Nigel, one of the things that really amazes me as a reporter is, you come to Britain, and the newspapers, including yours, are just full of stories about the National Health Service [NHS]. ... Brits love this system, or they're fascinated with it.

Well, health has got a very, very high political profile in this country. It's a system run by the state, out of taxation. Therefore, it's a big test of any government to see how well they can make it work. And Labor staked their reputation on improving it; they've poured a lot of money into it. So everybody's very interested in seeing how well that money is being spent.

Would you explain basically how it works? Do you pay an insurance company or something?

No. It's all paid out of taxation. So the money, which is running about 90 billion a year at the moment -- pounds -- comes out of the tax budget, and that goes to pay the doctors, the hospitals, the nurses, the entire system. There are no insurance premiums.

So if I'm sick, I go in to the doctor and --

You'd be registered with a family doctor, a general practitioner [GP], and you'd go and see him, and he would, or she, get whatever treatment is required, or get [you] referred to a hospital or whatever is needed.

Here's the part that Americans like: And then you walk out of the office, and there's no bill.

There's no bill; there's no payment at the point of service. ... There are a few things you pay for: Dental treatment you might pay; if you have a prescription, you pay a prescription charge; if you have glasses, you pay some of that. But co-payments are quite small in the British system.

How much do you pay for [a] prescription?

Six pounds, 7 pounds, of that order. ... A lot of people are excluded; they don't have to pay -- the elderly, the chronic sick, the young. So actually the people that pay prescription charges are quite a small proportion of the total.

This all sounds really sweet. Does it work?

It works in some respects. I think primary care, the family doctor service, is pretty good. It can be difficult to get an appointment. ... They act as gatekeepers to control the costs and stop you rushing into hospitals for expensive procedures. And emergency care works quite well. ... Again, there's a bit of a wait sometimes, but they do a good job.

Where I think it can fall down is on elective care -- hip replacements, heart operations, this kind of thing -- where care tends to be rationed by queues. It can't be rationed by cost because it doesn't cost you anything, so it tends to be rationed by queues, ... and that can be quite a long time. It used to be on the order of 18 months to get a new hip. That's been greatly reduced by Labor, by the current government, over the last 10 years. It's down to certainly less than six months, and for most people about two or three, which is acceptable.

If you get waiting times down, does that mean some other part of the system then starts to hurt?

Exactly, it does. The trouble with a centralized system like we've got here is, you can achieve one target at a time, or two or three targets, but if you're focused on reducing waiting times, improving heart care, improving cancer care -- which are fundamentally the three areas they've focused on -- other things tend to fall by the wayside. ...

... Would you say the British people, the patients, are satisfied with the NHS?

I think the patients, generally speaking, have a higher satisfaction than the general public. ... People that have been treated tend to have a fairly positive attitude. The general public tends to be a bit negative.

And how do doctors feel about the NHS?

... They're fairly unhappy in the NHS. I think family doctors are probably more contented than hospital doctors. Hospital doctors tend to think their advice is ignored. They're told what to do by managers; they're constantly given targets; and they're constantly under pressure. So they're fairly disenchanted. ...

We would think in America, it's just kind of natural that the high-powered heart surgeon in the hospital makes more money than some GP that I go down to when I have a cold. But that's not true in Britain.

No, not any longer. They make, I'd say, about the same amount of money. It depends. If a surgeon has got a lot of private practice, he can make a lot of money, but if he's just working for the NHS, he'd make about the same as a GP.

So the surgeon, the internist, the orthopedist in a hospital is a government employee?

They're employed by the Hospital Trust. The hospitals are all, so to speak, independent organizations. They get their money from the government, but they have a board and directors who run the hospitals, who pay the hospital doctors, the specialist consultants and so on.

Are the GPs NHS employees?

No, the GPs are independent contractors. They're given a sum of money to run their practice based on the number of patients they've got and the quality of service they deliver. Out of that money, they have to pay for the setup of the practice, and the difference is their annual income.

So that gets us to an interesting distinction from America. In America, most medicine is fee-for-service: I have an earache, and the doctor bills me for treating that. But in Britain, they don't charge you for the individual visit.

No, they don't, although hospitals now have a system of payment that attempts to capture this. It's called payment by results, in which, when a patient is treated for a specific condition, the hospital is paid a fixed sum based on a tariff for that treatment. This is intended to increase efficiency, really. That doesn't apply to GPs, though, just the hospitals. ...

When I went to visit the NHS as a reporter, they had on the wall, "Free at the point of service." They're really proud of that notion.

They are -- I think perhaps overproud in the sense that I think when you're not paying for a service, you don't necessarily value it; you don't necessarily get a service that's really focused on you. People often say here that they get a better service for their pets when they take them to the veterinarian than they do from their general practitioners. Now, that's not true in my case, I should emphasize, but, you know, you ring up your vet, you get an immediate appointment on a Saturday morning, say, and it's all done very efficiently. You pay for it.

You pay in cash.

You pay in cash, yeah, but it is much more user-friendly. The NHS is a little bit remote. You have a slight feeling that it's being given to you as a charity, so this makes patients less demanding, I think, than they would otherwise be. So there are drawbacks with not paying. ... I think it would help control demand a bit. It would stop people going for frivolous reasons. But the GPs don't want that at all.

Why?

They don't want to be involved with money at all. I remember one elderly GP telling me his father had been a GP, too, and he worked on his own in Liverpool. And the only employee he'd had in the surgery was a debt collector to collect the money from the patients who didn't want to pay. And this chap said to me, "I don't want to go back to that." Frankly, we wouldn't go back to that, but that is the attitude that a lot of GPs have.

... The NHS has done a lot of experimenting on different payment modes, is that right?

Well, under the new contract that came in in 2004 for GPs, there's a quality element. If they can achieve certain quality points, they get paid more. The quality points are things like making sure you've tracked down everybody in your practice who's got diabetes or heart disease, and you've treated them appropriately, and you've kept in touch with them, and you've called them in every six months, those kind of things. ...

Alan Maynard, this British academic, told me that it didn't work at first because they went to the doctors to say, "What should we pay you extra to do?," and the docs just listed all the stuff they do anyway.

Yes, that is true; they all earn pretty near the maximum number of points. ... Now the government is trying to up-rate the quality and make it more difficult to achieve maximum points. But the doctors are still doing it.

My doctor told me that he gets extra payment for reminding people to take their blood pressure every day. He said, "Of course I do that."

Yes, well, he would get extra for that. My doctor calls me in regularly to check my cholesterol level. It gets a bit tedious, actually, ... but for that he gets a point, and that's worth money to him.

This gets to the next thing, which is [that] the NHS, because it's responsible for you from before your birth until you're 99 years old, has an incentive to do preventive medicine.

It has, but it's traditionally been very bad at that.

Do you think so? Because I look around Britain, I see all these signs: "Call the home health assistant," "Call this number." It seems like they're very concerned.

Yeah. I don't think it's been very effective. For instance, we have a very high level of hospitalization for people with diabetes. Now, if diabetics were properly managed -- as they are in some American systems, actually ... -- they should be managed outside hospitals. ... Although the NHS should be able to deal with chronic conditions, it doesn't have a terribly good record of doing so.

I felt also that one result of having a single budget to cover everybody's medical care is there's this, to me, very strong "nanny state" mind-set. That is, if you ride a motorcycle without a helmet, it's costing me money; if you eat too many muffins at breakfast, you're a bad person.

Yes, I think there is an element of that. This government has striven very hard not to be seen as a nanny, I think to an excessive degree, actually. I mean, we've got a big obesity problem in this country -- not quite as extreme as in the States, but getting on the same way -- and the government has actually done rather little about that, although it has huge implications for future health. So I could tolerate a bit more nannying, actually, or a bit more firm instruction. ...

We look at these comparative statistics of the United States versus other wealthy countries, including Britain. ... On most health indicators, Britain does better than the U.S.

Yes, it probably does, but other countries do better than Britain. The proper comparison really is with continental European countries like the Netherlands, France, Germany, Spain. And on most measures, they tend to do a little better than us.

So the notion, "We're doing better than the U.S.," that's not an important notion to you?

No. The U.S. is always considered to be an outlier in health policy, because you've got this insurance-based and rather uncontrolled system that leads to very high costs and very great inequalities, as perceived from this side of the Atlantic. Unfortunately, I think the American experience has tended to put British people off insurance-based health care, because they say, "Oh, we don't want the American system." But you don't have to have the American system. You can have the French system or the Japanese system, which are not so expensive and which seem to work quite well. ...

... Plus, there's a very interesting aspect that the health system reflects the culture of the country. For example, in Britain everybody gets care, tens of millions of people.

Yes, everybody gets care. That is the strength of the British system. Everybody gets care. And that's a big strength. I mean, one mustn't underestimate that. ... I take that as a given. But that's true in other systems, too.

It's not a given in our country.

It's not a given in the States, but it's a given in France, Germany and, as far as I understand, Japan. In their insurance-based systems, they do provide care for everybody. So that's not an intrinsic part. In this country, people tend to associate the NHS with everybody getting care, as if it isn't delivered in other countries. And they've been led into that by politicians who kind of imply that if you lived anywhere else, you wouldn't get this. Well, you would. People are not stupid. They go to France; they go to Spain; they know perfectly well that they get good service there. So this doesn't work any longer. ...

Another benefit of the NHS that you may take for granted is that it saves people from financial ruin due to illness. ... How many Brits go bankrupt because of medical bills?

None, I should think. I think it's extremely unlikely that anybody ever goes bankrupt for a medical bill. There's no reason to. ...

I used to watch PMQs [Prime Minister's Questions before Parliament], and somebody would say, "Oh, the NHS is in shatters," and [Tony] Blair's answer would always be, "The honorable gentleman wants to impose the American for-profit system."

Yeah. The American system is a kind of bogeyman that's wheeled out to frighten people into sticking with the NHS.

And it works.

It's worked so far. I mean, look at the Conservative Party. They don't have any radical plans for changing the NHS, because they've been terrified. Every time they come up with a suggestion, Labor says, "Oh, you want to privatize the NHS." And it doesn't play well with the public, so the Tories lose votes. So they've just been cowed into basically doing whatever Labor does, only more efficiently. ...

I went to my GP because I have a sore shoulder and said, "I want to get a replacement for my shoulder, arthroplasty." He said: "Well, I could refer you to a specialist. It would take three months, and he'll say no." It's kind of his guidance, probably right.

Yes. Well, of course you can go to a specialist here privately.

And pay him.

And pay him.

Yeah. Now, this gets to another thing I don't understand. I can go to my NHS doctor for free, but I can go to the same doctor and pay him through insurance?

You could go to the same doctor and pay him out of your own pocket or out of insurance, if you wanted to have a private GP. ... But most people don't bother with that. There are more people that might go for private consultations to specialists in order to speed up the process or to get the exact consultant they want. More people are prepared to do that. ...

I could see a system where there's a certain set of doctors who are only private and then the NHS doctors. But it seems to me, if the same guy can do both, he has an incentive to keep the NHS patient waiting.

Yes, and I'm sure this perception was shared by Labor ministers when they came into office. They viewed the waiting lists as a kind of deliberate product by the specialists to keep up their private work. ... And they introduced independent-sector, private-sector treatment centers to try and undermine the power of the surgeons -- and quite successfully, actually.

Did it work?

It did work, I think, yes. ... Although private-sector centers didn't do many operations, the waiting lists came down. So they clearly had some effect on gingering up the system and making it more efficient. I think that was one of the cleverest things the government has done.

When I was here, there was something called the post code lottery: If you lived in a certain ZIP code, you saw the doctor Friday, and if you lived down here in London, it took two months or some such.

Well, this is still true. It more relates to availability of drugs, expensive drugs. They're paid for locally by primary care trusts. They all have slightly different rules, or some are better off than others, and some will be prepared to pay for a particular drug that somebody else isn't. If you live in Scotland, for instance, you get many more cancer drugs than if you live in England. ... It's widely regarded as very unfair, but at the same time, the government policy is to delegate responsibility locally. So if you delegate responsibility locally, you must expect different people to make different decisions. ...

I don't understand why some local councils or trusts have more money than the others.

Ah, now you're into a really elaborate, complicated area. This is the system for allocating funds, which is done on a very, very complicated formula, which is supposed to make allowances for poverty, incidence of disease, the number of old people, whether it's an inner city and so on. So as a result of this complicated formula, some areas get twice as much money as others to run their health service.

And this is why areas like the northeast or the old industrial areas, which have got a lot of poverty and poor health, get a lot of money. You don't get any deficits in the NHS in those areas; they have enough money to run on. It's the comfortable country areas in the south of England that get the lowest amounts of money. That's where the hospitals tend to get into trouble. ...

People don't realize this happens. You ask the average person in the street, "Do you realize that Islington [an area of London] gets twice as much per head to run its health service as Guilford?," they would look at you as if you were mad. They think everybody gets the same, but they don't.

That sounds mad to me.

It is mad. I think it's slightly mad, but it's done for the best of intentions. It's done to try and level out inequalities. The truth of the matter is, it hasn't been effective at doing that. Inequalities, based really on wealth, education, social position, are still huge. Expectation of life is much greater for the middle classes than for the working classes, despite these attempts by the NHS to smooth it out. ...

It hasn't been the result because I don't think health care per se actually does anything to affect these inequalities. It's how you live, what you eat, whether you exercise, whether you've got good genes, how you bring up your children, antenatal nutrition. Those are the things that determine long-term health outcomes, not the availability of health care. ...

We want to talk about what Americans call rationing of medicine, which seems quite visible to me in Britain. I mean, there are certain drugs that you just won't provide.

Yes, exactly.

And I think there are certain ages beyond which you won't do dialysis? Is that correct?

There is a tendency not to use very determined medicine on elderly people. Unlike in the States, where you'll use heroic efforts to save anybody at any age, here, once you're beyond 80, the tendency is to say: "Well, you know, limited resources; we'll focus them on younger people, people of working age and so on." On the medicines front, we do have quite strong rationing. It's done by a body called National Institute for Health and Clinical Excellence [NICE], ... which looks at drugs and works out whether they're cost-effective or not, and frequently concludes that they're not.

I remember a case when I was here. NICE would not approve some breast cancer drug, and the headline in The Sun was "NICE Killed Mum" or something.

Indeed. Well, this happens all the time, particularly in cancer drugs. I mean, the modern cancer drugs are very, very expensive, and they maybe only prolong life by a couple of months. So if you look at this in cost-effective terms, which is a brutal way of looking at it, but if you do, you have to conclude that the money would be better spent somewhere else in the system. But that's no consolation to the person who's dying. So we have this argument constantly.

You might have hoped that the extra money that's gone into the system over the last five years would have eased these pressures, but frankly it hasn't. Not a lot of the money seems to have gone into medicines. There's an attitude in this country that medicines are an unnecessary cost. It's absurd; actually, they're all there is. That's what doctors do: They diagnose disease and prescribe medicines, neglecting surgery. But somehow, ministers claim credit when they reduce the drug bill. ... They would never come out and say, "I've reduced nurses' wages," or "I've cut the money doctors earn." They wouldn't dare say that. But they're quite happy to say, "I've cut the drug bill." And they did a couple of years ago; they reduced drug prices across the board by 7 percent.

Well, that says something about the political standing of the drug industry: They're bad guys, and you can cut their income.

I guess it does say that, yes. Nurses, good; doctors, good; pharmaceutical companies, not so good -- yeah, I think that is the attitude.

I think if it were my grandmother, I might think, because they're saving money on Grandma, they can use it to help some sick baby; that it's the same pool of money. ... Is that a legitimate perception?

I think it's legitimate, but whether it will be spent any more sensibly -- I tend to think that patients have rights. If you're 91 and you've got heart failure, you've got an equal right to be treated as somebody 65 with heart failure. And this idea that we won't treat the 91-year[-old], I'm uneasy with that. It's one of the consequences of the system we have that people don't demand treatment more vociferously. ... This is particularly true of elder people who remember the pre-NHS days. They still value the NHS very strongly, and they don't tend to make demands. Younger people, of course, who didn't know what it was like before, they are more demanding.

[Can you talk about the attempts to introduce internal competition into NHS?]

Yes. Originally -- and this is still true in Scotland -- you simply have a pot of money which is distributed by local NHS managers to hospitals, GPs or whatever. But in England, under Mrs. [Margaret] Thatcher and subsequently under Labor, it was decided that you could get a more efficient system if you divided those who provide the services from those who pay for them. So in other words, the hospitals are providers; the primary care trusts ... are the payers. The hospitals can compete among themselves for the available money. The idea was to create a sort of pseudo-market which would increase efficiency.

They compete by saying, "I'll deliver a baby for less money than the guy down the road"?

They're not allowed to do it for less money, unfortunately. That's why I call it a pseudo-market; it's not a real market. ... They made some attempts to sharpen it by introducing this "payment by results": the idea that each item of service has a price that a hospital can claim back from the primary care trust. And that also enables some competition, or some efficiency. The drive is to get more efficient. I have to say, it hasn't been hugely successful. But the principle, I think, is probably right.

Is it possible to come up with an overall administrative cost factor for the NHS? Is it an efficient system?

I think that's a very difficult question to answer. I mean, if you ask people that, they say: "Yes, it's efficient because it's easy to collect the money. We don't have to worry about people paying their insurance premiums. They don't have all those transaction costs."

But I think we have lots of hidden transaction costs in the NHS; for instance, planning care. In an insurance-based system, care is delivered when it's demanded. Here, you have to plan it ahead. So you have to decide: We're going to need this many beds for stroke; we're going to need this many heart bypasses. Very difficult to do. ...

I don't see why that would be different. ... [If] you're building a hospital [in America], you've got to know 10 years from now, "I need this many people in the ICU."

Yes, you do have those costs. But we know from other service delivery that capitalism is a very, very efficient way of delivering services. ... Supermarkets work with magnificent efficiency to deliver food all the time, and somehow they get through the transaction costs of running a system like that. So I don't really accept that a tax-based system is necessarily more efficient.

But this gets to a question we come across all the time. Do you think health care is a commodity, like lemonade or tea?

No, it isn't. The difficulty is striking the balance, really, so you get ... the sharpness that you get from a competitive market while still delivering an equitable system. I think some countries have managed that reasonably well.

... Who's doing well at it?

I think the Japanese do quite well. They have a very strange system by our standards, very strange indeed, but you get care very quickly. You can go wherever you like. There are not gatekeepers. You can get an MRI scan for $100 in two days; here, you might be waiting weeks for an MRI scan. ... Costs are quite low; they're tightly controlled by the government. So I think that's an interesting system.

The continental European systems like France and Germany, costs tend to be a little bit higher than the NHS -- not much higher now, a little bit higher. Service, I think, is prompter and in some respects better. So it isn't a market; it can't be a market. You have to make some attempt to deliver health care equitably, and a market isn't equitable. ... Somehow you've got to get the benefits of a market without the cruelties, and that is a very difficult balance to strike.

[Could you talk about "Choose and Book"?] What is it?

Patient choice. This is a system that this government brought in to try and really break the power of the hospitals. ... If it's an elective operation, they said you can choose initially from five local hospitals where you want to go. This meant the hospitals were essentially competing for patients, and you might have choice of a private-sector center as well.

Doctors hate this; they don't like this at all. They like to refer their patients to a consultant they know in the local hospital. They don't like the extra work of actually offering choice. Patients are a bit reluctant. A lot of them say, "Oh, I just want to go to the local hospital." But actually, people who have used patient choice have found it's very effective. You can get quicker care, and you can go where you want; you can sometimes actually go to the consultant you want. So I think it's been quite a useful initiative.

... This gets to this very American notion of a consumer-based health care, where the patient makes a decision. ... How do you know which specialist is going to fix your knee better than --

Well, you have to take the advice of your GP, but you can also do a bit of research yourself. My wife had a hip replacement done recently; she's had two done, actually. The first one she had done privately. Second one she did Choose and Book; she exercised patient choice. She said to the GP, "I want to go here," and he said, "I'll look that up," and he found they had no waiting list. So the second time, she didn't have to pay; she went on the NHS and [was seen] very quickly. So in her case it worked brilliantly. ...

Your talking about hospitals competing raises a question we've had all through this trip: We don't understand why people would compete when you can't make more money. In America, people compete to make profit.

Yes, that's a very fair point. Here you would compete in order to survive, because if you start losing patients to another hospital, your services are going to be under threat. You won't be able to employ the doctors. ... Now, nobody's worked out yet what to do when a hospital fails, because a consequence of the system that's been introduced is that hospitals will fail, or services will fail. ... In a private-enterprise system, they go out of business, somebody else takes over the premises, starts again and hopes to make a go of it. In the NHS that's very difficult to do. And people are very attached to their local hospitals. Once it looks as if a local hospital is under threat, there's going to be terrific political reaction. So I don't think the government has quite worked out how to handle that.

And it hasn't happened yet?

It hasn't happened yet. It's beginning to happen. It's beginning to happen with maternity services and A & E -- Accident and Emergency. Some of those are beginning to close and be moved to other centers. That's caused a lot of local trouble.

[We've seen some remarkable information technology implemented around the world.] Are they still using paper records in the NHS?

They're still using paper records. There is a big program now to update the IT system, ... which is progressing, but rather slowly. Some parts of it are working quite well. The patient record part is not yet functional, and doesn't look as if it will be for several years. GPs have very good IT systems in their own practices, ... but they don't connect; they're not in a network. The idea is to have a network where you can call up people's records wherever you are in the country. It's a good idea. It's difficult to implement; it's a lot of users; it's a huge system. And it hasn't quite worked yet. ...

Is the [European Union] pushing all its member countries to have an electric card, health card?

I don't know that, actually. ... We are moving toward identity cards here, but British people hate carrying papers. They take the view that "We're free citizens; we don't have to carry our identification with us." And so a health card or an identity card will be quite a controversial thing when it comes in. A lot of people are going to refuse to carry them, just on principle. ...

... But basically you have a medical home in Britain. You go in to your local GP and --

Yes, he keeps the medical records. ... If you go to the same GP all the time, he knows you for many years; he knows your past medical history; he might even have known your parents; he knows your children. You get continuity of care, which is, I think, one of the big strengths of the NHS. ...

For an American, we tend to think that the private sector is better and the government hospital is going to be second-class. I was kind of surprised when I was living here, and my neighbor had a baby, and I said, "Are you going to go over to the private hospital?" She said: "No, no. For something as important as having a baby, I want to go to the NHS." She trusted it more. Would that be normal?

I don't know. That might be for maternity, ... but in general, I think most people would take the view that private hospitals are probably cleaner, rather better equipped, with a better standard of nursing and more attention to the patients' own demands than an NHS hospital. But that's not to say that NHS hospitals aren't good and competent. They vary greatly. The best are very good; the worst are not that good. ...

Americans are very unhappy with our health care system. We're looking for ways to fix it. That's why we came here. We're looking for ideas. Do you think the NHS is a good model?

It's not one I would go with, to be honest. I think when it was invented in 1948, it may have seemed a logical thing to do, but that was the high-water mark of central planning, and things have moved on. We're now in a world in which people are much more demanding, and I think that the NHS is not very effective at delivering in that modern, market-orientated world.

So I wouldn't go for a centrally organized, tax-funded, free-at-the-point-of-use system for many, many reasons. One is, you've got no control of demand whatsoever. The other is, it tends to be captured by the people who work in it. The money all tends to go into salaries, centrally negotiated contracts for nurses, doctors and so on, ... and you don't get a very patient-focused service. ...

My view, I have to say, is a minority in this country, in Britain. Most people believe that taxation is the way to go; for reasons I've explained, I don't. But if I were starting from scratch, I'd go for an insurance-based system, but with pretty firm price controls, centrally controlled, a bit like [how] the Japanese do it. And I think that works better.

But if you're starting from the NHS, to move to that system would be quite difficult. If you're starting from the American system, to move to that system would be quite difficult. Once you've got a health system embedded, changing it much is really quite a difficult job. ...