Time to open up our health system to “disruptive innovation,” says new IEA publication
Author Nima Sanandaji outlines how entrepreneurship in healthcare can create better outcomes
- Most of the benefits of free markets have not been transferred to healthcare;
- The UK’s centrally-planned system had problems prior to the Covid-19 pandemic, with long waiting times, inefficiencies and patient safety incidents;
- The crisis has brought about comparisons between healthcare systems across the globe – rather than the binary choice between the NHS or the US system;
- Without reform, existing issues will continue to plague health systems in Western countries;
- Further, their funding is likely to require a “substantial increase” in the tax burden as populations age;
- The organisational changes needed to drive costs down and at the same time increase quality and safety – such as economies of scale and high levels of specialisation – have not been implemented to a significant degree under welfare state models;
- “Overly strict regulations” restrict the ability to adopt radical change. The focus is on controlling healthcare costs over the short term rather than “increasing quality and fostering innovation”;
- By contrast, developing countries are not stuck in the Western model. The greater openness of health markets in countries such as India has paved the way for the “Henry Fords of healthcare”;
- Healthcare entrepreneurs show that radical innovation is possible in the sector and they are achieving substantial cost savings and productivity gains;
- Without major reform, however, it would be difficult to introduce a similar approach in Western healthcare systems;
- Large numbers of patients are already travelling to destinations such as Thailand, Mexico and India to avoid long waiting lists or save money. This trend is likely to increase as the problems with welfare-state systems intensify.
A new publication from the Institute of Economic Affairs, by Dr Nima Sanandaji, examines the lessons Western nations could learn from some developing countries in fostering innovation and entrepreneurship in healthcare. Health systems in Western countries are “plagued by inefficiency and productivity growth”: in adopting a new approach they could cut costs, increase quality, and reduce waiting times.
The Henry Fords of Healthcare outlines how, during much of the twentieth century and the beginning of the twenty-first century, Western nations embarked on a policy route in which entrepreneurship was allowed to change the service delivery model of most sectors of the economy, yet healthcare was heavily regulated and thus impeded from enacting change.
In the UK, the private sector has little freedom to change systems of health delivery: it is not allowed to use its greatest strength – innovative, disruptive entrepreneurship – to improve the way health services are offered.
Perhaps, however, it is time to change this attitude – by learning from the Henry Fords of healthcare. Just as Henry Ford revolutionised the process of car manufacturing, so innovative businesses have shown that healthcare provision can be organised in ways that reduce costs and increase quality.
The most successful firms are delivering high-quality mass healthcare at affordable prices – something that eludes Western countries. A common feature of the successful models is their use of an assembly-line approach to healthcare provision, enabling them to capture economies of scale, achieve a high degree of specialisation, and therefore provide a high volume of good quality treatment at low cost.
Without major reform, however, it would be difficult to introduce a similar approach in Western healthcare systems. The funding and organisation of healthcare often gives each local hospital the task of treating a very broad range of conditions, making high levels of specialisation harder to achieve.
Moreover, healthcare systems are frequently organised such that patients receive portions of care from a variety of health providers, which may limit economies of scale.
Even though Western welfare states have so far been relatively closed to entrepreneurship, this might change if policymakers realise that it offers an opportunity to drive down costs and drive up quality, while also reducing waiting times. Allowing more room for a “lightly regulated private sector” would encourage the kind of innovations seen in developing countries.
Growth in health tourism will enable more Westerners to benefit from entrepreneurship and innovation in healthcare, even if regulatory barriers are retained in their own countries. Large numbers of patients are already travelling to destinations such as Thailand, Mexico and India in order to avoid long waiting lists or to save money, and this trend is likely to increase as the problems with welfare-state systems intensify.
Dr Nima Sanandaji, President of the European Centre for Entrepreneurship and Policy Reform, and author of The Henry Fords of Healthcare, said:
“The core innovation of entrepreneurs such as Devi Shetty is high levels of specialisation, with rooms in the hospitals dedicated to fit a particular form of medical treatment. Doctors and nurses similarly specialise in particular treatments, becoming increasingly good at it. The route of the patient through the hospital environment is streamlined, driving down costs while retaining high quality. Healthcare is thus delivered according to well-known lean principles, something not achieved well in Western health systems, which are restricted by overregulation and bureaucracy.”
Latest News from
IEA - Britain’s nanny state continues to expand, finds new international ranking01/06/2023 09:25:00
The UK is among the most authoritarian countries in Europe for food and soft drink, tobacco, and alcohol regulation
IPPR - Government failure to eradicate poverty holds back economy and damages livelihoods, new research reveals31/05/2023 15:15:00
Leading anti-poverty charities publish research showing that ending poverty is not just morally right – it's also an economic imperative
JRF - Sky-high food price inflation shows the corner hasn't been turned for struggling families24/05/2023 16:20:00
Inflation has fallen today but new JRF analysis shows that since inflation began to rise in April 2021, costs have risen by almost a fifth in the last two years. Energy prices have more than doubled, and food prices have increased by over a quarter.
IEA - Sticky inflation could mean higher interest rates24/05/2023 15:20:00
Julian Jessop, Economics Fellow at free market think tank the Institute of Economic Affairs, commented on the latest Office for National Statistics (ONS) consumer price inflation figures
Sunday Times Rich List shows tax reform 'more urgent than ever' says IPPR22/05/2023 10:10:00
Dr George Dibb, head of the centre for economic justice at IPPR, responded to the latest Sunday Times Rich Lis
Faith provides the foundations for free markets, says new IEA book22/05/2023 09:10:00
An upcoming book from the Institute of Economic Affairs suggests that the foundations of a free society can be found in the teachings of the three major Abrahamic religions
IFS - A deepening freeze: more adults than ever are paying higher-rate tax18/05/2023 11:20:00
How many people pay higher rates of income tax? We analyse the large increases in the share of adults paying the 40% rate or above since 1991–92.
IEA - New rental rules risk backfiring17/05/2023 16:20:00
Matthew Lesh, Director of Public Policy and Communications at the Institute of Economic Affairs comments on the introduction of the government’s rental reforms legislation
IPPR - More people are now out of work due to ill health than any other time since records began17/05/2023 15:20:00
Chris Thomas, head of IPPR's Commission on Health and Prosperity responds to the latest inactivity stats in the UK from the ONS showing that 2.55 million people are out of the labour market due to long-term sickness