The NHS’s problem isn’t what you probably think it is

Contrary to what seems to be widely believed, the NHS’s problem is not a general lack of funding or mismanagement. Its Achilles heel is that the people who decide how much funding the NHS receives and how to distribute its resources around the country have no way of acquiring the knowledge required to do so in the most rational way – i.e. in the way that maximizes value for each patient.

The Chancellor of the Exchequer and the central planners at the Department of Health can’t know the value-scales of patients, or the supply of resources or the available technology. They can’t know because this knowledge, which is otherwise irretrievable and dispersed in millions of people, can only be given in use and is transferred through unhampered markets – which the UK doesn’t have when it comes to medical care. (This is what eminent Austrian economist, the late Freidrich Hayek, described as the ‘knowledge problem’).

The best central planners can do is to allocate resources based on what they believe the medical care value-scales of tens of millions of people are. Absent this knowledge, which a free market in medical care would convey, they are essentially left to guess. These guesses are, no doubt, based on the past experiences of medical professionals across the country and government experts, but they are guesses none the less. Guessing is inferior to knowing. Furthermore, unlike owners and managers of private enterprises, central planners pay no price for being wrong.

This state of ignorance, which by design central planners cannot escape, results in continuous misallocation of the NHS’s resources, which inevitably costs lives and results in avoidable human suffering. This leads to endless frustration, anger and conflict between the public, NHS staff and government. We see the same cycle decade after decade. The public and NHS staff blame the current government for the NHS’s problems, and politicians claim NHS management/staff and patients must change their behaviour for things to improve.

Everyone’s so busy blaming everyone else for the system’s poor performance that it never occurs to anyone that the system itself is to blame. It’s like the passengers in a horse and cart blaming each other for the fact that they aren’t going as fast as a Ferrari. And expecting our system of nationalised medical care to do (a lot) better is like expecting a horse and cart to go at 150 mph. Totally unrealistic.

To use a medical analogy: the NHS’s problem isn’t malnutrition (lack of funding) or a disease (mismanagement), it is a flaw in its DNA (being run by government and centrally planned).

The point is that socialized medical care is inherently inefficient and wasteful. Increased funding, new government or new management will not significantly and profoundly improve the quality of medical service the NHS delivers. Even if we tripled its funding (which, as it happens, over the last 30 years we have) and bred super-intelligent angels to manage it, the NHS would still misallocate and waste a great deal of resources.

The tragedy is that our wealthy society is capable of doing a lot better when it comes to medical care, but our socialized system stands directly in the way. We could remove it and allow a free market to start to raise quality and lower cost, but the NHS remains standing like a Stonehenge monolith because we’re afraid of making a leap of (rational) faith into freedom.

Perhaps also, rather like the prehistoric humans who gathered at that ritual site of standing stones, we have come to value what the NHS symbolises to us as a metaphorical ancient monument to socialism more than its actual utility.

Government-run medical care not only means lower quality, but also higher cost. After all, in addition to hospitals, doctors and nurses, we must also pay for a costly government bureaucracy to ‘manage’ them all. Just think: how many more hospitals, doctors, nurses and ambulances, and how much more medical equipment could we all benefit from if we weren’t forced to fund the highly paid guess-work of the government Department for Health?

For a century or so the accepted wisdom has been that medical care is too important to leave to free markets, but the truth is that it is too important not to. The only thing government should run or manage is itself. And most certainly not the goods, technology and people who can save lives, cure diseases and reduce human suffering.

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