"Waiting lists in the NHS clearly demonstrate that it is inefficient." Discuss.

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Edward Manning, College of St Hild and St Bede

“Waiting lists in the NHS clearly demonstrate that it is inefficient.” Discuss.

In 2002, public expenditure on health represented 7.7% of GDP. At the same time, over one million people were waiting for treatment on the NHS. Through a regression analysis with a sample size of over ten thousand, T.Besley et al found that “ if the long term waiting list were to rise by one per thousand, then there would be a 2% increase in the probability that an individual….would buy private insurance.” It has therefore been shown through regression studies that consumers of health perceive quality in the NHS through waiting times.  Given that taxation remains the primary method of funding the NHS, the fact therefore, that waiting lists do exist remains a cause for concern to many people as they question how their resources are being allocated.

In this essay, I will principally discuss why waiting lists exist at all, and consider the related efficiency arguments. According to this aim, I plan to dispel the thought that waiting lists are altogether inefficient.

When applying economics to any area in an efficient area we usually consider two variables; price and output. In this respect, the NHS can be considered an anomaly with respect to economics as resources must be allocated without the price mechanism. It can thus be seen on a very basic level why waiting lists might exist. Consider the following diagram:-

Figure 1.

As far as we are concerned, in the NHS, there are no costs of treatment. The NHS will face a demand curve, D1 and its patients will consume up to the point Qnhs. Were there an efficient price mechanism in place, it can be assumed that the optimum quantity would be at OQ*. It is thus the case that in the NHS there exists excess demand to the degree Qnhs – OQ*. This excess demand can be simply thought of as the level of waiting lists.

Before we can discuss fully whether waiting lists are efficient we must ask what efficiency is in the NHS. I will asses efficiency in the NHS predominantly around the concept of Pareto efficiency. Pareto defined the economically efficient outcome in society as being a situation where “it is impossible to improve the lot of any person without hurting someone else.” This implies allocative efficiency as there is the correct application of resources to each person.  According to a single market, in this instance health, we can infer that this means that marginal benefits equal the marginal cost of consumption. We may also consider productive efficiency. That is that output is produced at minimum possible cost.

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Given that there is no price mechanism in the NHS to equate supply with demand, consumers are not deterred from using services as they face zero monetary expense. The main restrictions to access are formed through waiting lists. But why must they exist at all? A good answer to this question is provided by Buchanan. It is shown in the following diagram:-

Figure 2 (Figure taken from Are waiting lists inevitable? A Street, ...

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