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From the NHS to Brexit, give people a choice and they’ll make a good one

Posted by on November 10, 2016 in Economic Theory, Markets | 0 comments

From the NHS to Brexit, give people a choice and they’ll make a good one

A current headache for the government is the performance of the NHS, and whether it is running out of money. This was making the front pages until the judges’ decision on Brexit pushed it off.

Successive governments have discovered that the finances of the health service are a potentially bottomless pit. A key policy issue has been how to make the NHS more productive, to get it to deliver a better service for a given amount of money.

A paper in the latest American Economic Review provides strong evidence that extending patient choice is an effective way of getting better outcomes. In 2006, the Blair government mandated that patients in the English NHS had to be offered a choice of five hospitals when referred by their physician to a hospital for treatment. Prior to this reform, there was no requirement that patients be offered choice.

Martin Gaynor of Carnegie Mellon University and colleagues from Stanford in the US and Imperial College in London analyse, using detailed patient-level data, the impact of introducing choice in certain areas of elective heart surgery.

Economic theory regards choice as a Good Thing, but also recognises that, in complex areas like health, things might not be completely straightforward. For example, information on quality might be imperfect. Very difficult cases might be sent disproportionately to one of the very best surgeons, who, because of this, has a relatively low success rate. Understanding technical information might itself be difficult.

Even so, the authors show that the introduction of choice had unequivocally positive results. Patients became more responsive to clinical quality in deciding where to go. In turn, hospitals responded to this demand by improving the overall quality of the service. There was a small but very definite reduction in mortality. And, in the dry language of economics, there was a “substantial increase in patient welfare”.

Gaynor and colleagues make appropriate qualifications about the accuracy of their calculations, but they work out that the monetary value of the improvements in service to each patient in their sample was $6,226. The average value of each of the small number of lives saved was $300,900.

There were fears prior to the reforms that only the better off would benefit. On the contrary, those who were either more severely ill or from low-income areas benefited the most.

The importance of this evidence goes considerably beyond its immediate sphere of a single area of elective surgery in the health system. It has become an article of faith among the liberal, educated elite that ordinary people lack the ability to process information properly when making decisions about complex issues.

Whether on Brexit, on making choices about hospitals, or choices about schools for their children, the broad masses are deemed too stupid to understand. It follows that choice is bad for them and, instead, they should simply do what their so-called betters decide for them. But even in a complex area like elective surgery, given the opportunity, people can make good decisions and improve their lives.

As published in City AM on Wednesday 9th November 

Image: Surgery by Eduardo García Cruz is licensed under CC by 2.0

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