The debate about how to fund the NHS is never far from the headlines. Here we examine some of the claims made.
1. Does the NHS always need more money?
Some commentators have asked why the NHS always seems to need more money, while the government is reportedly resistant to increasing NHS funding when other government departments have implemented cuts to their budgets. Sir Nicholas Macpherson, previously Permanent Secretary to the Treasury, referred to the NHS as a ‘bottomless pit’ that will always keep coming back for more money.
Trends in health spending
Since 1948, spending on the NHS has risen by 3.7 per cent each year on average (adjusting for inflation). Public spending on health care also accounts for an increasing share of GDP, having grown from 4.1 per cent of GDP in 1978/9 to 7.2 per cent in 2016/17. This increase has been in response to a combination of factors, including medical advances and technological progress; increasing cost pressures from a growing and ageing population; and changing patient behaviour. For example, admissions to hospital have increased by 3.6 per cent a year since 2003/4, with hospital activity outstripping increases in funding in recent years.
The Office for Budgetary Responsibility (OBR) notes that our rise in health spending as a proportion of GDP in the UK is in line with trends over the past 40 years in most high-income OECD countries, which choose to spend more on health care as the wider economy grows. But public funding for health care as a proportion of GDP is now forecast to fall in the UK from 7.6 per cent in 2009/10 to 6.8 per cent by 2019/20. NHS spending per person is also forecast to fall in real terms by 0.9 per cent over the four years to 2019/20 as the population increases.
The OBR project that in the long term future health spending will need to rise again to meet patient demand. But these rises would be in line with long-term trends and are not inherently unaffordable. NHS funding has experienced periods of feast and famine, with underinvestment being followed by influxes of catch-up funding. For example, the NHS budget increased by 8.6 per cent a year between 2001/2 and 2004/5, but increases will average just 1.2 per cent a year from 2010/11 to 2020/21. Smoothing the profile of NHS funding might support greater efficiency in the longer term.
Decisions on health care spending
Rises in health care spending should not be framed as an intractable problem to solve. The British Social Attitudes survey shows that in 1997 half (50 per cent) of the public were dissatisfied with the NHS. But between 2001 and 2010 satisfaction increased significantly; this was a period of substantial increases in NHS funding and consequent reductions in waiting times for accident and emergency, and elective treatment, and other improvements in the quality of patient care. The projected falls in health care spending in future years may result in the NHS losing the ground it gained over recent years.
How much a country spends on health care is ultimately a political and societal choice. The majority of the British public (78 per cent in 2015) consistently rate health spending as one of their top two priorities for government, and surveys have indicated that an increasing proportion of the population support boosting NHS spending.
Governments of many high-income countries have chosen to increase spending on health services over time due to medical and technological advances which have improved health outcomes, and rising demand from patients. This does not make the NHS a bottomless pit, and there is no reason why the NHS can’t continue to deliver high-quality and accessible health care if it is given a steady and sustainable funding path.
2. Has the NHS been given the extra funding it asked for?
The government has repeatedly said that the NHS has been given the money it asked for, variously claiming that it has been given £8 billion and £10 billion in extra funding.
How much extra funding did the NHS ask for?
In October 2014, the Forward View estimated the NHS would face a funding gap of £30 billion a year by 2020/21 because of the mismatch between available resources and rising patient needs.
Under one of the options it set out to close this gap, the NHS would aim to save £22 billion by becoming more efficient, but this would still leave it in need of £8 billion extra funding a year by 2020/21. The chief executive of NHS England indicated £8 billion was the minimum level of extra funding the NHS needed, and that the budget for non-NHS social care and public health services should be protected, for the NHS to deliver what was expected of it.
How much extra funding has the NHS been given?
The £10 billion government figure covers a longer time period than the Forward View and includes £2 billion of extra funds that were already committed to the NHS for 2015/16. Once inflation is taken into account using 2015/16 prices, the extra funding over the Forward View period shrinks further.
The government’s figures also redefine ‘health spending’. The total Department of Health budget is the traditional measure of health spending in England. But the government chose to add the extra £7.6 billion to NHS England’s budget, rather than the Department of Health budget. The Department’s budget will grow by only £4.5 billion from 2015/16 to 2020/21.
The difference between these budgets is important, as the Department of Health budget includes funding for the upkeep of hospital buildings, training costs of junior doctors and investments in public health, among other things. Because the Department was not given an extra £8 billion in funding, these unprotected parts of the budget are now coming under greater pressure, with cuts to both hospital maintenance funding and public health budgets.
The Public Accounts Committee has said that contradictory statements about NHS funding detract from having ‘an honest, grown-up conversation about future [NHS] finance and service provision’. The chair of the parliamentary Health Select Committee has also noted that continued use of the figure of £10 billion for additional health spending to 2020/21 is misleading and 'risks giving a false impression that the NHS is awash with cash'.
The increase in total health spending over the Forward View period will be closer to £4.5 billion, far lower than the £8 to £10 billion variously claimed by the government. Spending on social care and public health has been cut. The government has given the NHS less money than it asked for.
3. Is the NHS inefficient?
Reports of waste in the NHS often hit the headlines. But is the NHS really inefficient compared to other health systems or the wider economy?
It is difficult to accurately measure or fully capture the efficiency of the NHS. However, a recent review by the Office for Budgetary Responsibility (OBR) estimates that the productivity of the health care sector grows by 1.2 per cent a year on average over the longer-term. This indicates that the NHS is producing more (eg, hospital activity) for the resources it is given.
This growth in NHS productivity is lower than the 2.2 per cent long-term growth in the productivity of the wider economy over the past 40 years, though a recent study found the NHS has successfully maintained its productivity growth since the 2008/9 recession even as whole economy productivity has stagnated. Lower growth in the long-run may generally be expected in industries like health care that focus on outcomes (such as producing years of healthy life and wellbeing) rather than manufacturing goods or products. Health care services are also heavily based on human interaction and customised care, and may be less amenable to efficiency improvements through automation.
It is hard to make comparisons across different health systems. The NHS is generally regarded as a well-performing health system on a number of indicators, and has fewer doctors and hospital beds per person than comparator countries.
The opportunities for greater efficiency
A recent OECD study suggests there are considerable opportunities to reduce waste in health care in many countries, as up to one fifth of health care spending makes little contribution to improving people’s health. A review of NHS efficiency by Lord Carter of Coles estimates that reducing unwarranted variation in how the NHS procures supplies and delivers care could save £5 billion of the £55.6 billion spent by hospitals each year. The Getting It Right First Time programme also identifies significant levels of savings from reducing variation in clinical and operational processes in orthopaedic care.
Shortening the average length of stays in hospital has allowed the NHS to ‘do more with less’ and to reduce the number of hospital beds despite an increase in the number of patients being admitted to NHS hospitals. Similar initiatives to increase the prescribing of cheaper generic alternatives to branded medicines and to increase the proportion of surgical operations that can be performed as ‘day cases’ without overnight admission to hospital have also increased NHS efficiency. In 2016/17, NHS frontline providers are expecting to make efficiencies worth £3.1 billion by reducing costs and improving ways of working.
The pursuit of increased efficiency in health care is always important. But in a system where demand fundamentally exceeds capacity, efforts to rapidly reduce costs can also increase inefficiency and be counterproductive. For example, increases in waiting times in accident and emergency departments and high bed occupancy in NHS hospitals reflect a system that does not have the spare capacity to deal with surges in demand over winter. The result is that highly trained NHS staff are unable to treat patients because beds, operating theatres and intensive therapy units are fully used.
There are still significant opportunities for reducing waste and clinical variation in health care. But there is no reason to believe that the NHS is more or less efficient as a system than other health care systems which face many of the same challenges.
4. Is the NHS too bureaucratic?
The organisation of the NHS can sometimes appear byzantine in its complexity. Some people have now asked if the NHS is overly bureaucratic and burdened by too many organisations performing similar functions.
An over-administered system?
Since the Health and Social Care Act 2012, many new organisations have entered the NHS. There are now more than 200 clinical commissioning groups (CCGs) that purchase hospital, ambulance, community and mental health services. Health and wellbeing boards, clinical senates, academic health science networks and sustainability and transformation plans (STPs) have also been introduced to the NHS in recent years. The growth in the number of different organisations, and the pre-existing separation between organisations that purchase and provide NHS health care, may significantly increase the ‘transaction costs’ of delivering health care in England.
Frontline NHS organisations are also overseen by different national bodies, such as the Care Quality Commission, which regulates care quality; NHS Improvement, which regulates NHS providers; and NHS England, which oversees CCGs. The cost of nationally mandated data collection requests from these bodies may be as much as £300–£500 million a year. This led Lord Rose to note, in his independent review of NHS leadership, that there are too many regulatory organisations making too many reporting requests from the NHS front line.
Previous attempts to reduce bureaucracy in the NHS have often focused on reducing management costs (the 2012 Health and Social Care Act set an ambition of reducing management costs by 45 per cent over four years), rather than addressing red tape in the administration of the NHS.
Current efforts to reduce the bureaucratic burden include bringing together different national oversight bodies such as the NHS Trust Development Authority and Monitor (now NHS Improvement). A single regulatory framework has been developed to monitor different types of NHS providers, and the national quality and NHS provider regulators are now co-ordinating their work to assess how well-led local NHS organisations are.
At a local level, GP services are increasingly forming federations to share management staff and good practice. Clinical commissioning groups are merging or sharing senior managers across local areas. And NHS hospitals are establishing new management chains and groups to standardise ways of working; reduce costs by rationalising back-office costs such as payroll management; and share senior leadership experience on a greater scale.
The chief executive of NHS England has also suggested that transaction costs could be reduced further by allowing parts of the NHS to end the split between bodies that purchase and provide NHS health care. This would allow parts of the country to form accountable care organisations that would formally bring together separate organisations involved in planning and providing health care, with the aim of delivering more joined-up care for local people.
The NHS is over-administered with too many organisations, too much regulation and too many transaction costs. This is partly due to government reforms that have increased the complexity of the health system and the administrative burden placed on the NHS front line. Efforts are now being made to reduce this burden by simplifying the regulatory environment and rationalising the number of different organisations in the NHS.
5. Is the NHS slow to change?
It has been suggested that the NHS lacks the agility to harness new technology and adapt to the changing needs and expectations of patients. But is this a fair reflection of how NHS services have developed over the years?
Changing times, changing practice
There are many examples of the NHS improving how it operates. For example, health care-acquired infection rates have reduced by more than 40 per cent, assessment rates for the early detection of deep vein thrombosis (blood clots) have increased to more than 96 per cent, and the number of patients placed in mixed-sex accommodation in hospitals has been reduced.
At a regional level, the NHS in London has concentrated acute stroke services into hyper-acute stroke units, which offer round-the-clock access to advanced brain imaging and clot-busting treatment. Taking patients to these specialist treatment centres, rather than the nearest hospital, has reduced mortality rates and the length of hospital stays.
The NHS has also improved the delivery of elective surgery for common procedures such as cataract surgery and prostate biopsy. The increased use of on-the-day surgery and earlier discharge from hospital has reduced the need for overnight stays before and after these surgeries and resulted in lower waiting times for patients.
Over a longer period the NHS has transformed the delivery of mental health services. This has involved moving from a system where patients would receive acute and long-term mental health care in large Victorian institutions, to a system where this care is now largely provided in local communities by multidisciplinary teams of health care professionals.
How fast is fast enough?
Although the NHS has demonstrated its ability to change, longstanding ambitions to shift care from hospitals to the community, encourage more effective ways of working between GPs and hospitals, and move from a system based on treatment to one that promotes health and wellbeing, are still in progress after decades of developmental work. The NHS has also been slow to embrace new technology, such as electronic patient records, to improve how health care is accessed and delivered.
Delivering fundamental and transformative change in health care takes time. New ways of delivering care often require the development of new clinical relationships and innovative ways of paying and contracting for care. More complex reconfigurations of services must also pass through significant levels of consultation with the public, local politicians and scrutiny committees, and in some cases national oversight is needed. Some plans to reform services have been either halted or slowed significantly as a result of these issues, which are often beyond the control of the NHS.
Ignoring these factors and simply exhorting the NHS to change at pace is unrealistic.
The NHS can do more to adopt and make the most of new technology and ways of working. But the NHS is not inherently slow to change – it has changed in the past and continues to do so.