Spending on health care: When is enough, and how do we know? Prof John Appleby Chief economist King’s Fund
Ever increasing spending? • Sir Derek Wanless suggested that after a period of ‘catch up’ just need to ‘keep up’ with our EU neighbours • This implied some flattening off of spending as a proportion of GDP at around 11%-14% • The implication is that by 2023 we will be spending ‘enough’ • But if history (and the experience of other high spend countries) is anything to go by, we know that pressures to spend even more will be unabating. • Arguing for more money will no longer be a case of saying we have to keep up with the Jones’s – or the Chirac’s, or the Merkel’s… • So what’s the future for health care spending? And how might we make decisions about the share of national wealth we devote to health?
“[The Technical Review] Panel does not view a 1% excess health care spend growth as implausible”
Spend more – a lot more – but why worry? • Apart from the need for higher taxes, living with a reduced consumption of non-health care goods and services and a doubling of health employment (and a consequent overall fall in productivity in the economy)…no need to worry…. • …but only if health care were like any other private good bought and sold in private markets. • We don’t fret, for example, about the total UK spend on shoes, or cars, or even food. Total spend is the sum of many individual private spending/rationing decisions. • But tax funded health care spending has to be determined top down, not bottom up. • Therefore judgements have to be made about total spend, and the private rationing decision becomes a public rationing decision.
Three spending questions • Why does spending grow? • Why limit spending? • Can a limit be set?
1: Why does spending grow? • Income growth (national and personal)? • Ageing populations? • SID? • Technology?
Two estimates of causal factors accounting for growth in real per capita US health care spending: 1940-1990
2: Why limit spending? • Obvious limits given scarce resources • Some spending unethical • Some spending not medical • Value of benefits of additional spending not worth it
3: Can a limit be set? • Standard economic evaluation approach… • Simple rule: Stop spending on health care when more benefits could be obtained from other forms of spending…but begs some questions… • What does the relationship between spending (or costs) and returns (or benefits) look like? • Where are we on the cost-benefit curve? • How might the relationship between costs and benefits change?
Health benefits Decreasing returns Negative returns Increasing returns Total returns Health spend Marginal returns Cost-benefit relationship almost certainly looks like..
Benefits of spending • Where are we on the curve? • What is the potential for shifts in the curve? • What are the ‘benefits’ we want from health care investment? • What value do we place on different types of benefit?
Health benefits Health spend Where on the curve? • Some evidence that we are near the ‘flat’ of the curve (eg returns of pharmaceutical spending; cross-country relationship between health and spend; Nolte and McKee work on ‘amenable’ conditions)
Contribution of ‘amenable’ conditions to increases in life expectancy has declined
Health benefits Health spend More (and different) things for our money? • Higher productivity? Bigger bangs per buck? • More emphasis on other benefits: eg speedy access, responsiveness, quality of life, pain reduction, a ‘good death’? • Higher values placed on these benefits (cf: DH/York/Gravelle: 1.5% addition pa)?
What has recent extra spending produced? • Higher wages, cost pressures • Quicker access • Modest increases in activity • Better ‘quality’? • But, little or no information on the value of gains (such as reduced waiting times: DH/York productivity study => very little value from reduced waits) • And little or no information on the costs of achieving these gains
Can a limit be set? • UK moving into big league spending • EU trend is upward • Controlling spending becoming more of an issue for the UK (as it is in France, Germany and many other high spend countries)
EU weighted average spending projections Wanless 2022/3 scenarios
Can a limit be set? • More spending not inherently ‘bad’ • But, increasingly pressing need for evidence on both sides of the cost/benefit equation to justify higher spending • Public attitudes suggest NHS spending still a priority (cf BSA surveys)
Can a limit be set? • Attitudes are important, but if the public could vote on the size of the health care budget, what information should they consider in arriving at a view? • …costs and benefits… • This takes us back to the relationship between spend and benefits, where we think we are on the curve, and how the relationship might change in the future…. • But we have only a tenuous grip on the answers to these questions..
Conclusions • Central theme: need to develop a rational, evidence-informed process for arriving at sensible limits to health care spending. • Some conclusions: • Strengthen the knowledge base (eg estimate costs and benefits of programmes of care (and policies such as choice cf: impact of statins (0.81% pa on NHS output), quantify valuation of benefits, measure health as it is produced by the NHS, extend NICE’s role) • Change the policy framework (eg DH: give up sponsorship role for pharma industry, ensure publicly funded research programme supports NICE role, ensure incentives do not inappropriately add to spending pressures where benefits not justified)
Conclusions • Recognise that health care is not the only (or perhaps main) route to better health • Face up to the fact that more spending is only worth it if we are prepared to make the sacrifice involved: • More public spend means higher taxes/less spending in other areas • More private spend means less equitable access/health
Who said economics was a dismal science! There are two certainties in life: death and taxes Benjamin Franklin: 1706-1790