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What is costing the NHS?

    Since the founding of the NHS the UK has gone through a period of intense demographic change – the population today looks very different to the one the NHS was established for in 1948. It is well publicised that the service is now facing severe cost pressures. These pressures are exerted by a variety of factors and jeopardise the long-term sustainability of public healthcare. These factors can only be overcome through careful examination and adaptation of NHS services. 

    Between 1997 and 2013, public sector healthcare spending doubled in real terms, from £63.8 billion in 1997 to £127.5 billion in 2013, and out of pocket private sector expenditure has increased in real terms from £15.6 billion in 1997 to £25.5 billion in 2013, an increase of almost two thirds. 

    Figure 1: UK Healthcare Expenditure in Real Terms, 1997 to 2013


    Source: The Nuffield Trust

    Investment has yielded results by many measures, avoidable deaths are down 20%, cancer survival rates are at record levels and 12,000 more health professionals have brought waiting times down. The fall in the share of the private sector in healthcare expenditure reflects the direct effect of rising government spending and the fact that, increasingly, the NHS is seen as a viable substitute to private healthcare. The Commonwealth Fund, a private health foundation, rated the UK health system the best out of 11 industrialised countries and the UK still spends a lower proportion of its GDP on healthcare compared to many of its OECD peers. However, in spite of this investment, under our current healthcare model the NHS is still facing immense budgetary pressure, with a predicted £30 billion funding shortfall between current patient needs and resources available by 2020/21.  

    Figure 2: Health Expenditure of selected OECD nations 1970-2013


    Source: OECD

    The causes of this budgetary pressure are well known. In the UK, 57.6% of men and 51.2% of women, have a BMI of over 25, classifying them as overweight, obese and morbidly obese. This brings with it an increasing rate of weight related illnesses such as diabetes, strokes and heart disease. The number of coronary bypass surgeries performed in the UK has increased from 2,297 in 1997 to 16,792 in 2012.

    Figure 3: People aged 90 and over per 1000 population, 1984 to 2014


    Source: ONS

    Baby boomers born after the end of the Second World War are now approaching 70. Increasing life expectancy, means the number of very old is increasing as well. There are now 550,000 people over 90 in the UK, compared to 187,000 in 1984, thus NHS faces growing pressure from age related diseases such as dementia, cancer and osteoporosis. The nature of many of these age related health issues also means they are incredibly expensive to treat and manage. If the NHS is to continue in its current form a greater amount of resources must be allocated to treating later life disease and co-ordination between health and social care must be greatly improved.

    A smarter use of technology could be one way of ensuring the NHS is able to use its resources to their full potential, an example being a successful trial of Skype consultations as a way to initially assess a patients requirements. However the trend in healthcare has been for innovation to increase costs further. Whilst there has been significant research in expanding the frontiers of what is medically possible, and this is a good thing; and something the UK has been at the forefront of throughout the 20th century; each innovative face transplant and plastic heart valve is a cost for the NHS. Researchers have found just 0.5% of studies on new medical technologies are spent on evaluating technology that works just as well as existing technology, but costs less, and the isolation between patients and many physicians from the costs of medical treatment inhibits their ability to allocate resources efficiently.

    It is doubtful that going into the next century, the government will be able to maintain the increases in NHS spending that we have seen over the last 25 years. We need to critically examine what we expect from the NHS, in the face of continuing and future pressures, and ensure that NHS structures incentivise all stakeholders to use resources efficiently because in healthcare the opportunity costs are simply too high. 

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