Transcript Economic Issues in the NHS

Economic Issues in the NHS
John Appleby
Chief Economist
King’s Fund
What issues?
• Spending
• Choice
• Efficiency, productivity, competition and
incentives
1: Spending
Current spend
Realistic spending range?
£0
£1,000 bn
Full range of spending options
How much should we spend?
Benefit
Total resources available
C
Fast cars (£z-y)
B
Health care (£y-x)
Education (£x)
A
x
y
z
Cost
…and now with real data..
Benefit
Total resources available
?
Cost
Pledge/promise…er..aspiration
Total Health care spending as % of GDP $PPP
12.00
Austria
10.00
Belgium
Denmark
Finland
France
Germany
Greece
6.00
Ireland
Italy
4.00
Luxembourg
Netherlands
Portugal
2.00
Spain
Sweden
U.K.
0.00
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
Per cent
8.00
TOT EU
Will we get there?
Total health care spending as a proportion of GDP:
actual and projected
EU (excluding UK) projections
12
UK spend
10
UK projections
9
8
7
6
Projected
UK spend
5
Planned
UK spend
4
3
2
1
2005
2003
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
1965
0
1963
Per cent GDP
Projected EU spend
EU (excluding UK) spend
11
Spend what we can afford?
Projected health care spending per head and GDP
per head: EU countries: 2001
Total health spending per capita
(US$PPP)
3500
y = 0.0841x0.9949
3000
R2 = 0.7618
2500
2000
EU average: $1.834
1500
UK
1000
12000
17000
22000
27000
32000
GDP per capita (US$PPP)
37000
42000
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
13
12
Per cent GDP
11
10
9
Historic
8
Slow uptake
7
Solid progress
6
Fully engaged
5
4
1977/8
1982/3
1987/8
1992/3
1997/8
2002/3
2007/8
2012/13 2017/18
2022/23
...Brown accepts
Percentage change in UK NHS real and volume
spending
Real change: Per cent
10
2.1% pa
Thatcher/Major
4.1% pa
Major
Blair
2.6% pa
4.8% pa
Blair
7.4% pa
10
9
9
8
8
7
7
6
6
5
5
4
4
3
3
2
2
1
1
0
0
83- 84- 85- 86- 87- 88- 89- 90- 91- 92- 93- 94- 95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 05- 06- 0784 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08
Volume change: Percent
Thatcher
Issues for Wanless II
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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...
Healthhealth 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?
2: Choice
• Economics: study of behaviour of people with
choices
• Sociology: study of behaviour of people with none
Choice: current policy
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•
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
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Choice vs other system goals (eg equity, efficiency)
Choice of what?
Limits to choice?
Information (eg asymmetry and knowledge)
Relationship between principle and agent
Choice and trade offs
• Early results from LPCP
• Conjoint analysis/Discrete choice experiment
• Values trade offs patients willing to make in order to
take up offer of quicker treatment
Trade offs
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Travel time
Transport arrangements
Reputation
Follow up care
Efficiency, productivity,
competition, incentives…
• Target to reduce waiting times...
• ...Patient choice...
• ...Financial flows….
=> Fixed price 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
Productivity
• Policy problem: NHS productivity is falling
• …based on traditional productivity measures
Falling productivity
NHS productivity and funding: English NHS
140
Index (1990/91=100)
135
Cost w eighted activity index
130
Funding adjusted for NHS inflation
125
Cost w eighted efficiency index
120
115
110
105
100
95
90
1990/1 1991/2 1992/3 1993/4 1994/5 1995/6 1996/7 1997/8 1998/9 1999/0 2000/1
Why has productivity fallen?
Extra funding…
• Absorbed by higher costs (rather than higher
outputs).
• Invested in services and activities which may take
some years to be reflected in increased outputs.
• Increasingly channelled into activities not captured by
the productivity measure.
• Used to increase the (unmeasured) quality rather
than the (measured) volume of outputs.