Our insecure future health

nick cowen, 13 September 2007

In honesty, Sir Derek Wanless’ ‘review of NHS funding and performance’, released on Tuesday by the King’s Fund, tells us little we didn’t know already: that while there may have been ‘some clear and notable improvements’, the NHS, overall, is not getting much bang for its buck. ‘The NHS has failed to generate the relatively modest improvements in unit cost productivity that might have been expected’, concludes Wanless – much the same as that of previous King’s Fund publications, that of the QQUIP team at the Health Foundation, that of Reform, and even that of a tome by the author of this blog.

Still, the report is undoubtedly significant – firstly because it’s probably the most comprehensive assessment done thus far (managing to tot up some 284 pages of stats and commentary), secondly because it states squarely just how much the NHS’ floundering productivity will cost in relation to what, in Wanless’ eyes, could reasonably be expected (astoundingly some £46.5bn by 2022/3 in real terms), but thirdly just because of who the author is. As Nigel Hawkes has pithily written in The Times, ‘the Prime Minister may come to regret ever involving Sir Derek Wanless in the NHS. His first report was supposed to spare Gordon Brown’s blushes at pouring money into unreformed services…the last thing he wanted was for Sir Derek to turn his beady eye on how that money was spent’. Wanless has kudos, and his report is damning.
Not to put too fine a point on it: things may have got better, but so much money has been wasted along the way. Nearly half the £43bn extra funding since 2002 has gone on pay contracts that have had minimal effect on output. Instead unit cost inflation has been exorbitant. Between 1998/9 and 2005/6, for example, spending on elective and emergency services rose by 56%, yet activity only increased by 12%. Wanless provides a stark illustration of what this has meant: ‘had unit costs decreased in line with [his] 2002 review’s assumptions, then in 2005/6 the same level of activity (11.8m finished consultant episodes) would have cost £1bn less – equivalent to an additional one million emergency and elective patients’. This is pretty astonishing, perhaps indicative of which is the worrying fact is that by far the largest source of overall growth in hospital activity has not been planned or day case surgery, but emergency admissions, with a net increase of around 1.6m (35%) between 1998 and 2005. This is probably a symptom either of the system not identifying health problems early enough, or of the disarray that out-of-hours care is now in following the GP contract.
Real unit costs have also increased for outpatients (by 28%), for mental health services (probably by at least 10%); no-one really knows about primary care because data collection is inadequate.
So what, you might say, if the quality of care provided has gone through the roof. But better quality is very unlikely to offset the massive hikes in unit costs – particularly if we take the line of Dawson et al. at York University that the value of waiting time reductions has achieved very little to a quality-weighted measure of NHS output. Wanless is forced to concede that ‘the lack of routinely-collected data on the change in patients’ health status arising from NHS interventions [and the lack of monetary valuations on these changes]…hampers development of NHS output and productivity measures’, which is true. No adequate measures of quality yet exist. But the best available study thus far – that by York/NIESR – estimates that incorporating what data we have on improved survival rates for patients, improved health gains for patients and changes in waiting times is equivalent to an additional average of 0.17% per year in increased output. Quality is improving – as Dr Foster’s research testifies, 95% of trusts in England have reduced their mortality rates over the past five years – but, particularly in relation to the massive cost increases, it’s not nearly enough.
Yet, after providing such a damning critique, the report’s conclusions are, it has to be said, somewhat gutless. For a start, it wants further spending increases on health care of at least 4.4% a year in real terms to follow Wanless’ 2002 review’s scenarios. But one must surely question the logic of pouring yet more money into a system that has proved so wasteful. The NHS is still a monopoly and will continue to display the response so ably highlighted in this report: overbuilding capacity, taking on too many extra staff and incurring lots of fixed costs rather than attempting meaningful efficiency gains.
Wanless argues that we need to give the ‘new combination of levers to enhance performance a chance to prove itself’ and that it would be ‘dangerous to embark on further significant change’. Of course, few would argue that the reckless pace of change and dis-change, and the ramshackle and oft little thought-out process of reform the NHS has been forced to endure, has had anything but a negative impact on how well the money’s been used. But the current structure won’t do either, because it is inherently contradictory.
Nominally, at least, there is competition for patients in the NHS between providers (both NHS and independent); providers get paid for the patients they treat, and patients can choose between them. Yet the system won’t permit it – there is no competition, only managed competition. Reforms have been pushed from the centre, by a government that is still obsessed with micro-managing the system through setting targets and budgets, and – unsurprisingly given history and the simultaneous ‘liberalisation’ and central direction – the system is fighting back.
Just today an article in the FT carried a worrying cry from the private sector increasingly asking itself ‘“whether we are wasting our time” in trying to build a business offering operations and treatments to NHS patients’ – since patients received the right to choose a private hospital in February, only 538 have had operations in them. PCTs are often not putting private hospitals on the choice menu or just referring patients to their own facilities, hospitals are putting pressure on consultants not to operate on NHS patients in private units and GPs still feel responsible for propping up their local hospital so refer patients there. Most patients don’t even know they have a choice and so don’t complain when they’re not offered one – yet until that is exercised there is no competition, and none of the subsequent incentives to drive up standards.
Of course – and this is the point that Wanless makes – the new system will inevitably need time to bed in. GPs and PCTs need time to develop world-class commissioning structures and patients, in time and particularly as better quality information and data emerges on health outcomes, will exercise their choice. That’s the theory anyway. But it’s unlikely to materialise. For one, the government already seems to be back-tracking on its commitment to competition; contestability is the word on the street once more and the ‘once-in-a-lifetime’ review of the NHS is stalling everything. But the real crux of the matter is that for however long the government has a monopoly on funding (for however long the NHS remains paid for through general taxation) the government will pull the purse strings, guessing and re-guessing which PCT requires what sum of money, guessing and re-guessing what the tariff should be for each treatment, and the NHS will remain a political football.
There is a difference, as Nick Bosanquet argues in a comment piece in the Daily Telegraph, between arguing that a tax-funded monopoly ‘probably produces the most even distribution of health care for the least expenditure’ and arguing that it ‘is guaranteed to provide the highest quality care or the most effective treatment for individual patients’. The NHS actually doesn’t really stand up to the former, but Wanless’ report surely shows it certainly doesn’t stand up to the latter.
There are other, much more effective ways of guaranteeing good quality health care to all; systems that can allow real choice and real competition to drive innovation and standards, while safeguarding care for those who cannot afford to pay for it – and those are well-organised insurance based systems.
James Gubb