‘Americans want our NHS’, ‘people before profits’, ‘#NHSNotForSale’… it’s always been difficult to have a sensible discussion about healthcare in the UK, but if you combine the NHS with both Brexit and Trump, it seems almost impossible. Fortunately, there are still some people – even on Twitter – who are willing to engage in constructive debate. Here’s my two cents’ worth.
To recap, there were predictable howls of outrage when US ambassador Woody Johnson said on the Marr show that he expected the ‘entire economy’, including healthcare, to be on the table in negotiations over a future US-UK trade deal. As it happens, the ambassador’s position was nothing new. The US has traditionally favoured a relatively liberal ‘negative list’ approach to trade deals on services, where the presumption is that a sector is included unless it is specifically excluded.
Rather confusingly, President Trump has since indicated that the NHS would be one of the exceptions, apparently taking it off the table again. Nonetheless, healthcare is a substantial part of any advanced economy and the NHS itself is the world’s fifth largest employer. Concerns about the impact of a US-UK trade deal on the NHS are therefore unlikely to vanish overnight.
But if you dig a little deeper, it’s still not obvious what the British people are supposed to be worried about. Initially the hysteria focused on the ‘threat’ that US firms would be allowed to bid for NHS contracts. This sort of reporting is almost unbelievably lazy.
For a start, the WTO’s Government Procurement Agreement (GPA) already provides some basic access for US firms. In practice, the UK goes some way beyond this, and many US firms already work closely with the NHS, whether directly or via their UK/EU subsidiaries. IBM, for example, is a major provider of IT services. Are the scaremongers really saying that this contract should now be cancelled, just because IBM is American? Or that a US firm can be trusted to run a critical IT system, but not to provide generic medicines or routine diagnostic tests?
Vince Cable has only been a little better with his warning that the US ‘would like preferential access to public service procurements, including the NHS’. I assume the key word here is ‘preferential’, but that’s simply not how free trade agreements work. Any conceivable agreement with the UK would simply put US firms on a level playing field with existing suppliers, including those from the rest of the EU. Indeed, we don’t hear many complaints about German or Spanish companies selling goods and services to the NHS…
There also seems to be plenty of (deliberate?) confusion about what a US-UK trade deal might mean for how the NHS is financed. At this point, someone usually brings up Nigel Farage’s comments about moving to an ‘insurance-based system’ (presumably more private insurance) and then jumps to the conclusion that a US-UK trade deal would inevitably lead to the adoption of the American healthcare model, with all its well-known flaws.
This is Project Fear at its absolute worst. Farage will doubtless be flattered by the attention but – last time I checked – he’s still not in government. No-one is seriously proposing that we go down the US route, including my old friends at the Institute of Economic Affairs. (See, for example, Kristian Niemietz’s excellent book, Universal healthcare without the NHS.)
The real debate is whether the UK should adopt the best practices elsewhere in Europe (or further afield, such as Singapore), where a mix of public and private provision delivers much better health outcomes for patients. Indeed, the relative weaknesses of the NHS have been identified in many independent studies, including ‘How good is the NHS?’ (a joint report by the Health Foundation, Institute for Fiscal Studies, The King’s Fund and the Nuffield Trust), and the Euro Health Consumer Index.
But in any event, a US-UK trade deal would have no impact on how the NHS is financed. Again, this simply isn’t how free trade agreements work. No country would ever be obliged to privatise a public service by anything in a trade deal.
Just look at the diversity of funding models in the EU, which is a club that goes well beyond the degree of integration and harmonisation ever likely to be included in a US-UK trade deal. There’s no pressure on other EU members to copy how things are done in the NHS (and most have gone their own way). What’s more, none of the large private healthcare companies elsewhere in the EU have shown any interest in taking over the NHS.
To be fair, there are three other concerns that probably do need to taken more seriously, though I still think they’re mistaken.
First, some have argued that ‘market access’ provisions in a US-UK free trade agreement might force the UK to end the NHS monopoly on the provision of public healthcare. But putting aside the question of whether that would be such a bad thing, it’s standard practice for government services to be ringfenced from these provisions. Indeed, this was a key feature of the stalled negotiations between the US and the EU over the Transatlantic Trade and Investment Partnership (TTIP).
Second, there are concerns that a US-UK trade deal would include an investor-state dispute settlement (ISDS) mechanism, or investment court system (ICS), which might allow US firms to sue the UK government for discriminatory practices and make it harder to bring services back under full public control without paying appropriate compensation.
These constraints would not necessarily be a bad thing either, in my view, but let’s put that to one side too. The more important point here is that the TTIP negotiations also provide a template for ringfencing public healthcare from an ISDS. And it is far from certain that a US-UK deal would even include an ISDS, which are now just as controversial in the US as they are over here. The US negotiating objectives have not specified an ISDS, and there wasn’t one in the draft of An “Ideal” US-UK Free Trade Agreement worked up by a group of free-market think tanks in 2018.
Third, the US would want to find some way to make the NHS pay higher prices for US-made drugs, partly because the costs to the NHS are often used as benchmarks in other countries. This is an important aim of the policy known as American Patients First and US pharmaceutical companies have long resented the monopsony power of the NHS to influence prices. Nonetheless, it is very hard to see how a US-UK trade deal would change the market dynamics in practice. Indeed, this is one respect in which the giant size of the NHS does work in favour of patients.
Presumably the US would try to have more influence on the decisions made by the UK regulator, NICE, and more say in the voluntary agreement, the Pharmaceutical Price Regulation Scheme (PPRS), between the industry and the UK government. However, it is unclear how this would be achieved.
For example, a US firm might want to lobby for better patent protection, or for its more expensive drug A to be used instead of a cheaper alternative B. But it would still have to demonstrate (to NICE) that A is better than B in terms of the benefit to the patient. The underlying market forces of supply and demand would also still apply, so the NHS would not pay over the going rate for either drug. What’s more, the NHS budget would still be set by the UK government, so bills would be capped.
It seems far more likely that a reduction in trade barriers, increased competition and more choice would lower prices and raise quality, just like in any other sector of the economy. There might be less scope here for savings on the NHS drug bill, given the higher prices in the US. But it would be surprising if there were not substantial benefits to be gained in the healthcare sector as as whole.
All that seems to be left is the scaremongers’ claim that we can’t trust American healthcare companies to put ‘patients before profit’. Aside from the crude anti-Americanism (would people say the same of a Dutch or Swiss firm?), this ignores the fact that healthcare isn’t a monopoly. In this respect, healthcare companies are no different from private sector retailers like M&S or Tesco’s, who can only make profits by keeping customers happy. Of course, the market is never perfect and there are examples where private sector providers have failed patients. But there are many horror stories from the purely public parts of the NHS too.
In summary, no US-UK trade deal would affect how the NHS is financed, US firms can already bid for NHS contracts, and it is standard practice to ringfence public healthcare from the most controversial provisions of these agreements anyway. Private healthcare companies have at least as much incentive to look after their customers as any other business – perhaps more, given the costs of getting it wrong.
Some may still argue that the UK will have to bow to every US demand in order to get a trade deal over the line. But if the US did insist on ‘breaking up the NHS’ (i), it would be politically impossible for any UK government to agree. Put another way, no deal would be better than a bad deal.
(i) I’m still not sure what this is supposed to mean, but will assume it’s a bad thing
Plain-speaking Economics 