Wednesday, June 1, 2011

The Myth of Free Healthcare, the Southern Cross Healthcare Crisis

Southern Cross Healthcare, the UK's largest provider of elderly care is on the brink of collapse.  The bulk of reports and comments base their ire on the fact that Southern Cross Healthcare is a private company and that privatization is the root of the problem.  This is yet another example of a partially privatized or deregulated market appearing to the public as a problem of a free market.

Yes, Southern Cross is a private company, but the market is controlled.  The government is the only buyer. This was not a market where individuals could judge the properties, negotiate prices, choose the facility of their liking.  The way the NHS works, the elderly person applies for care and gets put where ever the NHS wants to put them.  There is no choice.  The NHS has many people to place.  They want to find the old person a bed so they can move onto the next application.  Southern Cross was able to do these lease/purchase schemes with inadequate focus on patient care because the government was obligated to keep sending pensioners to them.   They had the most beds.  That is, Southern Cross gamed the government.  It is easier to game an institution than it is a whole lot of individuals.

To be clear, I am not contending that Southern Cross is an angel of a private company.  On the contrary, they sound like a nasty lot.  I am contending that nasty lots can do more damage in a regulated market than a free one.  Contrast Enron's collapse, in which a private company's pyramid scheme destroys itself, another company, sees its officers in jail, and damages the energy sector and regional economies, and Fannie Mae and Freddie Mac's subprime mortgage collapse, in which a public company's bad debt scheme brings down the world economy and yet leaves the naughty company and its officer still in power.   In a free market, Southern Cross might have been able to pull off this scheme a couple of times.  In a regulated market, Southern Cross has jeopardized 31,000 residents in 750 homes.  From today's news: [emphasis mine]

Care was privatised over the past two decades with the State becoming a purchaser rather than a provider. Instead of town halls running old people’s homes, they buy accommodation from businesses or the voluntary sector.
The Government is proposing to increase the purchaser/provider split within the NHS and opponents are warning that the same problems will ensue in healthcare.
Without doubt, investors see growing demand for some type of care arrangements. Politically, it has proved difficult for the State to foist costs on to residents and their families. This is good news for investors who can look forward to reliable income streams rather than having to attract private custom.
One financier involved in the market said: “The way that investors describe these businesses based on the elderly can sound very cynical to outsiders.
“The classic care home business will be created by someone involved in nursing and someone involved in property. They come together seeing a mutual way to make money. What people are becoming interested in is what they call the ‘dementia market’. The biggest nuisance to care home businesses are the relatives. When some complain, the perception is that this is because they feel guilty for leaving the elderly relative in strange hands.”

One comment somewhere in the articles listed below cried that the NHS needs to jump in and grab Southern Cross by the scruff of the neck and fix the problem.  With what?  The UK budget is in crisis.  This problem came to light due to budget cuts for elderly care.  There is no solution that doesn't involve private funds, either through higher taxes or personal funding of elderly care.  Free health care is a myth.

Further reading:

"Many old people live alone in houses that are too big for them. I know: I’m one of them. Across the country, this amounts to great unused wealth. The myth persists that we have the right to hold on to those assets even in our hour of need, in order to pass them on untouched to the next generation. Yet at the same time, the next generation is going to have to pay for our social care from their own income. We are going to have to find a way of resolving this paradox."
Finally, many of the reports and comments also allude to individual families needing to take more responsibility for elderly care.  Yeah, well, that was a lot easier to do back in the one income family Then, there was an adult member who could take on the extra task of care because or who could find a job to supplement the family budget for some hired care.  In today's two income families, the budget base is two incomes so savings and assets are the only ways to get extra funds and the adults are too busy to provide the care themselves.  The changes required to fix this problem involve far more than budget wrangling.


Anonymous said...

There are some fundamental,factual errors in this piece that detract from the power of your case.

AHLondon said...

And they are...?

Anonymous said...

and they are your responsibility. You go fix them.

AHLondon said...

I grant that "they" are my responsibility to addreess, if I knew what they were. I wrote the post using my knowledge and understanding of the facts. If I thought the facts were different I would not have written this post this way. If you want me to address some factual shortcomings, then you need to tell me what factual shortcomings you see and I will be happy to address them. It seems you are trying to discredit my argument without committing to a position of your own. That may seem convenient for you but leads me to assume that you don't have an argument, that you merely want to place a bad aura on mine.