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Does EU competition law apply to the NHS?

Surpluses (and deadweight loss) created by a m...

If only it were that simple!

The current debate in the UK, specifically England, on reforms of the publicly funded health service have raised the red-flag of privatisation. Hostility has centred in the main on private firms offering health services and the scope and meaning of ‘any willing provider’.  Signals from politicians are confusing given they are walzing back and forth across the dancefloor depending on criticisms. Indeed, there appears to be some risk that dance partners may change, as the Lambs, for instance, change sides to avoid slaughter in the arena of public opinion. Such self-interested face-saving aside, is there an issue to answer here?

Article 106(2) TFEU as a general interest exception: which involves invoking public interest grounds, specifically, “undertakings entrusted with the operation of services of general economic interest … shall be subject to the rules contained in this Treaty … in so far as they application of such rules does not obstruct the performance … of the particular task assigned to them. The development of trade must not be affected to such an extent as would be contrary to the needs of the Community.” [Community here referring the EU, not the local community.]

In operationalising competition arrangements, the EU approach is built on simple foundations, of equal treatment, and that firms given special treatment cannot also be protected through public measures which favour them.  There has always been some debate about public monopolies and what has been called ’emanations of the state’, and through it all a recognition that state organisations are deemed to have a dominant position that they cannot abuse — perhaps more importantly, state organisations delivering a service cannot be protected by the government engaging in abusive market practices simply to protect them. It is certainly an abuse for a government to create a monopoly that cannot deliver the services required.

From an EU perspective, can states create a monopoly situation simply because they want to avoid competition in a particular area of the economy? Well, presumably yes, if it is of general economic interest, and if the prohibition of competition is necessary for the resulting bodies to do their job.

The ‘get-out’ clause is whether restriction on competition is necessary for the NHS to do its job. What is the job of the NHS?

If it is to procure health services from any “qualified” provider, then it is a procurement body and restrictions on competition would not be appropriate as this might lead to contracting for services from a subset of qualified providers who would be preferred on other than a level playing field — that public and private firms compete on an equal basis. The interesting question underlying the assumption is also that there would be market failure otherwise. But one test of market failure is that there are no providers willing to enter the market. But an any provider situation presupposes that isn’t true, that firms would enter the market and provide health services. So prohibiting competition effectively partitions the market in favour of public providers and that doesn’t seem to sit with the general EU competition tests. There is a subtle change in terminology that may be political but may be important (hah!): between any willing provider and any qualified provider — being willing isn’t enough, being qualified is, but can the determination of being qualified act to restrict access to the provision of health services, as being qualified may preclude organisations that might provide care, i.e. they are willing, but currently aren’t.  A bit like the only way to learn glass is fragile is to break it, the only way to find out if an organisation is qualified is to let it offer services. Of course, with an onus on qualified, there could be a presumption in favour of legacy providers, as obviously they are willing and qualified. (How many angels was that again?)

Does the EU treaty permit monopolists to abuse their dominant position by providing a service to a level less than is needed? In other words, can the purchasers purchase in such a way as to ignore lower cost/higher service level providers in order to protect the legacy NHS providers? Not really, as that violates the simple test of neutrality with respect to ownership status under competition law.

Granted that the purchasers could argue that financial controls are necessary as not everything would be affordable for everyone all at once, but the ECJ healthcare rulings have established a base line test: would the person involved eventually get treated? Saying ‘no’ is not an option for a state monopoly health service as that is called rationing and the ECJ has ruled that such decisions must be made on the basis of international clinical evidence, not administrative niceties.

So we are left with the question whether the prohibition of competition is necessary for the NHS to provide care. This is where it is necessary to decide whether the providers of health services in England are really state-owned entities, or simply contracted-in subcontractors. GPs in England have always been private businesses, though they have badged themselves as within the NHS since 1948, unlike community pharmacies, who similarly have virtually monopolistic contracts with the government, but are more readily perceived as not part of the NHS. It seems that as soon as you create a distinction between the delivery of services from the purchase of those services, you create the basic conditions for a market, for contestability, and by definition have eliminated the applicability of the market failure argument.  So the NHS delivers services of general economic interest, but it is not necessary for the delivery of that service to prohibit competition.

That means that the competition rules apply.

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