Priority setting in health care: should we ask the tax payer?

It is popular and politically correct to involve the public in healthcare priority setting. But it may not necessarily be a good thing to involve it in rationing decisions.

It is almost an article of faith among many United Kingdom health economists that a publicly funded and provided healthcare service is more efficient than if left to the free market. Several reasons sustain this view. An important one is the low level of knowledge by the potential healthcare consumer of the relative utility of a healthcare service with respect to its price—or in economists' jargon—informational asymmetry. Consumers tend to choose the most expensive procedure they can afford on the basis that the most costly will be the best. Hence, in the context of hip replacements consumers may choose the most expensive prosthesis in the belief that this must be better.

Rationing is painful, complicated, and difficult

This phenomenon partly explains the reason that the United States spends a much greater proportion of its gross national product on health care compared with other, less market oriented, healthcare systems. For example, public pressure has made 10 US states pass legal requirements that autologous stem cell support for patients with breast cancer should be available if requested. This is despite it being more expensive than conventional treatment and no more effective.

By taking the healthcare purchasing decisions away from the consumer the NHS improves efficiency by allowing only those people with sufficient knowledge of health care to purchase effective (and occasionally cost effective) medicine on behalf of patients. Thus, doctors act for patients by assessing the therapeutic options available and advising the patient which is best.

While the NHS may remedy some of the market's inefficiencies it is not without its problems. One weakness, which ascertaining the public's view seeks to address, is that provision of healthcare type is divorced from what people actually want. Thus, for example, doctors may not wish to provide a service so women can have home births because it is easier for them to let women have their babies in a maternity hospital. Similarly, the public may wish local general practitioners to provide unproven complementary medicine rather than spend their budgets on the cost effective vaccination of older people against influenza. While the NHS is accountable to the public through the electoral system this accountability is very muted as people rarely cast their votes solely on the basis of one issue.

The belief that ascertaining the public's view on resource allocation is efficient within a publicly funded service must rest on the following assumptions. Firstly, the public is incapable at an individual level to make efficient choices. Secondly, it possesses sufficient knowledge to ration health care on a population basis. The first assumption must hold otherwise the best way to make the health service responsive to the consumer is to abandon public healthcare provision and meet the equity objectives of the NHS by giving transfer payments (either in the form of cash payments or vouchers) to the poor and let people decide which health care to buy. Only if both these assumptions hold will it be possible by eliciting public perceptions to produce a more efficient healthcare service.

On the other hand, if you assume that if people who cannot make an efficient choice about their own health care are also unlikely to be able to ration healthcare delivery to the population efficiently then we may end up with the worst of both worlds. Assuming the views of the public are actually used rather than seen to be used then the healthcare system could end up being as inefficient as one in the private market but without the relative freedom of choice a market offers. Thus, resources could be diverted into popular medical procedures that at best might be effective, but horrendously expensive, and at worst expensive and harmful.

Rationing is painful, complicated, and difficult. Involving the public may result in inefficient use of resources. From the published surveys of public opinion on priority setting the results tend to be fairly predictable. Questionnaire surveys show that smokers, drug users, heavy drinkers, and the elderly should receive lower priority than other people. Clearly, if “local voices” give the wrong answer healthcare managers can ignore them. If this is the case the only inefficiency will be the money that is wasted soliciting public opinion.