As Daniel Johnson wrote last week, revelations about the UK falling behind with cancer-care provision compared to other developed countries seems testament to a struggling NHS. The UK spends less of its GDP on healthcare than any other nation in the developed world – and many would argue that the system is failing because of this lack of cash. Both the Conservative and Labour parties are promising huge (if not blank) cheques to the NHS to rectify the problem if elected to Government.
But, according to the King’s Fund, UK investment in healthcare from the state is about average for a developed nation. Where we’re missing out is in the private sector, where UK investment is very low. If the UK is to keep up with international standards, the government needs a way to get private sector money into the system, and not just pump in more tax payers’ cash.
The top spender on healthcare in the international league tables is the USA. Seventeen per cent of GDP is gobbled up by the health sector there each year – split around equally between the public purse and the private pocket. The UK’s spending on healthcare comes in at 9.7 per cent of GDP, with 2 per cent from the private sector and 7.7 per cent from the state. This means the cost of an average person’s yearly health provision in the UK is $4,246 (the lowest in the developed world) while the average citizen in the US spends well over double this, around $10,224. The American model has merits for some, but it is clearly inefficient and complex; value doesn’t always come with greater private sector involvement.
So, where does the efficiency in the UK model come from? The time an average UK patient spends in a hospital bed, an indicator of efficiency in the health system, is around a day shorter in the UK than the EU average. The UK has one of the lowest ratios of hospital beds per head of population in the developed world: 2.7 beds per 1000 people. Germany, by contrast, ranks top in this area with 8.2 beds per 1000 people. Some argue that this indicates that the UK is not investing in a basic health service, and flogging the staff who run it half to death. Others argue it is a sign of efficiency, and proof of UK investment into medical advances. The reality is a bit of both: excellent and overworked NHS professionals in a system which has become highly efficient, while investing in the best value advances in medicine.
Much of the investment into medical advances is due to The National Institute for Health and Care Excellence (NICE), which oversees medical drug procurement for the NHS. According to a report by the OECD group of industrialised nations, the UK paid $497 per head in medical drug expenditure in 2015: the lowest in the developed world. The USA was over paying at $1,162 per head, despite having similar prescription usage as the UK. NICE is so well-regarded by other state and private health-care providers they peg prices to the ‘NICE rate’ – meaning it it has control of around 40 per cent of global drug prices.
NICE has a firm but fair pricing policy with a long-term outlook. Although UK-based drug (or life science) companies must work hard on price, they can work in conjunction with NICE when investing in long term research and development projects. In doing this, the private sector understands what price they will be able to charge at the end of the development process. What’s more, once the NHS starts using a drug, the rest of the world sees it as good value for money and exporting to global markets is opened up. This has created a private sector investment boom in the UK life sciences sector: £30 billion to the UK economy pumping £8.4bn into the treasury while supporting 482,000 jobs. The UK now has the largest and fastest growing life sciences sector in Europe.
This world class procurement structure is testament to the state actively working in partnership with a vast array of small, medium and large companies, along with academic and charitable institutions. Writing blank cheques from the taxpayer to the NHS will not solve the UK’s health care issues, but nor will going down an American model and opening front end care to the private insurance sector. Both will create inflation in the sector and stifle efficiency and value.
The NHS should carry on being the main route for patients to access healthcare. The private sector, however, should have the ability to deliver back-end delivery on behalf of the NHS. Areas such as social care, mental health and long-term health provision could be revolutionised. Specific expertise found in the charitable sector and small to medium sized businesses should be used to inject money into the healthcare system as has happened in the life science’s sector. In doing this, the UK will be able to a create private investment boom pulling UK GDP investment in health-care in line with other developed countries. This will ensure efficiency, medical advancement and, most importantly, save lives.