Good Evening Ladies and Gentlemen. Thank you for the opportunity to come and speak to you today.
I want to talk a little about three things:
First there are some major changes that are taking place in our society which may have serious implications for the picture on healthcare. Over the next fifteen years or so, life expectancy is likely to increase by about 4 years, up from roughly 79 years to around 83 years for men. And for someone entering the workforce now, they are likely to hit the high eighties if they are a man and their nineties if they are a woman.
Now if I were a health economist, I might regard all this as a bad thing. However, being an ordinary mortal, I can’t quite bring myself to see it this way. I can’t help but be glad that I am likely to live to a ripe old age. Health economists tend to be gloomy about it though because of the pressures it seems likely to place on the NHS. The thought is that older people tend to be major users of healthcare services, and so the older people there are, the greater the burden on the NHS is likely to be. I think this argument is overstated. You can easily make the case that ageing is not likely to be the main driver of health care expenditure in future. There is some evidence to suggest that while the overall number of older persons is likely to increase in the UK, the impact, on future demand for health care may be mitigated to some extent by improvements in the overall health status of these older people. Most demand is placed on the health services in the last year of a person’s life. And these is some evidence that suggests that this is the case whether a person lives to be 60 or 90. So an older population need no necessarily mean a sicker population.
However we can’t dismiss the impact of demographic factors altogether. A more worrying result is the change in the balance between the numbers of retired people (who pay no tax) and the working population, who do. The ratio of pensioners to those of working age is likely to change from about 1 oldie to 4 workers, to about 1 to 2 by 2050. What we are likely to see is a mismatch between ‘net contributors’ to the NHS (younger, healthier, tax payers) and ‘net consumers’ (older, less healthy, non-tax payers) putting pressure on the NHS finances. Overall then, while it is clear that health care expenditure is at least sensitive to the impact of demographic change, some of the most doom-laden predictions that suggest an ageing population will have a catastrophic impact on the healthcare system are almost certainly false. I think we should be much more worried about the pressure on healthcare resources over the coming 20 years as a result in advances in new medical technologies and medicines.
Again this is a good news story masquerading as bad news. It is a very good thing that it appears that we can look forward to rapid progress in the treatment of some of the most difficult diseases, such as cancer and genetic disorders. So I want to be clear – this is a good thing. However, the development of new medical technologies, such as very expensive and specific cancer drugs will be a fundamental driver of healthcare expenditure over the next 20 years. In particular refinements of genetic technology may yield significant new treatments and diagnostic tests. The treatments themselves are likely to come to market with hefty prices tags since they will represent the culmination of vast research and development programmes.
In addition, the improved diagnostic tests are likely to cause higher downstream costs as many patients currently diagnosed ‘too late’ will be diagnosed ‘in time’ and will be candidates for treatment. This again is something to be pleased about, as it means more people will be successfully treated, but of course it also means that more pressure will be placed on the healthcare budget. This is going to present some serious political challenges. I’m sure many of you remember the public outcry that occurred when it seemed that the cancer drug Herceptin might not be made available on the NHS (I’m certain that my fellow speaker Sir Michael Rawlins will remember the outcry all too well!). NICE was created to rationalise the process of decision making here – to try and bring objectivity to the debate. But that, of course, has not made it any less controversial.
A third trend that may further push up the cost of proving healthcare over the next 20 years is the way in which our expectations are changing. It is clear that people do expect more from their public services now than they did 20 years ago. There are three separate reasons for this. First is our experience of the public sector services. We are used to 24 hour banking and online shopping for example – to services which are fitted around our busy lives. And we are used to a much higher standard of facilities including comfort than our parents or grandparents generation. We are likely to judge the qualify to services we get in the public sector against this benchmark, even while accepting that our services may not always be able to meet those standards.
The second reason I would cite is the slow death of deference in our society. We are quite rightly not prepared to defer automatically to figures in authority, such as doctors and more prepared to question what our doctor says. This trend has been exacerbated by the explosion of information that has been made available through the internet. They therefore expect more say and control over how they are treated. The third element pushing up patient expectations arises not from broad social developments, but from a change in approach by government itself. Government reforms have attempted to make the NHS more patient-centred. Government rhetoric has promoted this view, which is that the NHS should be the servants of the patient, rather than the patient needing to adapt to the system as it is.
Now in my view this is how it should be – not just because it is more convenient for the patient but because we know that putting patients in control of their own healthcare improves outcomes. But this has had an effect on how people, particularly younger people, view the NHS. Not much work has been done to date on the way in which public expectations will change in the future and the impact this will have on the health service. But it is certainly a serious option that rising public expectations may add significantly to cost pressures on the NHS. I have thus far sketched out how three trends – Demographic change, the development of medical technologies, and rising public expectations – will challenge the health service in England over the next 20 years. The question this is how can the healthcare system adapt to deal with these pressures? Or can it adapt at all? For example, a report produced by BUPA and Nera Economics entitled ‘Minding the gap’ predicted an £11b funding gap by 2015, working on the assumption that the NHS would continue to provide what it currently provides. Well let me say a little about some of the “usual suspects” in policy terms that are wheeled out in response to the claim that health demand will outstrip our ability or willingness to pay for it. There are 5 of these in all.
Suspect No.1 is social insurance. There are those who argue that future demands on the health service will be such that continuation of a tax funded service free at the point of use is not feasible for the long term. They call for a radical change in our approach to healthcare, introducing a social insurance arrangement as seen in countries such as France and Germany. On this model, funds are raised predominately from employers and employees. They point out that user satisfaction with healthcare in France is pretty high, as are outcomes. However critics of this approach point out that the cost of healthcare in France is very high indeed compared to the UK. But the costs of this system are high compared to the UK.
Suspect No.2 is private insurance – the US model. In fact there are very few people who seriously propose this as the dominant model for healthcare these days, given the American experience of rising costs and profound inequalities.
Suspect No.3 is co-payments and charges. Another popular response has been to call for introduction of co-payments for additional services or extra services such as GP out of hours appointments home visits, hospital diagnostic tests or non-generic drugs. As an aside, I have to say that co-payments is a terrible misnomer – actually what we are talking about is people paying twice – once through taxation and second through charges. So for instance you would pay a charge of £20 if you wanted to visit your doctor between 6-9 in the evening. The argument in favour is that co-payments would both be an additional revenue stream whilst also restricting demand from the ‘worried well’. However there is concern that co-payments would undermine the founding principles of the NHS leading to a two-tier health service with vulnerable patients, not the ‘worried well’, dissuaded from seeking healthcare. There is also an argument that the costs of administering co-payments would make any extra revenue and savings marginal – are co-payments simply fiddling at the edges when more dramatic reform is needed?
Suspect No.4 is at bottom a very similar argument. Rather than raise charges on some NHS services, it goes, we should limit the number of things which the NHS provides, through the introduction of a core package of treatments. Anything not on this list would have to be funded privately, or through an add-on social insurance scheme. Those who argue in favour point out that defining a core package could improve efficiency and control the spiralling costs of providing healthcare, whilst at the same time improving honesty and transparency about the scope of NHS provision. However, such a task would be beset with conceptual, practical and political difficulties. International attempts at setting out a core package of health services in countries such as New Zealand and Holland have not been terribly encouraging. And in Britain, where health care provision is politicised to a degree not found in almost any other developed nation, it would be even harder. Both mainstream parties are extremely wary about taking responsibility for clearly defining the boundaries of NHS care, since this will unavoidably involve alienating sections of the electorate. It may also be taken as a ‘binding promise’ to citizens to provide everything that is on the menu, which could pave the way for costly legal challenges were gaps in provision to emerge.
Suspect No.5 is top-ups. In practice this means allowing NHS patients to add to their publicly-prescribed treatment by buying certain drugs or treatments from the private sector. So for example if NICE’s analysis found that the efficacy of a particular new drug did not warrant it being prescribed on the NHS, patients would have the right to buy that drug themselves – and importantly, to have their consultant or GP continue to manage their treatment. In my view, this is where the real pressure on the NHS is going to come over the next few years. Up until now, in most areas, the distinction between public and private treatment has been quire stringently maintained. But with the media being prepared to campaign for particular drugs or treatments to be made accessible, this might be where the damn is breached. It might certainly look like a political win for a party in opposition to call for this strict public-private boundary to be broken down. This would be highly controversial however, since there is a real concern that this would lead to a two-tier health service, and would undermine the principles of the NHS.
So I have set out five common responses to the challenges facing the health service over the next 20 years – Social insurance, private insurance, co-payments, a core package and top-ups. All of these options have serious problems and, in their different ways, all would mean the end of the NHS as we currently know it. So are these the only routes open to use to meet the challenges of new medical technologies, an ageing population and rising patient expectations?
I would argue not, or at least certainly not yet.
There are a range of other steps we could take, before we start thinking about more fundamental reforms.
We need to look seriously at the potential for productivity gains in the NHS. Despite the considerable recent investment in the NHS, productivity looks pretty poor. Estimates range from +0.9- +1.6%. Now it may be that practices haven’t caught up with the flood of money that has come into the NHS, and that we may see productivity grow over time. This is not inevitable though. What we do know is that the most important factor in increasing efficiency is changing how medical professionals work. This is about behaviour rather than structures. Government needs to encourage changes in the way in which care is delivered, not the structure that surrounds it. But it cannot do this without drive and commitment from the medical professionals. Staff roles could be redefined to encourage greater flexibility. Nurses could take on a greater role in supporting people with long-term conditions, for instance. However, I have to say that the reaction of the BMA to proposed changes in working practices leaves me very despondent. They should bear in mind that if they are not willing to engage, and to work with health managers, to increase productivity, the long term implications could well be an erosion of the core functions of the NHS.
In a similar vein, we need to look at the way in which we use the NHS estate. Hospitals do not operate round the clock and GP surgeries are notoriously hard to access outside of working hours. Consideration should be given to how more value can be won from expensive healthcare facilities. Much could be gained here from an approach which allowed greater local innovation, while holding NHS providers to account for outcomes, rather than inputs.
We at the SMF are very interested in the scope of NICE to improve cost-effectiveness. I hope Michael would be pleased to learn that we are interested in giving NICE a bigger role and bigger resources to match. In any field of public services, there is a danger of “Legacy” services continuing to be funded simply because they have always been funded, irrespective of their effectiveness, and health is no exception. We would like to see NICE appraisals applied to existing technologies and practices which may no longer be appropriate or cost effective. NICE could also continue to expand its technology appraisals to include more assessments of preventative care that can be very cost effective. (I would be interested to hear what my co-speaker Professional Rawlins has to say on these points).
We also think there is considerable scope to improve the commissioning capacity of PCT’s and GP practices (through practice based commissioning). Although this is a better track record of commissioning in health than in other areas of the public sector, there is certainly scope for it to improve to develop an NHS that is: more responsible to local needs, more focused on prevention and promoting well being, provides better and more personalised care. To achieve this Commissioners will have to become much better at working with their local populations and building effective partnerships with clinicians.
Sir Derek Wanless in 2002 set out three scenarios for healthcare up to 2022/3 – slow uptake, solid progress and fully engaged. At the moment we’re somewhere between slow up take and solid progress, but it is important that we move closer to the fully engaged scenario. Much more needs to be done to encourage people to take greater responsibility for their health; it would be interesting to see whether the NHS constitution that might mark the 60th anniversary of the NHS will enshrine patient responsibilities, as well as rights. Much greater efforts need to be made to improve preventative care and tackle obesity and unhealthy behaviours. Public engagement with the service can be encouraged through patient empowerment. Over the next decade more emphasis must be placed on designing services around the needs of the individual. Direct payments and personal budgets need to be further devolved to individuals for long-term and chronic conditions, so they can choose what help they get instead of being chivvied into doing what suits the system. This will help foster a feeling of ownership over the health service, resulting in better engagement and more responsible behaviour.
In conclusion, it is not inevitable that the NHS is going to be eroded to a point at which it no longer provides an equitable service, free at the point of use. But what is clear is that, if the health service is going to adapt to the challenges what will be placed upon it over the next decade or so, we are going to need to see some significant changes. Politicians have to be more open about issues such as rationing and the fact that with a limited budget some treatments will not be available on the NHS. Medical professionals need to get real about the need to adapt. History is littered with the ghosts of trade unions which defended the short-terms interests of their members while damaging their long-term interests. I feel strongly that this is the case here. And we, the public, need to be brought into a debate about what they can reasonably expect from the health service, and what responsibilities we have towards the health service and towards ourselves.