Healthcare spending has increased in most nations, requiring an increasing share of the gross domestic product (GDP). There are a number of explanations for this, including expensive technological and medical advances.
In other sectors, technological advances often lead to cost reductions, whereas in healthcare the discovery of new treatments usually results in cost escalation.
Despite the increasing costs, support for the NHS is strong. This is understandable. What is more important than good health?
Under Labour governments (1997-2010) annual healthcare spending increased by an average of 5.6% in real terms (discounting inflation) as opposed to just 1.3% in subsequent Conservative-led governments (2010-2016). An increase of 1.3% is inadequate: the average real term increase in the previous 60 years had been 4.1%.
Healthcare spending has increased recently to meet the demands of the Covid pandemic, but we are now returning to the pre-Covid spending trajectory despite the worsened health crisis and the longer waiting lists.
Under the latest Conservative budget, the average annual increase in healthcare spending will be 2.9%, which is still inadequate, according to the Institute for Fiscal Studies report on NHS funding (December 2022).
Why the underfunding?
Occasionally some conservative politicians drop the mask, as when Sajid Javid argued that the NHS is on ‘unsustainable financial trajectory’. Peddling the myth of the NHS being unaffordable or a “bottomless pit” is used by some to justify underfunding.
Sajid Javid’s argument that the NHS needs reforms, rather than more money, is a weak one. Of course, the NHS needs to increase productivity. However, this is an ongoing strategy that has been underway for decades and it does require investment.
What is needed
The role of nurses, for instance, has been enhanced by creating new roles such as nurse practitioners and nurse consultants, thus allowing medical staff to be more productive. NHS staff has driven the modernisation, but this process becomes more difficult when the NHS is always on an emergency footing.
Funding the NHS is a challenge that we can meet. First of all, we need strong economic growth without the damage of Boris Johnson’s hard Brexit and Liz Truss’s budget statements: both have reduced tax revenues.
Secondly, increased spending is required to resolve hospital “bed blocking” caused by lack of social care arrangements in the community. The Conservatives’ anti-migration policies have made recruitment to social or healthcare vacant posts more difficult.
We also need to enhance the role of patients, a strategy called “patient activation”. With education, and better access to their health records, many patients with chronic conditions could actually manage some of their problems without having always to fall back on the NHS.
Living longer does not necessarily increase healthcare expenditure as many of the healthcare costs are in the last few years of our life, regardless of how long we live. Healthcare spending, though, is significantly affected by the increase of chronic diseases such as obesity, diabetes, osteoarthritis, and dementia.
Some Conservatives have fantasised about funding the NHS through health insurance rather than taxation. In developed nations healthcare is funded with different combinations of taxation, insurance contributions and user payments: each model has advantages and drawbacks.
However, our parliament has looked at the different healthcare funding options and concluded in 2017 that our tax-funded model “has substantial advantages in terms of universal coverage and overall efficiency”.
We can afford increasing health and social care spending, particularly if we move away from policies that damage the economy and embrace both modernisation and vigorous public health policies, whilst enhancing the role of patients.