In part two of his look at the future of the NHS, Peter Madigan asks what the next five years hold and if the excesses of today will give way to a financial emergency tomorrow
The NHS has grown fat. Bloated on the tens of billions it has ingested over the last six years, the health service, in keeping with the rest of society, has exercised little to justify its mammoth intake. This is not something that has passed the Government by, however.
According to Polly Toynbee and David Walker in their book Better or Worse, former health secretary John Reid nearly had "an attack of apoplexy" in October 2004 when the Office for National Statistics found that productivity in the NHS had fallen despite the spending increases.
In the same year it was estimated that the NHS could be making efficiency savings of £6.5bn by 2007-8 by making better use of staff time and cutting 720 civil service posts. While it is of course important that the Department of Health (DoH) identified these savings, perhaps dubiously, it has already started to factor these savings into its spending plans.
Belt tightening
In 2004-5, 7% of the UK annual growth funding for the NHS came from expected efficiency gains, according to DoH data. Given that the entire extra funding the NHS in England received in 2004 was £5.1bn, the fact officials estimate that by 2007 £6.5bn will be recovered when it would otherwise have been squandered is astonishing. It begs the question, how many millions are being wasted in the NHS today?
Efficiency savings, which already play a big part in the budget, are due to take on even greater significance within the next two years.
The massive funding injections that have seen the NHS budget grow by 7% a year in real terms in the last four years are to cease in 2008.
The exact funding plans for 2008-2011 were to be announced at the Comprehensive Spending Review later this year. The Treasury has, however, delayed the review until 2007, giving NHS managers just 12 months to get their books in order ahead of what will almost certainly be a dramatic drop in annual growth funding.
In January, the Financial Times claimed to have seen a leaked Treasury presentation that set out a strategic context for the Comprehensive Spending Review.
The document implied that the NHS would be very lucky to receive 4% growth in real terms and a figure below 3% was more likely. This is despite the fact that the Government-commissioned Wanless Report reported that the service would need real-term growth of at least 4.4% in the five years following 2008.
All levels of Government are aware of the massive inefficiencies that are blighting the NHS and are keen to plug gaps to ensure value for money. A major concern for healthcare think tanks, though, is that the Government may be using these savings as a political tool for two purposes.
The first is to stave off opposition claims that the extra money is being wasted and the second is to divert attention from one fact that is becoming increasingly plain: the NHS budget, even with the current massive investment, is incapable of meeting the challenges facing it.
Due to the cost of expensive new drugs, staff increases, pension rebasing, medical negligence claims, rising obesity and the ageing population, the extra money the service has received has only kept pace with these new challenges and not translated into the advances most were expecting.
Resource gap
A fall in annual growth funding to 2% or 3% will see the NHS unable to answer these tests effectively and inevitably the standard of care will suffer. The think tank, Reform, has calculated that in the next five years the NHS will receive an extra £11.4bn in total growth funding. Over the same period, however, cost pressures such as those mentioned above will amount to £18.2bn, leaving the health service with a £7bn shortfall.
This resource gap can only be expected to widen in subsequent years without sustained funding increases similar to those in the last five years. Throwing more money at the NHS is not a possibility as already 9% of national wealth is shortly to be spent on healthcare, and this is only possible due to the favourable economic conditions of the last decade.
Another problem may be presented by today's spending and the expense of the facilities we are currently investing in while the war chest is brimming. Hospitals currently under construction as part of Private Finance Initiative (PFI) schemes will not become operational until after growth funding has fallen away, meaning there will be a large jump in costs exactly in the period where the NHS will be least prepared to deal with them.
Indeed, even the concept of PFI has been questioned over whether it is value for money. According to Reform, when the scheme began in 1997 there were up to seven bidders for each contract. Now there is, on average, just one. With no competition, naturally there are concerns about whether the best possible deal has been agreed.
The recruitment drive currently underway may also emerge as another issue that could cause the Government embarrassment in a more efficient environment. Labour has proudly announced that thousands of new doctors have joined or are soon to join the NHS - but little heed has apparently been paid to the need for them.
Reform reports that by 2010, 5,750 doctors will be graduating but just 2,250 doctors will be retiring. After decades of under-provision we could find ourselves having more doctors than positions to give them.
Several think tanks, including Civitas and The King's Fund, believe the only way efficiency savings can truly be made and expenses brought under control is through competition, not only in PFI schemes but, crucially, also in the delivery of healthcare to patients.
The think tank highlights independent mobile cataract treatment centres that have treated eight time more patients a day than the NHS has traditionally managed and reduced waiting lists to three months. In addition there were 310,000 cataract operations in 2004-5 compared with 245,000 in 2000-1.
Harsh reality
Put simply, the NHS in its current form is unsustainable. The pressures being exerted from within the system and the demographic changes taking place outside it are building at a faster rate than the service can hope to keep pace with.
This does not mean that the NHS will collapse, or indeed be stretched to breaking point; that is not how these pressures would manifest themselves.
We are more likely to see waiting lists increasing, new and expensive drugs becoming harder for patients to obtain and general service standards falling as the elderly and obese take up more and more capacity.
The reason Labour's plans to rejuvenate the NHS will be considered a failure is not because they have been a disaster, but because of the optimism with which the NHS Plan was announced.
The colossal sum of money involved seemed like a cure in itself when the spending plans were unveiled; it was easy to imagine that so much money would solve all the services problems on its own. Unfortunately, the extra investment coincided with the advent of a range of stresses that neutralised the effectiveness of the extra expenditure.
The only means by which the NHS, with its funding limited to 9% of GDP, can hope to adequately address the enormous health challenges our society poses is through efficiency savings above and beyond what the Government currently expects managers to claw back.
Elective
The health service must become a streamlined, sleek and efficient operation with minimum waste.
The only way this is possible is through competition with the private sector to win contracts. Small steps have been taken in this direction with some elective surgeries such as knee and hip operations being outsourced to independent treatment centres while the flagship payments-by-results scheme has given patients the choice of being treated at a private hospital.
These are encouraging steps that should be embraced. Inevitably this trend will lead to opposition parties claiming, for the sake of political point-scoring, that the NHS is being systematically privatised and that healthcare will no longer be free at the point of delivery.
This ignores the fact that the current model cannot survive in its present form. Those parties that promise the electorate the long-term continuation of a health system based on the needs of post-war Britain are deluding voters and themselves.
Competition between the NHS and the private sector for public money is the only way the health service stands a chance of meeting the huge challenges our longer living but unhealthier society presents.
The sooner politicians are prepared to accept this as an unavoidable truth, and the public realises that giving public money to private healthcare providers will improve treatment within the NHS, the sooner things will begin to get better.
