Since 1948 the NHS has provided health care free to all at the point of use with the intention of ensuring all citizens, regardless of their socio-economic background, have access to treatment. Yet, there is an ever-growing strain on the service with an ageing demographic and an imbalance between funding and demand, raising questions about whether the system built for a country in the mid 1900’s can suit modern day times. Recent headlines indicate chaos and a need for urgent change, from two junior doctors being left to care for 436 patients (Press Association, 2017), to fear of the NHS facing the worst winter in history (Ward, 2017). In the pursuit of efficiency, privatisation is becoming a more prominent solution to the economic woes of the current NHS. It has the potential to increase efficiency of treatments and reduce wastage of scarce resources by inducing a reduction in demand by those who least require medical attention. Despite this, the reduction in equality of health care because of privatisation could be vast, compressing the positive externalities that come with a healthier, more productive work force. Although the current system is flailing, it is questionable that a private health care service is the next best alternative despite the theoretical economic advantages.
As a publicly provided service, the NHS is non-excludable, meaning no one can be stopped from
using the service, and non-rival, meaning up to the point of capacity everyone can utilise the NHS
without another person preventing them from doing so. This encourages over use and thus is a potential waste of resources as people seek unnecessary treatment and patient priorities become disordered
amongst excessive demand (Cullis and Jones, 2009). Figure 1 illustrates that demand reaches far beyond that which would be the equilibrium level in a ‘free market’, creating a huge excess in demand,
meaning those that least want or require treatment are still seeking it due to the distortion of the
price rationing signal.
If privatisation could ensure increased competition in the provision of health care, allowing patients
to choose who they seek medical help from, there could be some real improvements in health services
overall (Propper et al., 2008). Providers would have to compete to provide the fastest, best quality
service possible, initiating investment and innovative ways of providing top health care. This has
more recently become the case as over the years the NHS has transformed in to a quasi-market, where the state still provides the finances for the service but there are competing suppliers of health care
(Cullis and Jones, 2009). A key issue to the running of the NHS in its original state was that it didn’t
have to compete to provide treatment, and therefore there was little pressure to reduce costs (Hutton,
1996), further evidencing privatisation is the solution. The Red Cross Foundation declared the NHS
is facing a humanitarian crisis with 20 hospitals found to be extremely overcrowded, so much so that
patient safety was at jeopardy, indicating government failure in the provision of health care (The
Economist, 2017). This substantiates the view that there is a drastic need for change in the current
system, potentially solved by a more competitive environment. This would make it is less likely such
poor treatment would occur as patients could readily switch providers if they felt their safety was at
risk and could receive better treatment elsewhere. However, the key to this resolution is to ensure the
market is competitive. If privatisation simply causes the market to switch from a public monopoly to
a private monopoly, the negative effects on welfare could be immense.