Britain Rediscovers A Truism Americans Are Forgetting

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I love that poster with the picture of Branson!  The question is would you want Branson or David Cameron and minions of faceless, nameless, and unaccountable cleptocrats in charge of your health care? 

Oh, the irony!  As any semi-conscious person is aware, the first couple of years of the Obama administration was marked by a national discussion of American healthcare and it’s rising costs.  Too often, the UK’s socialized health-care was held as a model that the US should emulate.  Well, we never got there.  Instead, the US ended up with an intermediate step to socialized medicine, mandated health insurance, with the government as one of the competitors. 

Now, I’m not big on comparing systems like this.  What may work with one nation, people, or social group may not work for another.  Cultural differences have a significant impact on health care required. 

But, there is one truism which is universal and extends beyond the boundaries of healthcare.  Government cannot provide services as well as the private sector.  Government doesn’t do much of anything better than the private sector. 

English business magnate Richard Branson is into just about everything.  British healthcare is no different.  From the WSJ.

Branson Becomes Face of U.K. Health Flap

There are some worthwhile parts of this article.  Essentially, some Brits are upset that Branson may have found a way to deliver healthcare services at a profit. 

The Virgin Care unit of Mr. Branson’s Virgin Group has spent the past 2½ years supplying health-care services like podiatry and dermatology to the National Health Service, which is increasingly turning to private-sector contractors in a bid to save money and improve service.

Many doctors, patients and members of the public object to the outsourcing trend, saying they don’t like the idea of private-sector companies squeezing a profit out of the already cash-strapped NHS.

On first glance, these people seem to have a point.  The NHS is out of money, and Branson is taking more out of the system and into his pocket!!!  Oh noes!!!  Surprised smile   However, “the company says its contracts require it to save the NHS certain sums of money before taking a profit for itself.”

How’s that?  Like any governmental agency, the NHS has a budget.  It knows if it provides X service to Y people it will cost Z.  So, they contract with companies such as Virgin, for a sum less than Z, saving the NHS money. 

Even so, health-care workers wearing Richard Branson masks have staged more than a dozen protests outside Virgin Media VMED +0.06% stores and Virgin Active gyms in recent months, carrying signs that said: “Branson—Hands off our NHS!”

The next part of the article is where it gets particularly delicious for me.  Let’s see who is protesting….

Jacky Davis, an NHS radiologist who helped organize one of the protests, said medical care “is uniquely unsuited to the commercial market.”

“Multinationals make their profits by driving down the working conditions of their employees and by cutting back on services,” she said. “In both cases patients are the losers.”

Oh, we see a government employee is helping organize the protests.  Interesting.  The government employee also states that the services will be cut back, as well.  Hmm.

Virgin says parts of the NHS are so inefficient that there is plenty of room to improve service and make a profit too. “We all know that the NHS can provide fantastic services a lot of the time, but on occasion they can also be improved,” said Bart Johnson, Virgin Care’s chief executive. He said Virgin aims to provide “better service for patients, more convenient service for patients and a good deal for the taxpayer as well.”

The next part of the article is a bit tangential to the specific, but worth noting.

Like most Western countries, Britain is grappling with soaring health-care costs and a yawning budget deficit, forcing the NHS to find ways to cut costs. The previous Labour government began outsourcing some health-care services to private companies in the mid-2000s in what it described as an attempt to save money and improve services.

This isn’t necessarily unique to healthcare.  This is unique to the common direction of most Western governments.  In recent times, the governments are continually providing more services and payments to their people.  In the US, we’re providing almost everything to various parts of the populace.  Healthcare?  Check.  Housing?  Check.  Food?  Check.  In some cases automobiles and even telephones.  In Western nations the ever expanding role of government has become nearly all encompassing.  Why are our budgets in the red?  Because there is an insistence that the government be able to provide more and more of what the people deem as a need. 

Moving back to the specifics ………

In March, Virgin won one of the biggest NHS contracts awarded so far: a five-year, £500 million ($806 million) deal to provide “community health services” in the county of Surrey, near London.

The contract includes the running of seven nonacute hospitals, which perform minor surgeries and other non-urgent care, and providing services ranging from diabetes treatment and physical therapy to screening for breast cancer and sexually transmitted diseases. Under the deal, 2,500 local NHS employees were transferred to Virgin’s payroll.

Oh, we see now why the radiologist is helping to organize the protests.  Government work is fun.  There’s very little accountability compared to the private sector when things such as waste are considered. 

… Surrey Link, a nonprofit local health-care watchdog, says Virgin has taken action “whenever we have highlighted where improvements to services must be made.” For example, the company has made repairs to buildings that “had not been invested in for a long time,” Surrey Link said in a statement.

Virgin says it also has extended the hours its facilities are open on evenings and weekends and is offering walk-in appointments, which can be hard to get from the NHS.

At most Virgin offices patients are encouraged to rank the service on a 1-to-10 scale; a spokesman said 81% of respondents give it a 9 or 10.

Oh, so maybe services are not sacrificed as radiologist Jacky Davis suggested.  Lastly, the article leaves us with this…

One of the groups that lost the bidding for the Surrey contract—Central Surrey Health, a nonprofit group owned by 700 nurses and health-care workers—says it doesn’t understand how Virgin can make much profit on the deal, particularly as the NHS has grown more frugal about payments for service.

“I’m interested in the model of how they’re going to be able to make that work,” said Rebecca Jones, a spokeswoman for the group.

Central Surrey Health is working on other NHS contracts in the county and averages a 1% return on sales before interest and taxes, which it reinvests in its operations, she said.

Non-profits are funny organizations.  I was most recently employed by one.  They are very good at not making profits.  It is inherent to the structure of the business model.  In this particular case, being owned by a bunch of nurses and health-care workers, it isn’t surprising that they don’t understand how a “for profit” group can turn a profit.  The problem with non-profits is that on good years, they may initially turn a profit, but they can’t.  So, instead of socking it away or making long term investments, they’ll will spend the excess on whatever is the passing fancy of the day.

My personal experience can be relevant.  I was hired to implement all sorts of techno goodies for a non-profit electric utility company.  At nearly every turn, I would advise them to wait, to let the technology work it’s bugs out and the price to drop.  At nearly every turn, I was ignored.  We bought the junk, I made it work, by the time I was done on whatever project, one could look around and find a cheaper, more efficient, easier to use, more encompassing product.  This is the nature of non-profits. 

h/t Dirk

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20 Responses to Britain Rediscovers A Truism Americans Are Forgetting

  1. tckev says:

    Straight from the NHS website – http://www.jobs.nhs.uk/about_nhs.html
    “The NHS – a rewarding place to work

    The National Health Service (NHS) is one of the largest employers in the world, and is the biggest in Europe, with over 1.3 million staff.”

    Apparently about 1 in 25 working people in the UK are employed by the NHS. If some of this can be off-loaded to Virgin, then hopefully this will improve things – giving the private sector a route into this massive (and bloated) government run tax-sinkhole.

  2. DirkH says:

    “Under the deal, 2,500 local NHS employees were transferred to Virgin’s payroll.”

    That must have been a rude awakening for them.

    I never know with Richard Branson. He’s about as Ayn Randian as it gets … yet he’s an ardent warmist.
    But Steve Jobs was equally weird – he drove around without a license plate and paid the fines, he didn’t want to be registered, and he created his great products – yet he was too stupid or anxious to get good cancer care…

    • suyts says:

      I hated Jobs’ products. They were the classic form over function products.

      • DirkH says:

        You’re free to hate them – I don’t own any Apple product myself. Main reason being that I would have to buy an Apple computer to be able to develop software for the iphone or ipad. So, too much vendor lock in for me.

        But you can’t deny that he hit the nerve of the masses (after many attempts).

      • suyts says:

        Yes, he did very good in finding the proper product to market. I look at his success as more of a statement towards society. What major significance did an I-phone bring to the people? Or an I-pad? Or a Mac?

        • DirkH says:

          Oh come on. If Nokia or Microsoft had been a bit smarter they could have brought their own tablet prototypes on the market before Apple did. Both companies had teams that developed prototypes.

          The MSFT prototype was rejected because it didn’t run on Windows; the Qt-based prototype at Nokia was rejected because the managers didn’t see a market in high-priced smartphones.

          Jobs had the guts to push it to the market and CREATE the market. I really expected the other companies to counter him immediately… I never expected they could be THAT sluggish.

        • DirkH says:

          Oh, and what does it say about society – in my case, that I like a telephone that doubles as a navigation system, an internet browser, a graphics tablet etc… (I have a Samsung Note.)

        • suyts says:

          I’m not saying MS or others didn’t lose out, I’m saying the value brought to us by the various Apple products, for the price has been very negligible. Yes, they condensed many things into one product….. as it the nature of things, especially tech gadgets. I’m left wondering why they didn’t put a can opener on one of them.

        • DirkH says:

          Yes, they were overpriced. That’s why I waited for the competition to do its magic. And the antics of some Apple fans were truly bizarre.

        • suyts says:

          LOL, yes, the antics…… the Apple fanboys have a near religious zeal which rivals the warmists….. some are one and the same.

  3. DirkH says:

    To extrapolate the argument of the protesters…. How can it be that the NHS buys syringes from for-profit companies? :-)
    Somebody makes a profit! The scalper! Actually they sound very Soviet – in the Soviet Union, private businesses were allowed – but profits were forbidden.

  4. Drama says:

    The NHS worker from the story is right. It would drive down working conditions and cut back on benefits. Purely by ratio because the workers would be required to, you know work, the conditions and benefits would therefore be lower. Gubmint math.

  5. kelly liddle says:

    The service is still being delivered ultimately by the government because they are paying for it. If and only if the government contracts are well written will it be more cost effective and currently those services are being very poorly run by the government (which is probably the case). Overservicing can also be a problem in the private sector. I am not suggesting the above example is good or bad only that private does not mean better in every case and especially so if the government is paying for it.

    One thing that I am very positive about is that the infrastructure appears to be remaining public and the operations being run privately. This is what makes sense, those who are purists don’t seem to understand that government ownership of infrastructure is far cheaper than if privately owned due to cost of capital and no profit needed (except in rare examples where private companies go broke thereby providing something at a very low cost). Operations are best carried out by the private sector but only if the contracts are well written there have been terrible examples of this not being the case.

    • DirkH says:

      ” that government ownership of infrastructure is far cheaper than if privately owned due to cost of capital”

      A state can borrow for free? A state has no cost of capital? Now, of course what you mean is, a state can print as much money as it wants, and rig the interest rate any way it wants, as long as it doesn’t hit the Keynesian endpoint, for which we will soon have Japan as living example.

      Japan, by the way, has invested heavily into infrastructure since 1991 to get Keynesian deficit spending going, to a point where every village has a highway bridge. The new prime minister Abe has announced he will get the economy going again…

      …with some infrastructure spending (and money printing).

      We will see whether this is really as cheap as you think.

    • kelly liddle says:

      Dirk
      You are going a little off my point and in some ways confirming other points I have made. It all comes down to the government being efficient or not and private enterprise is out to make a dollar. The argument can be made to stop all state funding for health (or control of like in Obama care) but this is not going to happen. Of course governments under normal circumstances can borrow money more cheaply or god forbid actually just run balanced budgets. The Australian federal budget is around $350 billion and if only 10% was spent on new infrastructure we could literally have anything. You have pointed out Japan has wasted money on infrastructure and no doubt they have but I think you would find in Oz or Germany far more is wasted on various social schemes rather than infrastructure. Private companies to build infrastructure, private companies to operate that infrastructure, but government to own it. Even though this is what makes sense does not mean that it will be successful if it is not run properly.

  6. tckev says:

    “This is what makes sense, those who are purists don’t seem to understand that government ownership of infrastructure is far cheaper than if privately owned due to cost of capital and no profit needed…”
    Of course, as the government make the rules and runs the system, no outside audit is required because governments always do the best for its citizens – or not?
    The NHS in the UK is the officially established religion.

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