Is the NHS Underfunded? What does underfunded mean?

The NHS is underfunded.

This is such a widespread belief, that I don’t know anyone who would challenge that statement.  Instinctively I believe it too, if only because over the last few years the Government has fibbed outrageously about how much it is putting into the NHS which they wouldn’t need to do if funding levels were as good as the Government claims.

It is certainly true that NHS funding is growing more slowly that it was at the start of the century.   I covered some of this in an earlier blog, but it is worth repeating that since 1947 the NHS budget has increased by 4% per year on average above inflation.  A lot of that increase in budget took place in the New Labour years – between 1997 and 2008 the NHS Budget tripled.  At the moment it is growing by 1% above inflation.   This leaves a funding gap of roughly £22bn which the NHS needs to find through efficiencies over the next few years.  This is the biggest saving programme the NHS has ever been asked to find.   At the last election Labour promised a much more better financial settlement for the NHS, but sadly while their funding promises were bigger than the Tories their fibs were larger too.

While all of this is going on the Government continues to promise more and more from the NHS.   More generous Cancer Funding.   7 day services. 

Of course this just tells us the size of the increase, to get a better picture we need to see total Healthcare expenditure compared to similar Nations.   This is the OECD data for 2016:

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This puts the UK in the top 20 nations for Healthcare spending, above the OECD average (9.7 vs 9%) (I have included non-OECD countries like India which participate in the OECD data collection process as well to give the widest range of comparators).

It is probably worth pausing for a moment to stare in astonishment at the USA data which is completely out of step with the rest of the table.  Even after the modest attempts by Obama to restrict healthcare costs and widen coverage the USA is still a total outlier.

If the NHS data looks higher than you were expecting that it because the OECD have recently changed how they look at Healthcare spending to include Social Care spending.   Not all OECD countries have adopted this new measure, which makes a big difference to spend:

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The UK is more generous in funding Social Care compared to other countries than it is in funding Healthcare.

This however just tells us spend.  What we need to know is what this money achieves.   One of the claims frequently made about the NHS is that it is more efficient at allocating resources than pure free market systems like the USA.   Again, instinctively I agree.   There are lots of aspects of healthcare such which can be organised more cheaply and effectively as a State run National service than left to market forces.   Only core OECD countries provide life expectancy data, so I used WHO data for the rest.

This lets us explore the ratio of GDP spend and life expectancy to see how they co-relate:

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Sadly this tells us less than I hoped, as countries with low levels of healthcare expenditure get a lot for their money.  Small increases in healthcare expenditure have a big impact on poor countries, it is a lot more expensive to improve the health status of rich populations, particularly ones with high levels of obesity.

It does however highlight exactly how awful the USA is for healthcare, and that there is a Public Health disaster taking place in South Africa.  You can download the entire dataset and have a play with it if you like – the link is at the end of this blog.

It’s better to look at it as graph, showing spend vs Life Expectancy.   Countries below the curve are getting shorter lives than they are paying for. Countries above the curve are getting longer lives than they are paying for.   Turkey is doing so much better that I suspect that there data is bollocks.

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The UK is doing slightly better than we would expect given it’s level of funding, but only if you look very closely, the advantage is actually slight.  A awful lot of this is do to Social Care funding.   If you went back to the old definitions which excluded Social Care the UK’s performance leaps up above the average.

This is the Commonwealth fund assessment of relative systems performance stripping out the Social Care data:

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We can see that reflected in the data for healthcare resources:

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The averages for Pharmaceutical expenditure are distorted by the USA which spends a staggering $1100 per capita on prescription drugs.   That strange anti-hair loss drug Donald Trump is taking doesn’t come cheap.

The UK delivers an above average life expectancy with below average resources.

Essentially we are getting a good deal from our Health Service, but a much worse deal form Social Care -in fact pretty much all of the efficiency gains that we make from having the NHS are wiped out by the high cost of Social Care. 

The 1947 Act makes a distinction between Health and Social Care.   We all have Social Care needs – we all need to feed ourselves, house ourselves, provide for our own welfare.   We don’t however have the same Healthcare needs.  That’s why there is a difference between Healthcare which is free at the point of use and provided by the state, and Social Care which is only provided in limited circumstances when the individual can’t take care of themselves and is means tested.

At this point I should declare my own position.   I’m a 1947 loyalist. I believe in the principles of the 1947 Act.  I even have my own copy of it, and a copy of the original Beverage report.   

Providing Health and Social Care is expensive, and people intensive.   Politicians regularly claim that technology will make healthcare more efficient such that fewer Drs and Nurses can provide more care.   As I explained a few months back this isn’t efficiency – it is reducing quality:

The costs of providing Social Care have gone up in the UK.   Lots of Local Authorities have got rid of all of their own In-House provision and have left the market to take care of it.   I don’t mind Private Providers delivering Social Care – this has been going on for as long as there has been an NHS.  I do however think that moving to totally Outsourced provision is a mistake as it makes it harder for Local Authorities to set prices and make the market.  Having run Health and Social Care I would never willingly have an all In House or All Outsourced Social Care model.   I am certain that the shift to Local Authorities acting as Commissioners, not Providers of Social Care has made it harder to control costs.

But the big driving force behind the increase in costs is the National Minimum Wage.  Staffing costs are the vast majority of the costs of Social Care provision and the NMW has had a massive impact.  Anecdotally one of the worst sectors for using dodgy employment practices to avoid paying the NMW are in the Care sector.

The debate at the last General Election around Social Care saw the 2 main parties on unfamiliar territory.   The Conservatives proposals to increase the amount individuals have to contribute to their own care, and reduce the amount they can retain to hand down to their families are consistent with the 1947 NHS Principles.   As a 1947 loyalist this makes me happy.   From each according to their ability, to each according to their need.

The opposition to these proposals by the Labour Party puts them on less sure ground compared to the 1947 Principles.  The Labour Party’s plans for a National Care Service is the biggest shift away from the 1947 Act that Labour have made.   As a 1947 loyalist I’m not convinced that this is the right direction at all.   If we are going to invest more Government spending into the Health and Social Care system I would rather it went into the NHS, then be used to reduce the amount people have to contribute to their own Social Care Costs.

This only leaves one question?   Is there any Healthcare metric which doesn’t make the USA look terrible?


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