The NHS’s financial problems are increasingly in the news. The focus on them looks set to intensify now that a new report from the King’s Fund has shown that NHS commissioners and providers ended the 2015/16 financial year with an aggregate deficit of £1.85 billion – the largest in the NHS’s history.
As this report says, the NHS seems to be “buckling under huge financial and operational pressures” because “funding has not kept pace with the increasing demand for services”. Different views on how to solve the NHS’s financial crisis can be found right across the political spectrum, but what do the public think?
An intergenerational issue?
Firstly, it’s important to explain the intergenerational dimension of this debate. The question of how to fund the NHS often boils down to striking a balance between three options: higher taxes (including the possibility of some kind of hypothecated “NHS tax”), introducing more charges for patients, or retrenching what the NHS offers. Obviously, all three options are controversial, because voters generally want governments to offer them outstanding public services accompanied by low taxes.
From IF’s perspective, the intergenerational dimension to these choices is critical. NHS services are overwhelmingly used by older people: IF’s analysis of official statistics shows that over 47% of all treatment episodes taking place in hospitals currently involve patients who were over the age of 60 (up from 38% in 1998). Clearly this is to be expected, as older people tend to have more complex health needs than younger ones, and during the last phase of life is when the vast majority of people use most of the healthcare resources that they will need over their lifetime. Paradoxically, the NHS is struggling partly because of its own effectiveness at increasing the nation’s lifespan. Today’s young people will clearly be old one day themselves, so they need the NHS to be economically sustainable so that it can look after them when their time comes.
The upshot of the fact that older people are the biggest users of NHS services is that paying more to fund the NHS out of general taxation will increase the transfer of public resources between young and old. The debate also needs to be seen within the context of the UK’s broader political economy. As recent analysis by the Resolution Foundation has shown, the current government’s austerity measures will remove an average of £220 from those in their 30s and give away £170 to those in their 60s between 2015 and 2020. This will come on top of the trends – which previous analysis have identified – of declining living standards for Britain’s younger workers since the beginning of the recession, while those in their 60s have seen them improve.
By contrast, higher user charges would predominantly fall upon older people, so to the extent that this creates a better alignment between the people who are placing extra demand on the NHS and those who have the ability to pay for it, they should increase intergenerational fairness. Possible options which have been suggested include making patients pay for the so-called “hotel” costs involved in being an in-patient (such as food and laundry), or making people pay for booking appointments with their GP. But of course, these options would have plenty of downsides – such as the risk of people being discouraged from seeking help, or creating perverse incentives to seek certain kinds of treatment over others, and the need for some kind of means-testing to avoid such charges discriminating against the poor – which is why service charges are often seen as politically toxic.
The third option, simply cutting back on services, is already taking place across many parts of the country, often through mechanisms which may disguise what’s happening and resulting in pressure simply being pushed from one branch of the NHS to another (such as when reductions in hospital services create additional need for care in the community). In another report, the King’s Fund provided a comprehensive analysis of how cutbacks function in practice. Cuts also have an intergenerational dimension if services which are predominantly used by either the young or old (such as adolescent mental health) are retrenched or protected disproportionately.
Now that the intergenerational context to this debate has been established, what does the public think is the fairest way of funding the NHS? See Part 2 of this blog.