economic issues in the nhs
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Economic Issues in the NHS
John Appleby
Chief Economist
King’s Fund
What issues?
• Spending
• Waiting lists
• Choice
• Efficiency, competition and incentives
Determining NHS spending
£0 £1,000 bn
Full range of spending options
Realistic spending range?Current spend
How much should we spend?
x y
Health care (£y-x)
Education (£x)
Total resources available
Cost
Benefit
A
B
z
Fast cars (£z-y)C
…and now with real data..
Total resources available
Cost
Benefit
?
Pledge/promise…er..aspirationTotal Health care spending as % of GDP $PPP
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Pe
r c
en
t
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
U.K.
TOT EU
Will we get there?Total health care spending as a proportion of GDP:
actual and projected
0
1
2
3
4
5
6
7
8
9
10
11
12
19
63
19
65
19
67
19
69
19
71
19
73
19
75
19
77
19
79
19
81
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83
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85
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87
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89
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91
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93
19
95
19
97
19
99
20
01
20
03
20
05
Pe
r c
en
t G
DP
EU (excluding UK) projections
EU (excluding UK) spend
UK spend
UK projections
Projected EU spend
Planned UK spend
Projected UK spend
Spend what we can afford?
Projected health care spending per head and GDP per head: EU countries: 2001
y = 0.0841x0.9949
R2 = 0.7618
1000
1500
2000
2500
3000
3500
12000 17000 22000 27000 32000 37000 42000
GDP per capita (US$PPP)
To
tal h
ea
lth
sp
en
din
g p
er
ca
pit
a
(US
$P
PP
)
UK
EU average: $1.834
Wanless Review of NHS funding
• Defined a ‘vision’ of the NHS in 2022• Costed vision (ie, reductions in waiting times,
increased quality, better infrastructure etc)• Crude sensitivity analysis produced three possible
spending pathway scenarios• Cost by 2022 (today’s prices)
– ‘Fully engaged’: £154 bn (10.5% GDP)– ‘Solid progress’: £161 bn (11.1% GDP)– ‘Slow uptake’: £184 bn (12.5% GDP)
Wanless recommends….
Total UK health care spending
4
5
6
7
8
9
10
11
12
13
1977/8 1982/3 1987/8 1992/3 1997/8 2002/3 2007/8 2012/13 2017/18 2022/23
Per
cent
GDP
Historic
Slow uptake
Solid progress
Fully engaged
...Brown accepts
Percentage change in UK NHS real and volume spending
0
1
2
3
4
5
6
7
8
9
10
83-84
84-85
85-86
86-87
87-88
88-89
89-90
90-91
91-92
92-93
93-94
94-95
95-96
96-97
97-98
98-99
99-00
00-01
01-02
02-03
03-04
04-05
05-06
06-07
07-08
Re
al
ch
an
ge
: P
er
ce
nt
0
1
2
3
4
5
6
7
8
9
10
Vo
lum
e c
ha
ng
e:
Pe
rce
nt
Thatcher Thatcher/Major Major Blair
2.1% pa 2.6% pa4.1% pa
Blair
4.8% pa 7.4% pa
Issues for Wanless II
• Cause and effect• Health health care spending• Improving health is the objective• Better sensitivity analysis• Evidence base for assumptions• More of the same?• Patient/public satisfaction
Cause and effect
• Wanless assumed relationships between variables that were:
– Fixed (constant over time)– Linear (A determines B)– Bivariate (only A determines B)
• But, relationships change over time, have ‘feedback’ loops and tend to be multivariate: eg
• Technological advance influences supply and demand• Reduced waiting times creates more demand...
Healthhealth care spending
• Differences in assumptions about population’s future health generates the three ‘scenarios.
• Level of health assumed rather than generated by Wanless
• Increased spending > improved health: not part of Wanless’ approach
• Health influences demand (and hence spending levels) but is also a desired outcome of higher
spending
Improving health is the objective
• Is the ‘vision’ for the NHS in 2022 the best (eg most effective and cost effective) way to achieve actual goal: ie improving population health?
Better sensitivity analysis
• Most important cost drivers: delivering high quality services and meeting rising expectations (common to all three scenarios).
• But how sensitive are predictions about changing quality and expectations?
Evidence base for assumptions
• Need for systematic review of the evidence supporting Wanless Review recommendations
More of the same?
• Wanless had a tendency to assume the NHS in 2022 would look similar to the NHS in 2002 - but bigger.
• Different structures, different ways of working?
Patient/public satisfaction
• What are the determinants of satisfaction?• How do these change over time?• Patient/public involvement in determining spending
levels?
Why do we wait?
• Not enough resources?• Demand > supply?• Poor management?• Private practice?• Clinical variations?• No prices?
Wait for Grommet insertion operation: Variation within and between trusts
0
10
20
30
40
50
60
Trust I D K N C L G M E F
Wee
ks
Targets, Targets, Targets
• Numbers
• Maximum waiting time
• Average waiting time
• Variations in waiting list/maximum/average time
• …a fair waiting list process?
Reduce total waiting
NHS Plan targets: Maintain 100,000 reduction in total waiting lists
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1997MARCH
1997SEPT
1998MARCH
1998SEPT
1999MARCH
1999SEPT
2000MARCH
2000SEPT
2001MARCH
2001SEPT
2002MARCH
2002SEPT
2003MARCH
2003SEPT
2004MARCH
2004SEPT
2005MARCH
Nu
mb
ers
wai
ting
Maintain target: 100,000 less than March 1997 list
How was it achieved?
1997 manifesto pledge: reducing waiting lists by 100,000 - local achievement
-60
-40
-20
0
20
40
60
80
Health authorities
Per
cent
age
chan
ge in
wai
ting
lists
: M
arch
199
7 - M
arch
200
42% of authorities reduced lists - but by less than the national average target of 9.5%
18% of authorities increased numbers waiting
40% of authorities reduced lists by more than the national average target of 9.5%
Reduce maximum wait
NHS Plan targets: By 2005, no one to wait longer than six months for admission to hospital
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
1997MARCH
1997SEPT
1998MARCH
1998SEPT
1999MARCH
1999SEPT
2000MARCH
2000SEPT
2001MARCH
2001SEPT
2002MARCH
2002SEPT
2003MARCH
2003SEPT
2004MARCH
2004SEPT
2005MARCH
Patie
nts
wai
ting
mor
e th
an s
ix m
onth
s
Reduce average wait
Mean and median waiting times: Inpatients+Day cases: England
0
1
2
3
4
5
6
7
8
9
10
1988 1988 1989 1989 1990 1990 1991 1991 1992 1992 1993 1993 1994 1994 1995 1995 1996 1996 1997 1997 1998 1998 1999 1999 2000 2000 2001
Mon
ths
Mean
Median
Reduce variations in waiting
West SurreyWest Sussex
Redbridge & Waltham ForestEast SurreyEast Sussex
East KentNorth Cheshire
Bexley , Greenwich & BromleyWest Kent
AvonLambeth, Southwark & Lewisham
Barnet, Enfield & HaringeyCroydon
Cornwall & Isles of ScillySouth and West Devon
SuffolkBarking & Havering
BedfordshireNorth Essex
East Riding & HullSouth Cheshire
North & East DevonWiltshire
Brent & HarrowHerefordshireHertfordshire
StockportSalford & TraffordNorthamptonshire
Kingston & RichmondBuckinghamshire
LeedsWorcestershire
I of W, Portsmouth & SE HampshireNorth Cumbria
OxfordshireWakefieldSheffield
Southampton & SW HampshireBerkshire
South StaffordshireMerton, Sutton & Wandsworth
South HumberHillingdonSomerset
Morecambe BaySouth Essex
NorfolkNorth & M id Hampshire
ManchesterLincolnshire
North DerbyshireCambridgeshire
South LancashireEaling, Hammersmith & Hounslow
East LancashireSefton
TeesEast London & City
Wigan & BoltonNorth Yorkshire
North NottinghamshireLiverpool
Bury & RochdaleSouthern Derbyshire
SolihullCounty Durham & Darlington
ShropshireNottinghamSunderland
WirralBradford
WarwickshireCamden & IslingtonNorth Staffordshire
LeicestershireCoventry
St Helens & KnowsleyNewcastle & North Tyneside
North West LancashireNorthumberland
Gateshead & South TynesideWolverhampton
West PennineKensington, Chelsea & Westminster
GloucestershireBirmingham
DudleyCalderdale & Kirklees
BarnsleyWalsall
RotherhamDoncasterSandwell
Dorset
ENGLAND
0% 20% 40% 60% 80% 100%
Percentage waiting less than 6 months
Percentage of patients w aiting less than 6 months for an inpatient admission, 2001/02 (Q2)
5 (i) SIX MONTH INPATIENT WAITS
...a fair process?
• Clinical need (urgent, soon…er…never?)• Scoring system?
Choice
• Economics: study of behaviour of people with choices
• Sociology: study of behaviour of people with none
Choice: current policy
• New policy objective for the NHS?• National cardiac care choice scheme• London patients choice project• How did we get here?• Implications for financial flows
Choice in the NHS: some issues
• Choice vs other system goals (eg equity, efficiency)• Choice of what?• Limits to choice?• Information (eg asymmetry and knowledge)• Relationship between principle and agent
Efficiency, competition, incentives
• Target to reduce waiting times...• ...Patient choice...• ...Financial flows….
= Fixed price contract market!?
Fixed (HRG) price market
• Implementation?– What tariff?– What period?
– Rules of engagement?
Fixed (HRG) price market
• Benefits– Incentive to increase volume– Reduce private sector prices– Cut costs/improve efficiency
Fixed (HRG) price market
• Costs– Quality/cost trade off– Exit from market– Mergers– Cross subsidisation within hospitals– Unavoidable costs/inefficiency– Regulation/monitoring/transaction costs
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