Monday, 31 December 2012

Rational Policy Making Vs The NHS Cult

Here’s an uncomfortable fact for you. Did you know that the unit cost of providing healthcare is rising at the rate of 9-10% per year? That means that for the NHS to deliver the same standard of healthcare next year as it has this year it will either have to spend 9-10% more or find ways to work 9-10% more efficiently. The alternative is that the quality or amount of care provided by the NHS will shrink by the same amount. This is a policy fact, not a political point. It cannot be made to disappear by a rousing speech about “saving our NHS”.

For whatever reason, the British are squeamish about discussing the cost of healthcare and even more so about discussing the ways in which it can be delivered. It is the ‘state religion’, as one ex-Chancellor quipped. As I have found to my cost on a number of occasions, if you raise this question in polite society you are accused of wanting to sell the NHS and to leave the poor to die of Victorian diseases. The problem is that the question is real, and that response simply ignores it.

By far the most popular policy would be to simply increase health spending by the required amount. Well, the NHS currently costs around £100bn per year. So that means finding £110bn next year, £121bn the year after and so on. Because the costs are rising so much faster than the general rate of inflation (around 3%), eventually the money to do this runs out. That’s pretty much the point we are at now, what with that massive unsustainable public deficit that people keep banging on about. The increased spending option no longer exists.

A different route, which was half attempted earlier this year by the coalition, is a structural change in the way healthcare is delivered. Suppose that instead of the government being the provider of healthcare (e.g. actually running the hospitals) it was simply a purchaser? In theory*, private companies would compete against each other to provide the cheapest and best service which the government would then pay for. It would still be free at point of use, so nobody would be denied healthcare because they were poor. How could anybody object? Well they did, and all because they heard the words ‘private’ and ‘NHS’ near each other. I put it to you that this is not a rational way to make policy, and is storing up even bigger problems for the future.

My general point here is that there is a very real need to address the challenge of healthcare costs today, particularly as we have an aging population which is going to make it even more expensive to deliver healthcare, and require it to be funded by a relatively smaller tax base. When you hear a politician say that they will ‘defend the NHS’ or keep it ‘free of market forces’, ask them how they will address the cost problem. I bet you they have no answer. Well, we need one, and we need it soon.  

*In reality this might not work quite so smoothly, for a number of reasons that I don’t have the space for here. If you are interested, let me know and I’ll write a separate post on the subject.

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