Public Management in Health Care Reform: Germany and Britain - Essay Example

COMPARISON OF THE ROLE OF NEW PUBLIC MANAGEMENT IN HEALTH CARE REFORM IN GERMANY AND THE UNITED KINGDOM FROM THE 1980s Introduction New PublicManagement is the change to professional management in the public sector with more clearly defined standards and measurement of performance, greater emphasis on outcomes than input, disaggregation of units in the public sector, greater competition and contract-based delivery of services, adoption of private sector management practices and judicious use of resources (James, 2001: 15). In the health care sector, reforms are distinguished by organizational changes such as the establishment of an internal market and consumer-based improvements which are in alignment with the concept of new public management. The planning of health care reform by the New Public Management (NPM) emphasized several targets including public/ private partnerships and a concern for quality through total quality management (Thomas & Lakhani, 2006: 141). Most reforms and improvements in the health care sector were based on NPM principles and took place during the late 1980s and 1990s, which was the decade of the welfare state retrenchment. New public management principles were considered to be more appropriate for analysing health care reforms than other concepts like privatisation, though NPM emphasizes “both market-based reforms and the use of private management styles in the public sector” (van Essen, 2005: 3). Since the Second World War, two main types of health care systems have developed in Europe. Firstly the national health service type that is present in the United Kingdom, and secondly a corporatist, insurance-based type of health care system as found in Germany (van Essen, 2005: 7). The purpose of this paper is to compare and contrast the role of New Public Management in health care reform in Germany and the United Kingdom from the 1980s onwards. Discussion Health care is not only highly valued by all individuals in society, it is also a social right. Hence, there is a requirement for equal accessibility of health care for all citizens, without exclusion. The undesirability of exclusion and market failures in financing and provision give legitimacy to state intervention in health care. Thus, in order to solve the market failures in health care and and to ensure universal, equal access, two different systems are developed in Europe. In the United Kingdom’s National Health Service (NHS), providers are mainly public organizations; for example most hospitals in the U.K. are led by the local governments. On the other hand, in the insurance-based system found in Germany, hospitals and other health care providers can be both public and private organizations. For instance, German hospitals are voluntary organizations which operate on a private basis (van Essen, 2005: 10, 12). The Differences in the Health Care Systems of the United Kingdom and Germany The National Health Service (NHS) of U.K. provides equitable health care to all members of society without any discrimination. The state is the main funder for services; hence benefits are public, and the central government sets the NHS budget. The state also delivers health care through its hospitals, where it has the responsibility of administration, based on its ownership. In the state-administered framework, the organized medical profession, particularly the British Medical Association had a privileged role in formulating and implementing health policy, sharing these responsibilitie with ministerial bureaucrats and NHS managers; which integrated to form a hybrid of “statism and corporatism” (Giaimo & Manow, 1999: 970). The hierarchical command structure in the NHS served as an ideal instrument through which the government created and shaped the market in the NHS. The move towards greater managerialism and upward accountability began in the early 1980s; and the 1989 reforms strenghened its progression. Vigorous state intervention and guidance became necessary to resolve extensive technical problems in the creation of a market from scratch (Giaimo & Manow, 1999: 973-974). The Health Care System of Germany is found to have unique features. German social insurance is employment based, with employers and employees paying equal shares of insurance contributions. In health care, the main actors are: “insurance funds known as sickness funds which are based on occupational or status groups, corporate actors such as the organized medical profession, and employers’ associations and trade unions who jointly staff the administrative side of social insurance” (Giaimo & Manow, 1999: 976). Insurance funds and physicians’ associations have the same status as public law bodies, which allows them a privileged legal status and an almost complete monopoly in social welfare provision. At the same they are constrained to fulfill certain public functions. Limited to this framework, the state sets the procedural rules and the goals of social policy in framework legislation, while depending on these societal actors to dispense the social insurance system with a high degree of independence and autonomy, through the principles and practices of self-administration. Ideological Differences There is a slight ideological difference between the two types of health care systems. In the German insurance-based system characterized by solidarity and universality, all citizens are provided universal access to a core of affordable health care. Contrastingly, in the U.K., the national health system provides specific health care services according to the need and ensures access to necessary health care regardless of the ability to pay (Scott 2001: 122-3). Although health care is considered to be part of the welfare state, the health care institutions do not represent the welfare institutions, especially in the United Kingdom. The NHS was set up by the Labour Party as part of a project of public ownership. Although the Conservative Party evaluated the NHS critically, the organizational structure of the health service was not questioned until the 1970s. Concurrently, Christian-democratic parties have headed the German government in the twentieth century, which explains the German insurance-based principles that are distinguished by corporatist, self-reliance principles. The different institutional structures of the two countries affect the start positions of the reform processes in health care, initiated and implemented by the New Public Management (van Essen, 2005: 11). The extent to which equity is considered as a policy goal by the political parties directly impacts the different political ideologies, which may be reflected in the health care systems. The new public management is believed to improve equity, according to some authors (Harrow, 2002: 148). On the basis of efficiency and effectiveness gains, NPM enables the health care system to incoporate higher levels of equity goals. Further, its focus on accountability and transparency of service helps to improve the quality of its service. On the other hand, NPM may lead to less equity in health care, according to several authors (Hessel, 1998: 27). In this case, it obstructs the solidarity of the economically weak, which adversely impacts people’s concern for the community in general, moving beyond their own self-interest. Change in the extent of equity may lead to political contestation of the health care reforms. New Public Management Reforms in the Health Care Sector In the health care sector, both components of NPM: market-based reforms and private management styles, gave rise to new ways of contracting between providers, purchasers or organizations that arrange access to health care, funders and customers. These contracts are distinguished by competition and new management styles. The main advantages of contracting are: decentralized management by which providers and lower level managers get more decision making authority and greater responsibility, increased monitoring and evaluation of performance, improves the planning of health care development, and by separating the functions of purchasing from the functions of provision of care, contracting can overcome the dominance of providers over consumers and payers (Savas et al, 1998: 157-160). The health care systems of the national health service and the insurance-based system developed their own contracting lines. The NHS of U.K. was designated by direct command and control lines between the government and the health care providers: hospitals. The insurance-based system in Germany was characterised by mostly independent purchasers such as hospitals, sickness funds and insurance companies. The way in which NPM impacts power relations is illustrated by the new way of contracting which changes the decision-making authority among the actors or stakeholders (van Essen, 2005: 13). Possible Contracts Between Actors in the Health Care Sector (van Essen, 2005: 14) New Forms of Contracts in U.K.’s National Health Service Before the health care reforms, a command and control system was prevalent in the NHS, denoting state intervention in the health care system. The state was the third party payer and health care providers such as hospitals were publicly owned. With the changes brought about by NPM reform, the hierarchical lines were replaced by contracting between purchasers and providers which are independent organizations. For example, with the reforms implemented in the U.K., the District Health Authorities (DHAs) are the first type of purchasers in the changed system, and they are required to contract with competing private and public hospitals and other health care suppliers (Flood, 2000: 95). The purchaser-provider split that characterises the health care reforms in the United Kingdom demonstrates how decision-making authority has shifted from the providers such as hospitals and health professionals to the purchasers. “Although hospitals have become self-governing trusts their decision-making authority has declined” (van Essen, 2005: 15). DHAs are not forced to cooperate with them and can set the standards. Patients’ choice is limited for a General Practitioners’ funder which enables services for patients with hospitals and other health services. Comparatively, choice for health insurance in Germany is more widely available. Health Care Contracting in Germany In the insurance-based health care system, contracting based on hierarchical lines already existed between customers, sickness funds/ insurance companies and the providers. Most contracting in Germany were not competition based since sickness funds were obliged to contract with every provider and people were not allowed to select the sickness fund that they felt was most appropriate (van Essen, 2005: 18). In the 1990s, state intervention and reforms in insurance-based systems was distinguished by the regulation of insurance companies, sickness funds and to some extent, health care providers. NPM reforms focused on reducing the dominance of health care providers, and promoting sickness funds to contract selectively with health care providers, which would result in the health care providers becoming more accountable to the sickness funds/ insurance companies. When citizens were able to choose among sickness funds/ insurance systems, these organizations became more accountable to the citizens. Competition among the sickness funds promoted quality and reduced costs through incentive for efficiency. Further, “sickness funds were no longer obliged to contract with all health care providers, and became more responsible for their own financial results” (Gress et al, 2002: 239). Decision making is based on the fact that Germany has a federal structure of political system, and health care is both a responsibility of the different Lander as well as the political state. Germany and U.K.: Roles Accorded Different Actors in Financing and Providing Care, and Their Definition of the Health Care Problem In Germany, reform debates were characterized by giving prominence to the problem of high labour costs because of the employment-based nature of social insurance. In recent years, employers have argued that “their social insurance contributions are so high that they have rendered German industry uncompetitive in the global economy, and have made Germany a hostile place to invest” (Giaimo & Manow, 1999: 977). Though employers were calling for some relief in financing health insurance, they have shown continued interest in retaining their influence in the health care system and in the entire system of social insurance that the corporatist system of social insurance permitted them. In contrast to the system in Germany, health care costs in Britain were not managed by employers as the main actors. The reason is that the British NHS accorded the state the responsibility for financing health care, rather than the employers. Thus, the health care debate in the 1980s and 1990s was not distinctlyy conducted in terms of the relationship between the health service and economic competitiveness, though the public sector’s effect on economic performance was a concern of the Thatcher government. There was greater focus on the internal performance failures of the NHS, the proper role of the state, market, and the professions in the welfare state, by the health care debate and the Thatcher government’s reform solution (Giaimo & Manow, 1999: 970). Some Common Factors in the NPM Reform of Both Health Care Systems: U.K. and Germany A common factor is that the governmnents of both the United Kingdom and Germany have aimed to change the relationships between the actors in the healthcare sector (Scott, 2001; Maarse, 2004). Changes in the health care sector is explained from critical junctures or incremental processes towards a market-based health care system. Health care reforms are undertaken when governmental failure becomes evident and the causes are explicitly identified. The reasons could be critical junctures such as actual, direct fiscal stress which have to be indicated clearly by politicians or other actors; or could be less critical fiscal problems. This underlines the importance of politics as well as that of institutions. Another similarity between health care reform in U.K. and Germany is that NPM replaced the command and control state intervention in the financing and provision of health care by contracts between the different actors, thus changing the institutional relationship between actors (van Essen, 2005: 18). Further, in both countries the same ideas about failures and solutions in the health care systems, are observed. More than the institutional settings, changing the existing power structure may be the underlying cause for the retardation in health care reforms. The use of private management styles may cause competition instead of cooperation. Thus, increased self-interest among actors, with reduced solidarity impacts equity in the provison of health care. For example, if purchasers or sickness funds refuse contracts with hospitals, this could make health care unavailable for certain groups. In all advanced, industrialized countries welfare states are under severe financial stress, with health care constituting a major part of social spending. In response, the governments were believed to unite in an approach towards marketization and privatization of social risks which ultimately result in the disintegration of solidarity. However, recent health care reforms in Britain and Germany are observed to prove this argument to be wrong, because each country has implemented a different reform in response to the financial pressures, combining markets with other policy initiatives. Further, in the construction of health care markets led by state actors, the extent of desolidarity is limited. The structure of each nation’s health care system influences the policy preferences and reform strategies of key actors. This is important in explaining the difference and distinctiveness of health care reform patterns in the U.K. and in Germany. (Giaimo & Manow, 1999: 967). Another similarity is that both the countries’ health care systems correspond to two of Esping-Anderson’s (1990) ideal-type welfare regimes. Although Britain is considered to be a liberal welfare state, its National Health Service “with its tax financing, state provision, and claims to benefits based on social citizenship, corresponds closely to Esping-Anderson’s social democratic model”. On the other hand, Germany’s health care system represents Esping-Andersen’s corporative regime, in which “benefits are provided on the basis of membership in an occupational or sickness fund, and corporatist actors administer the system on the state’s behalf” (Giaimo & Manow, 1999: 968). The two countries have taken distinctive paths to reform, constituting different mixes of market forces and other policy implementations. Britain imposed a market into its state-administered health care system, whereas Germany opted for a more mixed group of factors towards cost curbing policies including a careful use of market forces and greater state intervention, but also using the tried and tested rules of associated self-governance. Governmental Regulation to Supplement NPM in the United Kingdom and Germany The 1980s and the 1990s were characterized by centrally directed New Public Management reforms to utilize private sector organizations to deliver public services, introduce more competition and marketization in the public sector and develop health care actors that focused on outcome. Current reform efforts in the United Kingdom are identified as a move towards “regulated partnerships in a post-New Public Management reform era” (James, 2001: 23). Regulation helps to coordinate decentralised systems with lighter governance from the centre and selective intervention only in the worst cases of poor performance. Thus, the development of the new Commission for Health Improvement in Health and Best Value Inspectorate has helped to promote the cause of consumers while at the same time to maintains strategic health care operations. In the view of Prime Minister Blair, “Best Value” was a demanding framework helping councils to be efficient, supervising the quality of health care and contributing to a “one nation” health service in the U.K. In Germany, most of the health care reforms that the federal government introduced after the late 1970s were for the purpose of cost containment through a policy of maintaining contribution stability, restructuring of medical financing, and the restructuring of the statutory health insurance (SHI). During the 1990s, health care reform was prominent in the German political agenda, based on new public management’s pursuit for promoting enhanced health care systems in Europe. “Various reform legislation and regulatory interventions addressed different aspects of German statutory health insurance” (Altenstetter & Busse, 2005: 121). The first phase of reform measures were introduced in 1989 with the Health Care Reform Act by the conservative Kohl government, followed by the Health Care Structure Act in 1993. This policy helped the government to introduce a further package of reforms to counter rising unemployment and to curb increasing health care expenditure. The implementation of these reforms impacted fundamental changes in the structure of the health care system, improved equity, promoted cost containment measures, and strengthened the position of sickness funds in their relations with hospitals and other health care providers (Beil-Hildebrand, 2002: 318). The Green coalition in 1998 adopted the Act of 1993, and in 1999, the coalition enacted the SHI Reform Act of 2000 (Altenstetter & Busse, 2005: 121). Conclusion This paper has compared and contrasted the role of New Public Management (NPM) in health care reform in Germany and the United Kingdom from the 1980s onwards. All aspects of the health care systems of the two countries have been examined. Both the countries are found to share the same broad goals for their health care system: universal and equal access to reasonable health care, maintaining health care costs at an affordable level, and the effective use of resources. The relative importance given to each goal differs between the United Kingdom and Germany, depending on the country’s health care framework and governmental regulations. In the U.K. and Germany, “the governments have vigorously intervened in their health care systems, leading the reform process and actively shaping market forces in health care” (Giaimo & Manow, 1999: 992). Alongside market forces within the NHS, Britain has seen more sustained state centralization of its administrative structures. State intervention in the market in both countries has been necessary to prevent market failures and to overcome opponents of reform. New forms of contracts in U.K.’s NHS has been contrasted with health care contracting in Germany. Similarly the roles accorded to different actors in financing and providing care, their definition of the health care problem, similarities and common factors found in the NPM reforms in both countries, and governmental regulations to supplement the New Public Management reforms have been discussed. References Altenstetter, C. & Busse, R. 2005. Health care reform in Germany: patchwork change within established governance structures. Journal of Health Politics, Policy and Law, 30 (1-2): 121-143. Beil-Hildebrand, M. 2002. Going to market: the German health care reform experience. Policy, Politics and Nursing Practice, 3 (4): 313-324. Flood, C. M. 2000. International health care reform : a legal, economic and political analysis. London: Routledge. Giaimo, S. & Manow, P. 1999. Adapting the welfare state: the case of health care reform in Britain, Germany and the United States. Comparative Political Studies, 32 (8): 967-1000. Gress, S., P. et al. 2002. Free choice of sickness funds in regulated competition: evidence from Germany and The Netherlands. Health Policy, 60 (3): 235-254. Harrow, J. 2002. New Public Manangement and social justice: just efficiency or equity as well? In New Public Management: current trends and future prospects. K. MacLaughlin, S.P. Osborne & E. Ferlie (Eds). London: Routledge. Hessel, B. 1998. Market efficiency, equity and the future of the welfare state: a contribution to an interdisciplinary discussion. In Market efficiency versus equity. B. Hessel, J. Schippers and J. Siegers (Eds). Amsterdam: Thesis Publisher. James, O. 2001. New public management in the U.K: enduring legacy or fatal remedy? International Review of Public Administration, 6 (2): 15-26. Maarse, H. (Ed). 2004. Privatisation in European health care: a comparative analysis in eight countries. Maarssen: Elsevier Savas, S., Sheiman, I. et al. 1998. Contracting models and provider competition. In Critical challenges for health care reform in Europe. R. B. Saltman and J. Figueras (Eds.) Buckingham: Open University Press. Scott, C. 2001. Public and private roles in health care systems: reform experience in seven OECD countries. Buckingham: Open University Press. Thomas, P. & Lakhani, M. 2006. Integrating primary healthcare: leading, managing, facilitating. The United Kingdom: Radcliffe Publishing Ltd. van Essen, A.M. 2005. Theorising the political controversy on the emergence of new public management in health care reforms. Paper prepared for the Young Researchers’ Work- shop: The Governance of Social Policy in the New Europe, April 1-2, 2005, University of Bath, The United Kingdom. Available at: http://www.bath.ac.uk/eri/events/EVENT05- ESPANET/ESPAnet%20school/Bath%20YRW%20van%20Essen.pdf Read More