‘level playing field’ between public NHS and private organizations competing for slices of NHS spending.

Initially it is likely that the local agents of the Board will be reincarnated GP-total fund holding (GPFH). Originally proposals to use GPFH were predicated on the idea that it was necessary to countervail the power of hospitals by turning erstwhile poachers into gamekeepers who would better control resource allocation.2 Purchasers in the reformed NHS have been weak agents of patients and taxpayers for 20 years and catalytic change is clearly needed if the market model is retained. There is some evidence that GPFH had beneficial effects, particularly in controlling elective admissions to hospitals.3 However, the effects of any GPFH reform will depend crucially on the powers and incentives given to doctors. Current programmes such as Practice Based Commissioning have had little effect other than to increase expenditure.4

In time, and if some in the party are successful, the NHS might be reformed more radically to create effective competition in both insurance and provision. This could emulate the model of publicly financed healthcare in the Netherlands where both financial management and the provision of care are now privatized.

In the Netherlands, the finance side of the healthcare market is tightly regulated with private and public insurers competing for the patients, whose contributions are tax financed. The contributions are risk-adjusted so that high-risk patients are more financially attractive to the insurers, who are obliged to take anyone who wishes to join them. The insurers in competing for clients have an incentive to manage costs and seek more efficient patterns of care from providers.

In this system all providers are private and compete according to highly regulated rules governing prices, quality and access. There are clear rules regulating both market exit by failed providers and market entry by competing innovators.

The analogy for the English NHS would be that after some reorganization of PCTs, what the Conservatives call ‘organic mergers’, they could become competing organizations where citizens could freely join regardless of their area of residence. Thus, if the Hampshire PCT-insurer offered better value to NHS patients, they could join it even if they lived, for instance, in North Yorkshire. This model is called ‘managed competition’, has been debated internationally for two decades, particularly in the USA in the 1990s, and has been elaborated recently in the UK context.5

The success of the Dutch model is debated vigorously. The focus of Dutch reform has been largely on creating the regulations for competition among insurers. Their policy focus is now creating competition on the supply side where provision has many of the characteristics of the UK NHS, i.e. large variations in clinical practice and an absence of transparency and accountability.6

The Conservatives would find the adoption of the Dutch model challenging. On the one hand, the potential to privatize both funding delivery and provision of NHS care but maintains tax funding. On the other hand, it requires very high levels of complex regulation to design, implement and performance-manage such a system. As ever competition may be relatively easy to legislate, but its maintenance in the face of powerful monopolies is much more problematic. While privatization of financial management and provision would be attractive to the Tories, complex and costly regulation of the market would not.