Miliband’s NHS “cap” won’t work

If he becomes Prime Minister, Ed Miliband says he would curtail the involvement of private suppliers of clinical services to the National Health Service, by reducing the number of contracts awarded.

He’s quoted as saying that this is because the “the money we pay for our health care should be invested for patient care not for excess profits for private firms”.

Mr Miliband has vowed that a Labour government will scrap the Coalition’s market framework for the NHS and stop “the tide of privatisation”. He says a Labour government would impose a “standard rule” five per cent cap on the profit that private companies can make on outsourced healthcare contracts for clinical NHS services worth over £500,000.  Back office services are not included in this proposal.

Under Labour’s plans, NHS commissioners would also be empowered to lower or raise this cap in order to take account of particular issues relating to individual contracts.  But any company that made more than 5% from their contract could be forced to reimburse the difference to the NHS.

Mr Miliband also pledges that under a Labour government, the NHS would become the “preferred provider” for all services. Private firms would be blocked from “cherry-picking” lucrative treatments and the number of private sector contracts for the NHS handed out would fall.

The question that needs to be asked is exactly how Labour would impose such a cap on each company’s profits, which sounds completely unworkable in reality. It’s hardly surprising that they haven’t explained exactly how this would work in practice. In general, users of the NHS don’t care where their care comes from as long as it’s timely, effective and free to them.  A limit on the supply of clinical services could pile on even more pressure to an already over-stretched NHS.

One unwelcome result of the cap could be the withdrawal of private suppliers of clinical services from the tendering process, resulting in less choice for NHS managers trying to select the best supplier for the service required. Such contracts often need up-front investment in equipment and staff training, which can be delivered only with a sufficient profit margin that takes account of those costs and risk.

In our view, a decline in the number of private suppliers willing to bid for NHS clinical services, combined with growing demand for care from an ageing population, is a recipe for disaster. Mr Miliband needs a re-think and soon, if he wishes to secure the votes of those who care about health services provision.

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