We can now talk about some of the advantages that come about as a result of forming quasi- markets. In many ways efficiency has been enhanced. Hospitals are much more aware of what it costs to treat different types of patient and therefore how much to charge for different services. This can then lead to efficiency improvements. For example, GPs are now doing more minor operations themselves rather then send patients to hospitals. This costs less and quality is comparable. It is also much more convenient for the patient. We are also seeing a variety of organisational forms emerging where experimentation is taking place. Groups of FH practices are emerging, pooling their administration and purchasing and thus reducing costs. Another reason for increased efficiency was as a result that hospitals now needed to offer procedures at lower costs in order to win patients and funding, but without losing the main equity benefits of the NHS (healthcare remained free at the point of service and financed through taxation). Another advantage we can talk about is equity: although conventional markets can result in considerable inequalities of outcome, it is sometimes argued that state provision has done much better in this regard. Typically, the middle classes make more and better use of the services on offer. They are better informed about availability of health services; they can easily take time off work to go to the GP; they are better able to argue for preferential treatment. Hence it can be argued that quasi-markets could improve equity. Advocates of the reforms argue that advantages will only be fully realized in the long run as the system’s efficiency improves.
The quasi-market within the NHS can fail in a number of ways. Many GP practices have grown, resulting in economies of scale. These larger purchasers should provide countervailing power to the monopoly power of the large hospitals. Contracts can be negotiated, although consumer sovereignty can be compromised if there are too few competitors and if preferences are not informed properly. Monopolies affect consumer sovereignty by eliminating competition which means that there is no incentive to be efficient. As for the NHS, for consumer sovereignty advantages there must be a competitive quasi-market of the different regional hospital services. However if and when contracts are competitively bid, they have to be renewed routinely.
Much of the gain from the Internal Market was countered by the increased cost of running the administration-intensive system, and the lack of competition between providers in many areas (due to the presence of only one general hospital) also reduced the scope for increased efficiency. Arguments concerning the length of waiting lists (which can be very bureaucratic), the closure of hospitals and the problems faces by GPs who exhaust their budget are uncertain. It will probably be some time before it becomes clear whether the internal market has achieved an improvement in economic efficiency. Critics of quasi-markets argue that they can lead to problems of cream-skimming which is a version of adverse selection and is nicely illustrated by some work by Matsaganis and Glennester (1993). Funding for FHGPs comes via a capitation formula which includes additional money for older patients and for poorer ones, since it is expected that they will have higher health costs. However, if the capitation formula does not accurately reflect the true cost of treating such patients, then doctors have an incentive to 'skim the cream' - to exclude high cost patients. Another point seen as being a disadvantage of this market is responsiveness and choice, i.e. doctors excluding patients is an example where choice is not improved by the operation of quasi-markets. It is becoming clear that the number of patients struck off doctors' lists has increased substantially over the last two or three years. It is often argued (by the doctors) that these are often abusive or aggressive patients, but the suspicion remains that financial considerations are also relevant. If patients have no choice over treatment then the welfare state will not be responsive to the increasing demands of their 'customers'. It is not clear therefore that choice is working properly - in some cases the suppliers are choosing the customers rather than the other way round. Also quality can be seen as another drawback: if organisations are pressured to reduce costs, one way they might do it is simply by reducing quality. If quasi-markets are to be successful, the maintenance of quality must be guaranteed in some way
(P.T.O)
Over all, in my point of view I feel that there are more disadvantages than advantages and hence the evidence is mixed - quasi-markets can do some good but are not always ideal. When dealing with complex 'products' such as health and education which have many attributes, a contractual market may not work effectively. We need a degree of 'managed competition' and this is lacking in certain areas.
Bibliography:
- John Sloman, (1997), Economics, London: Prentice Hall Europe, chapter 8, pages 217-219. ISBN 0-13-568056-5
- Julian Le Grand & Will Bartlett, (1993), Quasi-Markets and Social Policy, chapter 4, pages 68-75. ISBN 0-333-56519-3
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CONTRACTING FOR HEALTH: Quasi-Markets and the National Health Service, Rob Flynn & Gareth Williams. (Online library – )
Journal References:
- Bartlett, Will, and Julian Le Grand. "The Theory of Quasi-Markets." In Quasi-Markets and Social Policy (page 13, edited by J. Le Grand and W. Bartlett. Basingstoke: Macmillan, 1993).
- Chalkley, M., Malcolmson, J.M. (1996), "Competition in NHS quasi-markets", Oxford Review of Economic Policy, (Vol. 12 page.89-99).
Pamphlet (From NTU Library)
- Studies in Decentralisation and Quasi-Markets, by Malcolm Prowle (1995), Chapter 2-4. ISBN 1 873575 81 5
