An unbalanced approach to funding healthcare puts long-term plans for the NHS at risk says Anita Charlesworth, director of research and economics at the Health Foundation
This is an edited version of an article that first appeared on the Public Finance website.
The marshmallow test is one of the most famous pieces of social-science research. A child is given a marshmallow, with the offer of a second marshmallow if they can wait 15 minutes without eating the first one. How good is the child at delaying gratification? In follow-up studies, researchers found that children who waited longer for the marshmallow tended to have better life outcomes.
It’s not just children who often struggle with delayed gratification; in many ways, this is one of the defining features of the UK economy – a preference for current consumption over longer-term investment. Recent ONS data shows that the savings ratio is at its lowest rate for over 50 years and the UK has a poor track record of infrastructure and business investment.
Sadly, such short-termism is not confined to the economy. We have a myopic body politic at a time when that is particularly problematic. Beyond Brexit, policymakers need to address a series of fundamental, long-term challenges including climate change, sclerotic productivity growth, an ageing population and the associated issue of inter-generational fairness.
In one area the government has tried to lift its sights and cast a longer-term view; to mark the 70th anniversary of the founding of the NHS, Theresa May committed an extra £20bn of funding over the next five years and the NHS produced its long-term plan for service improvement in England.
The NHS Long Term Plan sets out ambitious proposals to improve cancer and mental health. It seeks to deliver better value for taxpayers and to modernise health care. To meet growing hospital demand, it aims to shift towards more preventative care, and better co-ordinated care between hospitals, GPs and community health services. This shift in funding to improve mental health and primary and community services, while welcome, will constrain the growth in hospital budgets and, therefore, the amount of care they can provide.
In our latest briefing, Investing in the Long Term Plan: Job done? the Health Foundation finds that the long-term plan affords for hospital activity to grow by around 2.3% a year over the next five years, below projected demand pressures and recent trends – hospital demand has increased by 3% a year since 2010/11.
A new survey of NHS managers by the NHS Confederation shows wide-scale support for the plan, including its aim to reduce the growing demand for hospital care through better integration and prevention, but NHS managers are not confident that it will happen. There is a real risk that the laudable ambitions of the NHS will not be realised due to the tendency to prioritise current consumption over investment spending.
The £20bn cash injection for the NHS in England is ring-fenced for front-line health services, which is mainly the wage bill and the cost of medicines. The government explicitly excluded longer-term investment spending which covers things like the maintenance of buildings, IT, the purchase of X-ray equipment, CT and MRI scanners, the budget for training new doctors and nurses, and funding for public health interventions like smoking cessation. Funding gaps in these budgets are less immediately obvious to patients but they are make-or-break in the drive to improve productivity and ensure the longer-term sustainability of the NHS.
Recent years have seen an increasing shift in the balance of NHS funding away from investment spending. Prevention and staff training budgets have been cut with the result that we have 40,000 fewer nurses than we need. NHS capital budgets have been raided for six years in a row to plug deficits. Many other comparable countries, including Sweden, France and Germany, have rates of health care capital expenditure at least 50% higher than the UK.
Decisions on capital funding, budgets to train new doctors and nurses and public health, were all parked for the 2019 Spending Review, due to start this summer and conclude in November’s budget. With political turmoil over Brexit, and the change in Conservative party leader, the review is delayed and it’s unclear when the government will be in a position to make long-term spending decisions.
This unbalanced approach to planning health funding – setting out a long-term commitment to consumption spending but piece-meal, short-term decisions on investment spending – defies economic logic and it puts at risk ambitions to improve both the quality and productivity of health care. For example, recent research shows that late diagnosis is one of the main reasons that cancer outcomes in the UK have lagged behind other countries. MRI and CT scanners play a key role in cancer detection and diagnosis. We have the lowest rate of such scanners per head across the EU and G7 nations and it would require £1.5bn of capital investment to match average provision.
The task of reforming the NHS is both urgent and long-term – delaying gratification is hard. Like all countries, in England, there is a deficit between estimates of what is required to meet growing health needs and the revenue available. But if we are to achieve greatest value for lowest health care cost, a rebalancing of current consumption and long-term investment is essential.