The Outlook for NHS Funding
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Transcript of The Outlook for NHS Funding
The NHS Funding Challenge‘productivity isn’t everything, but in the long
run it is almost everything’ - Paul Krugman
Anita Charlesworth
Chief Economist
5th February 2015
Public spending on health in the UK, in real terms
and as a percentage of GDP (2014/15 prices)
2
Average yearly change in UK health spending over
different parliaments (2014/15 prices)
3
The annual change in English NHS spending since
2009/10
4
Public and private health care spending in the UK
(£bn) – 1997-2012 (2014/15 prices)
5
Total health spending as a percentage of GDP for
the EU-15 countries, 2000 and 2012
6
Average annual percentage change in health
spending per head in real terms, 2008-2012
7
Meeting the Challenge – the NHS approach
8
Reducing input costs
National public sector pay policy
Reducing administrative costs
Reducing prices of pharmaceuticals
Improving technical efficiency
Real terms reduction in the unit prices paid for hospital care
More competitive tender and choice based competition for NHS
funded care
Improving allocative efficiency
Shifting care from hospital to community settings
Better integration of care
Demand management
Where is the NHS now?
9
Overall NHS in balance last year (just £247m under-spend for DH as a
whole in 2013/14).
Quality broadly being maintained but cracks beginning to appear.
But significant pressure points.
Specialised services budget over-spending.
Access targets getting more difficult to sustain.
66 NHS providers in deficit in 2013/14 – almost 141 at Q2 2014/15.
Most have a small deficit but up to 20 with large, persistent deficits.
40% of acute providers in deficit in 2013/14, 80% at Q2 2014/15.
Surpluses falling, EBITDA and CIPs lower and a reliance on one-off
savings building cumulative underlying deficits.
2014-15 very difficult for the service to recover and not overspend.
-2%
-1%
0%
1%
2%
3%
4%
5%
2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 Annualaveragegrowth
Productivity Growth Year on Year
Annual change in English NHS productivity
10Source: Centre for Health Economics, Research Paper 94
Annual change in English NHS funding, 2010/11
to 2015/16, following the 2014 Autumn Statement
NHS administration costs from 2009/10 to
2015/16, real terms
12
Percentage change from previous year in funding
for a range of services
13
Purchase of health care from non-NHS providers
from 2006/07 to 2013/14 (2013/14 prices)
14
Annual change in the number of nurses from
2011/12 to 2013/14
15
Average NHS staff earnings from 2009/10 to
2013/14
16
Net reported year-to-date surplus/deficit by
sector, 2014/15 Q2
17
Quality, Innovation and Productivity (QIPP)
savings, 2011/12 to 2014/15
18
Public spending on health in the UK, as a percentage
of total public spending
19
NHS England estimates of funding pressures facing
the NHS in England by the end of the decade
20
Health care outputs, inputs and productivity estimates
for the UK, 1995-2010 (index numbers 1995=100)
21
Projected funding gap for English NHS in
2030/31 under three assumptions for productivity
22Source: The Health Foundation (2015)
Funding pressures on English NHS in 2030/31
(2014/15 prices)
23
OECD projections for average public spending on health for
EU15 countries, as a percentage of GDP between 2006 and 2010,
with projected spend in 2060 under both cost-containment and
cost-pressure assumptions
24
Conclusions
25
The NHS has been protected from the full impact of the government’s austerity
drive to tackle the fiscal deficit. Despite this, the service is showing growing signs of
financial distress and in December 2014, the Government found itself having to
inject significant additional resources into the service for both 2014/15 and 2015/16.
After the election, all political parties are committed to reducing the fiscal deficit,
which will involve cuts to public spending. Health care now accounts for almost £1
in every £5 of government spending – just sustaining, let alone improving, the
quality of care while delivering fiscal balance will be one of the major challenges
facing any incoming government.
NHS England has set out an ambitious programme of reform for the NHS in the
recent Five year forward view. This is designed to improve the system’s productivity
and modernise care to ensure that it meets the needs of an ageing population with
growing rates of chronic disease.
There is no doubt that change on this scale is required. The key question is can it
be delivered quickly enough to unlock the required productivity savings. Under NHS
England’s most demanding productivity assumption, they recognise that the NHS
will still need an addition £8bn extra over and above inflation by 2020/21.
Conclusions
26
An incoming government needs to:
Provide meaningful support for rapid progress on the new models of care set out in the Five year
forward view. A key part of this support will be to establish and resource a ‘transformation’ fund to
provide the financial assistance necessary to underpin change.
Commit to the additional annual funding for the NHS specified by NHS England, which rises to £8
billion of additional funding over and above inflation in 2020/21, while recognising that this is a low
estimate and if pay pressures turn out to be higher than anticipated, the NHS will need further
resources to maintain quality and access.
The funding challenge facing the NHS doesn’t disappear beyond the current parliament
even if the NHS succeeds in implementing the vision set out in the Five year forward
view.
Even with unprecedented productivity improvements of over 2 per cent a year the funding
pressures facing the NHS would rise to £48 billion more than inflation by 2030/31.
Our central estimates using the recent trend of 1.5% productivity improvements see funding
pressures increasing to £65 billion more than inflation by 2030/31.
If successive governments are to meet these pressures NHS funding needs to grow
slightly faster than GDP. Over recent decades other public services have reduced as a
share of GDP, creating headroom for the health service without the need to increase
taxes. It is difficult to see how this can continue indefinitely and there needs to be
societal agreement about how to sustain the health service in the longer term.
The four steps used to project funding pressures
Regression results
28
Model: AE OP
Age split: 0 01-19 20-49 50-84 85+ 0 01-19 20-49 50-84 85+
Intercept -0.6403 -0.6555 -0.2141 -1.764 -1.2116 -0.3276 -0.459 -0.5608 -1.0967 0.9262
Female -0.1843 -0.1687 -0.1061 0 0 -0.1762 0.0224 0.7969 0.0464 -0.2718
Agecat 0 -0.0607 -0.112 0 0 0 0.022 0.0104 0.0991 0
Diedinyear 0 0.2948 0.7057 0.2715 -0.1321 0.1983 0.7421 0.1455 -0.483 -1.0498
Gor_B 0.2138 -0.0508 0.0542 0.0961 0.1369 0.1089 -0.1299 0.0356 0.1153 0.1269
Gor_D -0.0313 -0.1905 -0.1857 -0.0974 -0.0063 -0.0888 -0.1455 -0.1782 0.0039 0.0653
Gor_E -0.1832 -0.295 -0.2692 -0.1582 -0.1264 0.0306 -0.2367 -0.183 -0.0559 -0.047
Gor_F 0.0546 -0.1564 -0.0331 0.0471 0.0689 0.2798 -0.0566 0.088 0.1964 0.1982
Gor_G -0.2545 -0.4819 -0.4141 -0.253 -0.1051 0.1938 -0.2372 -0.1661 -0.0715 -0.0564
Gor_H 0.3691 0.0308 0.0054 0.3736 0.3134 0.1484 -0.0777 0.0759 0.3236 0.4349
Gor_J -0.3327 -0.459 -0.3825 -0.1739 -0.0619 0.2504 -0.2298 -0.2413 -0.1213 -0.0662
Gor_K -0.3657 -0.3064 -0.2747 -0.151 -0.1981 0.057 -0.0668 -0.1598 -0.0016 0.0583
J_Diab 2.0715 1.3932 1.6104 1.3196 1.0511 0 2.2116 1.8219 1.2987 0.7136
J_Copd_Asthma 1.0337 1.5459 1.5297 1.6106 1.2884 1.19 1.5803 1.436 1.1796 0.6371
J_Arthritis 1.4887 0.9166 1.2038 1.2692 1.2351 0 2.7632 1.9332 1.4955 0.6891
J_Epilepsy 1.7454 1.719 2.0015 2.0342 1.465 2.0379 2.3319 1.511 1.1205 0.6032
J_Mh 0 1.9026 1.9337 1.9558 0.7855 0 0.7935 0.3779 0.2489 0
J_Stroke 0.8288 1.3728 1.8504 1.8854 1.4531 2.1757 2.5433 1.5959 0.8992 0.3001
J_Renal 0 1.3425 1.5858 1.5909 1.3334 1.8159 2.9531 2.3834 1.5359 0.556
J_Cancer 0 0 0.9563 1.1081 1.038 0 1.6705 2.4636 1.9831 1.128
J_Dementia 0 1.6905 2.2441 2.1142 1.6198 0 2.1456 1.4409 0.2448 -0.173
J_Chd_Hf 1.0587 1.5335 1.8939 1.6331 1.3575 1.7884 2.5896 1.6087 1.1772 0.6634
J_Diab_Copd_Asthma 0 1.7557 2.0047 1.6978 1.4417 0 2.363 1.7367 1.3034 0.6125
J_Diab_Chd_Hf 0 0 2.0736 1.7209 1.41 0 0 1.9397 1.412 0.7075
J_Copd_Asthma_Chd_Hf 0 1.6316 2.4254 2.0786 1.5914 0 2.4526 1.7264 1.2406 0.7314
J_Copd_Asthma_Cancer 0 0 1.2425 1.6223 1.3101 0 3.696 2.6113 1.9732 1.1262
J_Multiple 0 2.2356 2.6384 2.1747 1.7851 1.619 2.5909 2.1024 1.3805 0.5233
Regression resultsModel: EL NEL
Age split: 0 01-19 20-49 50-84 85+ 0 01-19 20-49 50-84 85+
Intercept -3.0911 -2.9035 -3.6236 -2.3903 -1.3798 -0.1274 -1.6552 -2.5424 -3.6048 -2.0253
Female -0.3331 -0.0381 0.3052 -0.0636 -0.5792 -0.1872 -0.0455 0.1924 -0.0169 0.0235
Agecat 0 -0.0548 0.1073 0.0302 0 0 -0.2994 -0.0555 0.0369 0
Diedinyear 0 1.3189 -0.3864 -0.4784 -1.0779 0.7439 1.3486 1.0425 0.5855 0.1176
Gor_B -0.2163 0.0693 0.1332 0.27 0.2173 0.0455 -0.0722 0.0064 -0.0141 0.0467
Gor_D -0.4522 -0.0361 0.0073 0.1123 0.1765 -0.0907 -0.1913 -0.1002 0.0118 0.0554
Gor_E -0.3998 -0.1616 -0.0832 0.0834 0.1698 -0.0405 -0.3214 -0.1623 -0.0273 0.0532
Gor_F 0.2716 -0.1452 0.033 0.2478 0.1283 0.0776 -0.2473 -0.1158 -0.073 0.0333
Gor_G 0.1583 -0.1613 -0.0834 0.156 0.1589 -0.0823 -0.5078 -0.3375 -0.1081 -0.0372
Gor_H 0.1229 0.049 -0.091 0.2691 0.2312 -0.2392 -0.4926 -0.2614 0.0631 0.0956
Gor_J -0.2929 -0.1878 -0.234 0.0645 0.1602 -0.0726 -0.3531 -0.2542 -0.0247 0.0317
Gor_K -0.0279 0.0112 0.0496 0.2435 0.2663 -0.1416 -0.3755 -0.1928 -0.0693 0.0718
J_Diab 0 2.544 2.3993 2.0987 1.4491 0 3.4513 2.9732 2.4837 1.814
J_Copd_Asthma 2.3917 2.5127 2.1941 1.9535 1.3185 1.3183 3.0093 2.6959 2.7514 2.0378
J_Arthritis 3.1775 4.2375 2.9409 2.3424 1.5695 1.5861 2.6431 2.4063 2.428 1.9785
J_Epilepsy 3.6022 3.2657 2.0034 1.8165 1.2899 1.8695 3.3684 3.1692 3.0783 2.0691
J_Mh 0 0.9711 0.1642 0.1071 0 0 3.0474 2.5109 2.3812 0.9601
J_Stroke 2.5834 3.8182 1.993 1.1163 0.3526 1.2753 3.4446 3.4052 3.1883 2.239
J_Renal 2.1591 5.0979 5.2822 4.3031 2.4376 0.8138 3.6363 3.3981 3.104 2.1817
J_Cancer 0 3.788 3.9351 3.1234 1.8148 0 2.4094 2.4854 2.5009 1.8553
J_Dementia 0 2.4983 1.7571 0.7814 0 0 4.4186 3.6701 3.2308 2.3127
J_Chd_Hf 2.8109 3.1892 2.1599 1.8811 1.2379 1.5407 3.3538 3.4068 2.875 2.1599
J_Diab_Copd_Asthma 0 2.3739 2.3066 1.9488 1.0429 0 3.9546 3.2913 2.8791 2.1382
J_Diab_Chd_Hf 0 0 2.3935 1.9036 1.3684 0 0 3.4775 3.0018 2.218
J_Copd_Asthma_Chd_Hf 0 3.1661 2.2719 1.871 1.3322 0 3.0054 3.7611 3.2692 2.4
J_Copd_Asthma_Cancer 0 3.6543 3.8641 3.0159 1.827 0 0 2.8348 2.975 2.269
J_Multiple 2.733 4.0298 3.5188 2.614 1.2044 0.73 3.9302 3.8137 3.4138 2.5759
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