The internal market in the NHS never really happened first time round, so it's time to give it another go, its champion tells Lyn Whitfield

Back in the late 1980s, as the Conservative government was casting around desperately for an outcome to the prime minister's review of the NHS, it came across the ideas of Professor Alain Enthoven.

The Stanford University academic and consultant to Kaiser Permanente, the largest health maintenance organisation in the US, had visited England in 1985.

His subsequent Reflections on the Management of the National Health Service, published by the Nuffield Trust, put forward an 'internal market model' and suggested the use of HMOs.

The rest, as they say, is history.

More than a decade later, with a Labour government loudly proclaiming the end of the internal market and all its works, Professor Enthoven has been back.

His latest conclusions, again published by the Nuffield Trust, reflect what is rapidly becoming received wisdom: the internal market never really was.

Essentially, Professor Enthoven argues that the public continued to 'hold the government responsible' for health services, so purchasers never had the 'political space' to drive poor providers out of business.

He finds that although the NHS is managing the 'remarkable achievement' of delivering care for 'everyone' for less than 6 per cent of gross domestic product, it is under pressure from the oft-cited trio of an ageing population, new technologies and rising expectations.

He also argues that there is a 'crisis of confidence in quality' which demands the introduction of 'continuous quality improvement' - 'an integrated management philosophy' used by big business - along with much better audit.

Doubting 'that it is possible to create and sustain a culture of innovation, efficiency, and good customer service in a public sector monopoly', Professor Enthoven suggests 'a good way forward' would be to reinvent the internal market.

Assuming there is 'no obvious or easy source' of extra funds, he suggests 'people who are willing to pay for better services' should be allowed to do so through insurance schemes part-funded by the government.

These are ideas to cheer the Right in English politics - although Professor Enthoven insists, as he did in the 1980s, that they are not prescriptions, and any change should be piloted first.

The Daily Mail published its own magpie-pickings list of '20 Ways to Save the NHS' two days before Professor Enthoven's book emerged. Number four was to turn hospitals into voluntary trusts with a 'Richard Branson wing' or 'Alan Sugar operating theatre'.

Number 20 was to let people 'opt out' into part-government-funded insurance policies.

But a number of questionable assumptions lie behind the ideas - putting aside the issue of whether HMOs have been such a great gift to US healthcare that Britain should rush to embrace them.

Is it really a surprise that the internal market did not have 'political space' to operate in, when the British public (unlike its US counterpart) rather expects its politicians to be involved with hospitals and schools? And if this were to change, wouldn't Britain be a rather different country to the one it is now?

'Maybe, ' Professor Enthoven mused in an interview with HSJ last week. 'But if you read the white paper Modernising Government, (the government) is talking about buying from the private sector and consumer choice, and that is pretty radical. Maybe they do not understand the implications of what they are saying.'

There is not much about the private sector in The New NHS white paper. Or 'consumer' choice.

And perhaps there are good reasons for that. Do people really want to swap their GP for an HMO operative? Or become rampant consumers in the way managed competition models suppose?

'It is a free country, ' says Professor Enthoven, a slight figure with a diffident demeanour that masks the dogmatism of some of his statements. 'But there have been huge changes in 50 years, and the younger generation is increasingly going to wonder: 'Why can't I be treated by the NHS as well as I am treated by Boots or in France?' And why is health secretary Alan Milburn saying modernisation, modernisation, modernisation?'

Perhaps because he wants to see the public sector model of healthcare improved and to encourage taxpayers to stick with it.

And is there anything that makes the public sector inherently unable to deliver, leaving privatisation in one form or another as the only way forward? Professor Enthoven has no faith in 'top-down modernisers', citing as examples Peter the Great and Kemal Ataturk - 'not the sort of people you would want to dinner'.

Innovation, he believes, must come from the grassroots and 'if we look around the world we have a decentralised system with lots of room for innovation and it is called the USA'.

In his book, Professor Enthoven acknowledges that one of the main problems with the insurance idea would be 'that the government would frankly be adopting a policy of multi-tierism'.

But he argues that there are two views of fairness. In one 'no-one should ever get more than anyone else' and 'anyone who gets out in front must be pulled down: as happened with GP fundholders'.

In the other, 'everybody gets a decent basic standard of care' but after that people can pay for better treatments or shorter waits. Not surprisingly, Professor Enthoven is not a supporter of the 'strict egalitarian ethic'. In his interview, he also insists that it is not true that the 46 million Americans without cover 'die on the street'.

He counters that 47 per cent of healthcare is funded by the government, through Medicare and other schemes.

So why not go the whole way, and let the government pay for all of it? 'Because we are a different country, ' he says. 'We are a country founded on a tax revolt and there is still a profound distrust of government.'

He would like to see everyone in the US insured, with vouchers to make poorer people attractive members of schemes and users of hospital services.

Whatever the economic argument, Professor Enthoven sees market solutions as the way forward because he does not like government or understand the public sector and the attitude of a public that puts up with the NHS. Those who sympathise are likely to welcome his ideas - those who don't, won't.

'One way forward' Reinvent the internal market Let primary care trusts evolve into competing HMOs to 'create competition at the consumer level'.

Privatise NHS hospitals as non-profit voluntary hospitals.

Examine strategies that 'allow people willing to pay for more and better services to do so'.

Arrange for everybody to be covered by non-governmental health insurance organisations.

Let the government pay into low-priced plans that people could top up for better services.

Challenging the establishment - but where are the alternative solutions?

Nick Bosanquet, professor of health policy, Imperial College UK health economists live mainly by the 'why' question of the special case for the NHS: they have had little to say about the 'how' question of getting delivery on all these aspirations. Alain Enthoven has faced up to these unpopular 'how' questions with a great deal of persistence and courage.

His 1985 Nuffield paper was the most accurate picture of an old NHS, now lost in the mists of nostalgia. In his new book, Professor Enthoven has challenged the establishment view on the NHS reforms.

He shows first that the maligned internal market was a terrifying totem like the bundle of sticks in the Blair Witch Project , but hardly existed at all, at least after 1994.

The key reforms were trust status, information and, above all, fundholding.

The new NHS has an unacknowledged, but more or less total dependence on the disciplines set by the 1990 reforms, above all in the links between expenditure and activity.

For the future, Professor Enthoven supports the new emphasis on quality but he hints at a need for new incentives.

His 'how' for 1999 stresses greater pluralism and bottom-up innovation.

Nigel Edwards, policy director, NHS Confederation It would be difficult to disagree with a view that the UK needs to adopt continuous quality improvement and spend a very large amount more on healthcare, IT and management.

But Alain Enthoven fails to make the case that this extra money has to come from top-up insurance or that the only way to decide how it should be spent is through markets. Given his excellent analysis of why the internal market failed, this is surprising.

Much of the additional money his proposals would raise would go on creating a market infrastructure and the large amount of spare capacity needed to create competing delivery systems.

He assumes that this represents a much better investment than spending on more services, reducing the workload of our overstretched staff, increasing the level of expertise in the system and supporting it with appropriate technology.

Professor Enthoven's analysis raises some important questions, but does not pretend to offer solutions. He suggests debate, pilot schemes and further thinking, and certainly not the rootand-branch reform that followed his last work in the UK. He has got that part of his analysis absolutely correct.

David Hunter, professor of health policy and management, Nuffield Institute for Health, Leeds University Alain Enthoven makes two important points: the NHS does suffer from an anachronistic, centralised and politicised management structure and the 'big bang' approach to health sector reform is a mistake.

But on virtually every other point he is profoundly mistaken. The book is a rather tired replay of the procompetition market mantra and the alleged superiority of market incentives over any other system of improving quality and performance.

Private markets, which Professor Enthoven clearly favours, are fundamentally inconsistent with universal, publicly funded systems.

Devising some sort of 'third way' between them is no solution.

Indeed, the cure risks killing the patient and could result in the demise of the NHS. But that may be precisely the outcome desired by those who share an aversion to public monopolies.

Rather than build on the NHS's success, which causes them great discomfort, market romantics like Enthoven wish to dismantle it. Why are they getting a hearing when they have so little of value to offer?

In Pursuit of an Improving National Health Service . The Nuffield Trust, 59 New Cavendish Street, London W1M 7RD.£15.