Transcript Slide 1

Edmonton, Feb 13TH 2014
LESSONS FROM THE UK: EXPERIENCES OF P3S
AND PRIVATISATION
Allyson Pollock, Professor of Public Health
Research and Policy
Centre for Primary Care and Public Health
Queen Mary University of London
British Welfare
versus
Nazi Warfare
‘The abolition of want before
the war was easily within the
economic resources of the
community: want was a
needless scandal due to not
taking the trouble to prevent
it.
Will
Beveridge, 1942
3
PrestonMarch2013
4
The aim of this plan for Social
Security and allied services is to
abolish want by ensuring that every
citizen willing to serve according to
his powers has at all times an income
sufficient to meet his responsibilities.
Social insurance, children’s
allowances and allied services, eg,
health, education and housing are
primarily methods of redistributing
wealth.
Beveridge,
1942
PrestonMarch2013
5
Health and Social Care Act 2012
• Abolishes the NHS in England
• End of Duty on Sec of State to secure and
provide health care for all
• New discretionary powers for providers to
determine what services are provided and what
will be charged for
PrestonMarch2013
6
Four stages of NHS privatisation
•
Phase I
1979
Efficiency & management
control moves away from professionals
Griffith’s supermarket management reforms
•
Phase II
1991
Internal market
purchaser/provider split
public corporations REVERSED IN SCOTLAND, NHS REFORM
(SCOTLAND) Act 2004 1998
•
Phase III
1992
PFI - PPPs
privatise asset base & non-clinical services
•
Phase IV
2000
NHS Plan
privatise clinical services- foundation trusts
pricing- financial flows, DTCs etc
local pay bargaining - GP/ consultant contracts
service unbundling- like post office
Remove Duty to secure and provide:
Phase V
Service unbundling:
‘soft’ clinical services pathology
radiology
medical records
GPs
nurses &
doctors
pharmaceuticals services
dentistry
UK NHS
PFI infrastructure
hospitals
premises
buildings
maintenance
clinical &
non-clinical equipment
ophthalmology
long term care
ancillary services eg, catering
cleaning
laundry
PrestonMarch2013
8
PFI: Lessons from the UK NHS
• PFI : a discredited Public Policy
•
•
•
•
Affordability
VFM: cost and time overruns
Accountability
Cost of finance
NorwayJune2013
9
NHS Hospitals
• 159 PFI hospitals
• Capital value 13.6 billion (2009-10)
• Aggragate of all PFI availability payments is
42.8 billion (2009-10) , service charges 30.7
billion (2009-10)
NorwayJune2013
10
Capital value and unitary payments for signed PFI projects in Northern Ireland, England and
Wales (1990-2008; n=500)
8000
6000
Capital value in £m
Total unitary charge in £m
4000
£34.7 billions
£m
2000
£34.7
billions
0
-2000
£191
billions
-4000
£191.3 billions
-6000
2047
2044
2041
2038
2035
2032
2029
2026
2023
2020
2017
2014
2011
2008
2005
2002
1999
1996
1993
1990
-8000
years
Source: HM Treasury (2008). Signed Projects List (March
2008). Available at: http://www.hmNorwayJune2013
treasury.gov.uk/ppp_pfi_stats.htm (Accessed: 24 November 2008).
11
Loss of Monitoring the true costs of
PFI
• Data issues
• 1. No account of additional contributions to PFI schemes - land
sales and receipts, NHS capital, Treasury “smoothing mechanisms”
• 2. PFI payments not broken down by sector
• 3. PFI payments do not provide split between FM and availability therefore disguise true cost of capital
• 4. Inconsistent definitions of PFI estimates of capital (capital not
defined)
• 5. Revisions to contracts and payments not provided
NorwayJune2013
12
Annual revenue implications of capital costs for 19 PFI hospital schemes
comparing costs before and in the first year in which the PFI scheme is
operating: ring fenced charges
NHS Trust
Before PFI
(Capital charges as
% of income 1998-9)
After PFI
(Capital charges + Availability
fee as % of projected
income in 1st year of
operations)
Dartford & Gravesham
6.7
32.7
Swindon & Marlborough
3.8
16.4
Greenwich Healthcare
2.1
16.2
West Middlesex University Hospital*
9.3
15.5
Carlisle Hospitals
4.0
14.7
Hereford Hospitals
3.8
14.6
South Tees Acute
5.6
13.2
Calderdale Healthcare
3.4
13.1
The Dudley Group of Hospitals*
8.3
12.8
University College London Hospitals*
6.2
12.5
Worcester Royal Infirmary
5.3
12.4
All calculations include payments to Treasury on existing
and retained estate.
NorwayJune2013
* Refers to 1999-2000
13
NorwayJune2013
14
Changes in bed numbers at NHS trusts
under PFI development Values are average
no’s of beds available daily (all specialties)
Trust
Bromley Hospitals
Calderdale Healthcare
Dartford & Gravesham
North Durham Acute Hospitals
Norfolk & Norwich
South Manchester
Worcester Royal Infirmary
South Buckinghamshire
Hereford Hospitals
Carlisle
Greenwich
Total
Percentage change from 1995-96
1995-96
610
797
524
665
1,120
1,342
697
745
397
506
660
1996-97
625
772
506
597
1,008
1,238
699
732
384
507
566
Planned
507
553
400
454
809
736
390
535
250
465
484
8,063
7,634
5,583
(-5.2)
(-30.8)
NorwayJune2013
15
Loss of control over planning
‘Unattractive economics’
“An incremental investment of £200m might require productivity
improvements leading to perhaps 1,000 job losses which might be
significantly greater than 25% of the workforce … [This] is probably only
achievable by reducing the numbers of doctors and nurses … in the local
health care market.”
PFI Futures March 1998
Newchurch & Co
NorwayJune2013
16
• “The involvement of private finance in taking
on performance risk is crucial to the benefits
offered by PFI, incentivising projects to be
completed on time and on budget, and to take
into account the whole of life costs of an asset
in design and construction.”
• HM Treasury. PFI: meeting the investment
challenge July 2003
NorwayJune2013
17
Treasury Committee report Aug
2011
• Main benefit claimed was transfer of
construction cost risk . However in a PFI
contract which lasts 30 years it is not
necessary to transfer that risk
• No convincing evidence ..that PFI projects are
delivered more quickly and at lower out- turn
costs than projects using conventional
procurement methods. .
NorwayJune2013
18
Treasury Committee 2011
Increase in private finance costs mean that PFI
financing method is now inefficient
• We are concerned that VfM appraisal system
biased to favour PFI
• Some of claimed risk transfer may also be
illusory
NorwayJune2013
19
Treasury committee on Public
Expenditure Rules
• Efforts to meet fiscal rules at national and
European level may have contributed to
misuse of PFI
• Lack of capital and Departmental Expenditure
Limits … have encouraged and may encourage
poor investment decisions…
……
NorwayJune2013
20
Commercial contracts
• “Contracts [….] have an important function in
specifying the risk-sharing arrangements that
apply in the face of unplanned events on
either the purchaser or the provider side. In
short, contracts are a means of steering
transactions and sharing or allocating risk.”
NorwayJune2013
21
• “There is a cost to the Government’s use
of private finance, involving the extra cost
of the private sector securing funds in the
market, but a great part of the difference
between the cost of public and private
finance is caused by a different approach to
evaluating risk.”
• HM Treasury. PFI: meeting the investment
challenge July 2003
NorwayJune2013
22
• “We have sought on a number of occasions to
gain an understanding of the relationship
between the returns which contractors earn
from PFI projects and the risks they actually
bear. At present the available information is
limited and rather mixed…”
• Select Committee on Public Accounts. PFI
construction performance. 35th report, session
2002-03
NorwayJune2013
23
Projected Dividends on Six PFI Projects
Equity Input
(£m)
Projected
Dividends
(£m)
New Royal Infirmary
Edinburgh
0.5
167.9
Hairmyres Hospital
0.0001
89.14
Hereford Hospital
0.001
55.671
Source: Response to Scottish Futures Trust Consultation Paper by Jim Cuthbert & Margaret Cuthbert
March 2008
NorwayJune2013
24
www.cuthbert1.pwp.blueyonder.co.uk/
How PFI contracts obscure the audit trail
• PFI contracting makes it difficult to identify who bears
risk
• PFI firms are shell companies that do not bear risk but
pass it on to others through sub-contracts
• The main providers of private finance are heavily
protected from risk
• Commercial confidentiality used to conceal contracts
NorwayJune2013
25
Export of PPPs / PFI to Africa
The Governments of South Africa, Uganda, Botswana, Tanzania,
Mozambique, Nigeria, Kenya, Egypt, Senegal, Morocco, Malawi and
Mauritius are all at various stages of setting up specialist units to
promote greater use of PPPs and pFI in infrastrucure.
Source: The Infrastructure Consortium for Africa: Annual Report 2007.
(The ICA was launched by the G8 in 2005. Members are amongst others the G8
countries, the World Bank Group, the African Development Bank, the European
Commission and the European Investment Bank.)
NorwayJune2013
glasgow sep 29th 2010
26
“Portugal: one of largest PPP programs in the
world, cumulative investments about 20 percent
of current GDP, or about 13 percent of GDP of
depreciated investments.
NorwayJune2013
27
ORGANISING PRINCIPLES OF 1948-1990
NHS
• Redistribution to achieve universality and
equity
• Area based structures NOT insurance
pools or members
• Free at point of delivery
• Public ownership, control and
accountability
• Integration
ORGANISING PRINCIPLES OF MARKETS
Risk Selection and Risk Avoidance
•Risk identification
•Risk prediction
•Risk pricing: the PREMIUM the market
charges for bearing the risk
•Risk Allocation
•Risk transfer through commercial contract
Externalising risks
Risk Selection: denial of care, deselection
of services and patient services
• Loss of coverage, time limits , entitlements
shrunk
• Increased cost : administration, fraud,profit
• Overtreatment and inappropriate treatment
• Loss of innovation
• Rising Inequalities
Risk Selection/Avoidance Strategies
•
•
•
•
•
•
Gaming and upcoding
Cherry picking
Cream skimming
Dumping
Restricting entitlements
Risk sharing: coinsurance, user charges
US Health Insurance
Coverage
60.5 million
Uninsured
Insured
245 million
Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January—March
2011 by Robin A. Cohen, Ph.D., and Michael E. Martinez, M.P.H., M.H.S.A., Division of Health Interview Statistics,
National Center for Health Statistics
Millions are Uninsured and Underinsured
Adequate coverage and no
bill or access problem
61.4 million
35%
Medical bill/debt problem
17.7 million
10%
Medical bill/debt and
cost-related access
problem
54.4 million
31%
177 million adults,
ages 19–64
Uninsured anytime
during the year
17.6 million
10%
Cost-related
access problem
25.9 million
15%
Source: S. R. Collins, J. L. Kriss, M. M. Doty, and S. D. Rustgi,
Losing Ground: How the Loss of Adequate Health Insurance Is
Burdening Working Families: Findings from the Commonwealth
Fund Biennial Health Insurance Surveys, 2001–2007, The
Commonwealth Fund, Aug. 2008.
Allocation of Spending for Hospital and
Physician Care Paid through Private Insurers
Other Insurer Costs and
Profit
11%
Insurer Billing
8%
Hospital Billing
4%
Medical Care
64%
Physician Billing
5%
Medical Care
Administration
8%
Source: James G. Kahn et al, The Cost of Health Insurance Administration in California: Estimates
for Insurers, Physicians, and Hospitals, Health Affairs, 2005
Estimated sources of excess costs in US market system of health care (2009) (US Institute of
Medicine report, 2012)
(Total spending at 2009: $2.9 trillion; 50 million Americans cannot get health insurance)
PRIVATE SECTOR EFFICIENCIES?
• LOSS OF COVERAGE
• TRANSACTION COSTS: BILLING , INVOICING
AND MARKETTING
• PROFITS AND RETURNS TO BANKERS AND
SHAREHOLDERS
• OVERTREATMENT
• UNDERTREATMENT
• LOSS OF INNOVATION