The+Invisible+Hand+that+Controls+Public+Health+-+How+Privatisation+of+Health+is+a+Win+for+All

Nerida Hart 07376642 Abbey Diaz

The Invisible Hand of the Marketplace, coined loosely just as “the invisible hand”, is a metaphor that describes how through the use of a free market, privatisation regulates itself to produce profits and benefit the interests of everyone (Le Grand, 2007). It was first introduced in 1776 by Adam Smith through his seminal book “The Wealth of Nations”. Smith (1776) explained “the invisible hand” as the process which allows the free market to satisfy one’s own self-interest, while benefiting the rest of society as a result. Milton Freidman, Nobel Prize winner, explains the concept in the short YouTube clip below:

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__How does this relate to public health?__
The Australian public hospital system is currently good, however it does have it short fallings. The latest Commonwealth Fund report “How the Performance of the US Health Care System Compares Internationally 2010 Update” (Davis, Schoen, & Stremikis, 2010), ranks Australia’s health care system as one of the best in the world, however the access to the health care system is one of the worst. One of the major flaws revolves around waiting list times in public hospitals. This topic is often one of the major focuses of the media and politians as waiting lists are often seen as a reflection of the inadequacy of health care funding (Curtis, Russel, Stoelwinder & McNeil, 2010). On June 9 of this year, ABC News put together this report:

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These types of figures are also mirrored in the Australian hospital statistics 2009-2010 report (Australian Institute of Health and Welfare, 2011). They found that the median waiting times for elective surgery increased from 32 days in 2005-2006 to 36 days in 2009-2010, with 90% of patients admitted being seen in 247 days. They also followed on to state that between 2005-2006, the number of admissions for elective surgery from waiting lists increased by average of 2% per year. For public health in Australia to improve, the issue of the waiting times in hospitals needs to be addressed. The use of a privatisation scheme to run the hospitals in Australia is one way to achieve this. Through the concept of “the invisible hand” individual companies will be motivated to treat more patients more efficiently allowing them to make economic profits but also reducing waiting lists to the benefit of society health as a whole.

__Literature review__
Privatisation is defined as the transfer of decision making authority, delivery or financing from a public to a private entity (Gollust & Jacobson, 2006). Such shifts may occur by directly contracting out services to the private sector, or may result indirectly from other arrangements, including partnerships with private sector entities and introducing competitive forces into government services (Gollust & Jacobson, 2006).

In theory, privatisation approaches are based on the premise that the private sector can deliver goods and services more effectively and efficiently than the public sector (Friedman, 1990). Friedman (1990) in his influential works gives examples of how privatisation works not just in health, but in other government provided services. Freidman states that private provision of services gives the consumer the right to choose the services they want. In an effort for the producers to make a profit, they must reduce inefficiency and waste in production, but also produce the best quality product so that the consumer will chose their services over competitors. This competition to win consumers whilst making a profit, drives higher quality products and services which benefit the consumer (Friedman, 1990). This is “the invisible hand” at work.

This ‘invisible hand’ concept is how privatisation can improve hospitals. Private provision would ensue that hospitals would compete against each other so sick people would choose which hospital suits them best to make them better (Drummond, Sculpher, & Torrance, 2005). This would result in higher quality care, but also reduce waste to ensure profits for the hospital overall.

In the current system, the public hospitals are 100% subsidised by the government through the use taxpayer’s money (Le Grand, 2007). Le Grand (2007) follows on to say that the money used by the public hospitals is spent according to the rules of the government beurocracy. In this system, the patient, no matter how much they earn, rich or poor, can be treated with no out of pocket costs by the government. They have no choice in a public hospital in the doctor treating them. In a privatisation scheme, the sick would chose which hospital and doctor they wish to attend, that hospital would then be given money by the government to complete the health services required (Friedman, 1990). This ‘voucher system’ can be means tested. This means those who are poor get their medical services subsidised in full, but those who have higher incomes only get part of their services paid for, the rest needing to be paid out of their pocket, or via private health insurance. Milton Friedman explains this same concept, albeit in a different government provided service, in the short clip below.

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The literature in public health puts this theory into practice by investigating the effects privatisation has on the healthcare system. Keane, Marx and Ricci (2001) found that health directors reported improved patient care, and hospitals had better doctors and nurses operating with greater efficiency if health services are provided by motivated organisations compared to the bureaucracy and inefficiency of the government system. Atun (2008) followed on from this by looking at evidence-based policies and what that meant for public health. He found that the privatisation of health lead to reduced administrative and financial burden for the public services, greater value for money and enhanced innovation within the health services.

Through the privatisation of health care, the length of waiting lists will diminish. Creating this competition based market where privately operated hospitals compete against each other, creates efficiency and increases the quality of service provided. The goal of the hospital is to create profits, and via the work of “the invisible hand” this counter intuitively benefits the patients (Friedman, 1990). Just like a good butcher will offer the best cuts of meats to his customers to guarantee their return service; hospitals attempt to offer the best health service. By providing a good, in demand service private enterprise benefits consumers while creating a profit for themselves (Le Grand, 2007). Each hospital’s wait list be shorter as hospitals will operate more efficiently to heal as many patient’s as possible to make the most use of the hospital’s assets.

A prime example of private provision of health care is The Netherlands who have privatised their heath care requiring all residents to have some form of private health insurance, the cost of which is dependent on the resident’s income (Rosenau & Lako, 2008) The Dutch health insurance reform includes guaranteed issue, price competition for a standardised basic benefits package, continuous community ratings, income-based subsidies for patients, and risk equalisation for insurers (Rosenau & Lako, 2008). In 2008, the Netherlands healthcare system was rated the best in Europe by the annual Euro Health Consumer Index based on patient rights, information, waiting time and choice of treatment (Health Consumer Powerhouse, 2008).

Adding to this, Schoen and colleagues (2007) compared health care experiences in seven countries. Phone interviews were conducted on 12000 participants in Australia, Canada, Germany, The Netherlands, New Zealand, the UK and the US. Such a high sample size, although could lead to recording errors, decreases the chance that the results were found by chance. Schoen and colleagues (2007) found that in the Netherlands 59% of people were very confident of high quality care, whereas in Australia, only 34% were very confident (Figure 1). Looking at this from the opposite angle, in the Netherlands 5% were not confident in the health care system, compared to 20% in Australia. Similarly, in Australia, they found 26% didn’t access health care due to cost, whereas in the Netherlands only 5% said they didn’t seek health due to cost (Figure 2). Waiting times in hospitals were also compared. In Australia, it was found that 34% of patients had to wait 2 hours or more for treatment in an emergency ward, whereas in the Netherlands, only 9% had to wait past the 2 hour mark (Figure 3) (Schoen, Osborn, Doty, Bishop, Peugh & Murukutla, 2007).





__Cultural and Social Analysis:__
The government’s job is to make people better when they are sick, not to run hospitals (Friedman, 1990). The (little “l”) liberal philosophy is to use the money allocated by the government to provide health care in a better way. That is, to get more people healthy using the same resources and provision the subsidies privately, rather than through the typical government beurocracy. (Drummon, Sculpher, Torrance, 2005). This is why the Liberal Party policies favour private provision and increased private health care. It would not be politically available to have a platform of total privatisation. Jensen (2011) completed a study that investigated the feasibility for right wing health politics to come to power in advanced nations, including Australia. He found that complete privatisation would not be accepted from the social movement due to misconceptions. He proposed that the right-wing politicians must match the left wings policies in some areas, but to encourage the support of privatisation so that privatisation is perceived as less of a threat and in turn for the public good. Once this is established, the implementation of privatisation can continue to progress (Jensen, 2011).

Tony Abbott in his Daily Telegraph Blog on the 27th of May this year stated that the coalition will work with the states to establish community hospital boards, so that each major hospital is accountable to the people it serves (Abbott, 2011). The board will appoint the hospital CEO, and set the budget on the needs of the community, not simply by what is deemed appropriate by the government bureaucracy. Hospitals will be funded on an “efficient” price basis, so that there will be an incentive to provide more services rather than simply to cut costs. This will be done through the states allowing the federal government go be the sole funder of hospitals – the basis of one of the coalitions prime healthcare policies (Liberal Party of Australia, 2010).

This way, the hospitals will be nationally funded, but locally run – just like the privatisation theory. This is an effort to introduce an “invisible hand” into the running of public hospitals as an attempt to have them operate as if they are privately motivated enterprises (Le Grand, 2007). This development of a community controlled hospital system will use the local doctors and nurses and local community who know the hospitals and situations best to help make managerial decision making better to improve the accountability and responsiveness of local hospitals instead of leaving that to the beurocrats down in Canberra who are removed from the public hospitals like it is under the current Labor government.

__Analysis of Artefact:__
The “invisible hand” represents much more than the privatisation of public health. It is a way of understanding how privatisation works to benefit the people, whilst still providing profits for the market. This concept is often misconstrued and misinterpreted, so the privatisation of health care is seen in a negative light. Providing insight into how privatisation works can hopefully reduce the stigma attached to privatisation as a whole. To understand that privatisation is not an end of universal health care as we know it, but just a different way of subsidising the services will only benefit Australians overall. This way the voters can make informed decisions about how they believe the public health system should be provisioned in the future.

Completing this analysis of “the invisible hand” and how the privatisation of health care works has completely changed my way of thinking. When originally thinking about the privatisation of health, I had preconceived notions that it would not be fair for all, those who cannot afford health care would not be treated, and the system would be focused solely around profits instead of patients. These ideas were based around the poor current state of the United States healthcare system rather than the successful Netherlands operation. Now however, I see that through “the invisible hand” privately provisioned health care system care about their patients, even if unintentionally, through a competition based market to provide high quality and efficient based health care. I have come to understand that this angle is not a dismantling of universal health care as we know it, but simply a changing of provision from government beurocracy to privatisation model. This still enables those less fortunate to have their complete health care costs covered but in a more efficient way.

Such a shift in thinking urges me to challenge my preconceived notions about other areas of debate and think critically about both sides of an issue instead of basing my opinions on predetermined beliefs.

__References:__
Abbott, T. (2011). Live Chat with Tony Abbott. //Daily Telegraph Blog.// Retrieved from []

Atun, R. (2008). Public-private partnerships in health: Time for evidence-based policies. //Heart, 94,// 967-968.

Australian Institute of Health and Welfare (2010). //Australian Hospital Statistics 2009-2010//. Retrieved from []

Curtis, A. J., Russell, C. O. H., Stoelwinder, J. U., & McNeil, J. J. (2010). Waiting lists and elective surgery: Ordering the queue. //Medical Journal of Australia, 192(4),// 217-220.

Davis, K., Schoen, C., & Stremikis, K. (2010). //Mirror, mirror on the wall: How the performance of the U.S. health care system compares internationally.// The Commonwealth Fund, retrieved from []

Drummond, M. F., Sculpher, M. J., & Torrance, G. W. (2005). //Methods for the economic evaluation of health care programmes//. New York: Oxford University Press.

Gollust, S. E. & Jacobson, P. D. (2010). Privatization of public services: Organisational reform efforts in public education and public health. //American Journal of Public Health, 96(10),// 1733-1739.

Health Consumer Powerhouse (2008) //Euro Health Consumer Index 2008.// Retrieved from []

Jensen, C. (2011). Marketization via Compensation: Health care and the politics of the right in advanced industrialized nations. //British Journal of Political Science, 41,// 907-926.

Keane, C., Marx, J., Ricci, E. (2001). Perceived outcomes of public health privatization: A national survey of local health department directors. //Milbank Quarterly, 79,// 115-137.

Le Grand, J. (2007). //The other invisible hand: Delivering public services through choice and competition//. Princeton, NJ: Princeton University Press.

Liberal Party of Australia (2010). //The Coalition’s plan for real action on hospitals and nursing.// Retrieved from []

Friedman, M. (1990). //Free to choose: A personal statement.// San Diego: Harcourt Brace Jovanovich.

Rosenau, P. V., & Lako, C. J. (2008). An experiment with regulated competition and individual mandates for universal health care: The new Dutch health insurance system. //Journal of Health Politics, Policy and Law, 33(6),// 1031-1055.

Schoen, C., Osborn, R., Doty, M. M., Bishop, M., Peugh, J., & Marukutla, N. (2007). Toward higher-performance health systems: Adults’ health care experiences in seven countries, 2007. //Health Affairs, 26(6),// 717-734.

Smith, A. (1776), In Smith, A, & Edwin, C. (2010). //An inquiry into the nature and causes of the wealth of nations// (1904th edition). Chicargo: University of Chicago Press.

__Learning Engagement:__
//“If you let me play sports, I’ll learn what it means to be strong”//

Who would have thought a corporation such as Nike would highlight the controversy surrounding women sports. After looking at this one Nike advertisement, I couldn't help but continue on via YouTube to see their other campaigns to promote women's sports.

With so many benefits of women playing sports, it is just sad to see it so suppressed. How we go about changing the ideas and preconceptions of mainstream sport is such an overwhelming task. There are too many stereotypes to break down and too much money in male sport to compete against it.

It seems that the only way that women's sport will continue to grow is if the women of the future help stand up to their rights and hopefully with the help of corporations such as Nike, women's sports can be brought forward.

//“Faceless”//

I really like the direction you have taken with your artefact. You are right in saying that the image promotes thought. To me, the image is quite confronting - but that is nothing compared to how Mental Health is being dealt with by the politicians and Australia as a whole.

The Commission into Mental Health is definitely a step in the right direction, but is that enough? Despite campaigns in the public through beyondblue.com.au, and R U OK?, I think the taboo in the subject of Mental Health is still overwhelming to the majority of Australians.

Mental Health will impact most people one way or another, either through their own dealings or via friends and relatives. I think as time goes on we will accept that, which will make the issue easier to deal with, but until then, we can only take one step at a time