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Edmonton, Feb 13 TH 2014 LESSONS FROM THE UK: EXPERIENCES OF P3S AND PRIVATISATION

Edmonton, Feb 13 TH 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.

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Edmonton, Feb 13 TH 2014 LESSONS FROM THE UK: EXPERIENCES OF P3S AND PRIVATISATION

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  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

  2. British Welfare versus Nazi Warfare

  3. ‘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

  4. PrestonMarch2013

  5. 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

  6. 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

  7. Four stages of NHS privatisation • Phase I Efficiency & management 1979 control moves away from professionals Griffith’s supermarket management reforms • Phase II Internal market 1991 purchaser/provider split public corporations REVERSED IN SCOTLAND, NHS REFORM (SCOTLAND) Act 2004 1998 • Phase III PFI - PPPs 1992 privatise asset base & non-clinical services • Phase IV NHS Plan 2000 privatise clinical services- foundation trusts pricing- financial flows, DTCs etc local pay bargaining - GP/ consultant contracts service unbundling- like post office Phase V Remove Duty to secure and provide:

  8. Service unbundling: nurses & doctors pharmaceuticals - services ‘soft’ clinical services - pathology radiology medical records GPs dentistry • UK NHS ophthalmology PFI infrastructure hospitals premises buildings maintenance long term care ancillary services - eg, catering cleaning laundry clinical & non-clinical - equipment PrestonMarch2013

  9. PFI: Lessons from the UK NHS • PFI : a discredited Public Policy • Affordability • VFM: cost and time overruns • Accountability • Cost of finance NorwayJune2013

  10. 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

  11. £34.7 billions £34.7 billions £191 billions £191.3 billions Source: HM Treasury (2008). Signed Projects List (March 2008). Available at: http://www.hm-treasury.gov.uk/ppp_pfi_stats.htm (Accessed: 24 November 2008). NorwayJune2013

  12. 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

  13. 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 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 NorwayJune2013 All calculations include payments to Treasury on existing and retained estate. * Refers to 1999-2000

  14. NorwayJune2013

  15. Trust 1995-96 1996-97 Planned Bromley Hospitals 610 625 507 Calderdale Healthcare 797 772 553 Dartford & Gravesham 524 506 400 North Durham Acute Hospitals 665 597 454 Norfolk & Norwich 1,120 1,008 809 South Manchester 1,342 1,238 736 Worcester Royal Infirmary 697 699 390 South Buckinghamshire 745 732 535 Hereford Hospitals 397 384 250 Carlisle 506 507 465 Greenwich 660 566 484 • Total 8,063 • 7,634 • 5,583 Percentage change from 1995-96 (-5.2) (-30.8) Changes in bed numbers at NHS trusts under PFI development Values are average no’s of beds available daily (all specialties) NorwayJune2013

  16. 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

  17. “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

  18. 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

  19. 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

  20. 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

  21. 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

  22. “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

  23. “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

  24. Projected Dividends on Six PFI Projects Source: Response to Scottish Futures Trust Consultation Paper by Jim Cuthbert & Margaret Cuthbert March 2008 www.cuthbert1.pwp.blueyonder.co.uk/ NorwayJune2013

  25. 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

  26. 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.) glasgow sep 29th 2010 NorwayJune2013

  27. “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

  28. 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

  29. 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

  30. 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

  31. Risk Selection/Avoidance Strategies Gaming and upcoding Cherry picking Cream skimming Dumping Restricting entitlements Risk sharing: coinsurance, user charges

  32. US Health Insurance Coverage 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

  33. Millions are Uninsured andUnderinsured Medical bill/debt problem 17.7 million 10% Adequate coverage and no bill or access problem 61.4 million 35% 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.

  34. 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)

  35. PRIVATE SECTOR EFFICIENCIES? • LOSS OF COVERAGE • TRANSACTION COSTS: BILLING , INVOICING AND MARKETTING • PROFITS AND RETURNS TO BANKERS AND SHAREHOLDERS • OVERTREATMENT • UNDERTREATMENT • LOSS OF INNOVATION

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