Delivering a new health agenda

Healthcare is an expensive business and is set to become even more so. Derek Wanless’s projections demonstrated that health costs will increase to £137 billion, or 10.6 percent of GDP, in 2017. The challenge for health reform is not only to save money in the next few years, but to make the health service affordable for the 21st century.

Over the last decade the approach has been to avoid dealing with challenges by throwing more money at the NHS. As is well known the budget for the NHS doubled in real terms between 1999 and 2009 and accounted for 40 per cent of the total increase in spending in public services between 1997 and 2007. Yet rather than delivering proportionate improvements in health outcomes, too much of this increase in spending was simply eaten up by higher wage bills and over-investment in hospital buildings.

The parlous state of the public finances means that this approach of “spending not reform” cannot be sustained. This is a serious constraint – as the rising cost of treatments, growing patient expectations and an ageing population will put pressure on the health budget and mean that the service needs to make savings of £15 billion to £20 billion over the course of this Parliament.

Achieving efficiencies on this scale from total annual budget of £105 billion should be possible. Indeed, the size of the NHS budget means that no other departmental budget can offer the same scope for savings. There are, however, good and bad ways of saving money. Simply trimming budgets would lead to the disruption of services, more ad hoc rationing of care, rising waiting times and breakdown of specialist care. Top-down exercises to drive innovation and service redesign lead to local people feeling disenfranchised from the management of local health services. To address waste in the system and ensure that the NHS delivers value for money a new approach is needed.

The Government has set out a plan to radically reorganise the NHS. Current administrative structures will be torn down and GPs will be put in charge of around £80 billion of the budget. The jury is out on whether this will shake up the NHS so it better suits patients or whether this will be another radical “redisorganisation”, to use Alan Maynard’s coinage, without long-term progress.

What is clear, however, is that, given the poor state of the public and NHS finances, this is a high risk gamble. What is also clear is that, by choosing to reorganise the service rather than grasp the nettle on how health services are financed, the Coalition has missed the real opportunity for NHS reform. An honest debate is needed on how health services are funded. Other international countries have faced the need to consider the greater use of co payments and user charges, to define a core set of services that the public system provides and to encourage the greater role of insurance. It is time to catch up with these international debates.