Two Numbers To Know About The NHS

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The Senior Lecturer Emeritus at Islington Technical College tells us two numbers that we need to know about the National Health Service. He’s right in that these are two important numbers. Given who he is he manages to gain entirely the wrong conclusions but then that’s rather what we’d expect.

Health spending has risen by an average of 3.7% per year since the NHS was founded, but only by 1.5% since 2010.

The relationship between input and output is known as productivity. Our desire is always to get greater output for the same input, or the same output for lesser input – we like increasing productivity that is. For, obviously enough, being able to do more stuff with whatever scarce resources we apply means that we’re richer.

The NHS is an inefficient organisation. Those numbers we’ve just been shown by the Senior Lecturer Emeritus prove that it is. Real budgets have been rising over time to gain that same thing, the health care of the nation.

So, we’d like to increase productivity growth in the NHS. How do we increase productivity? That’s something that market do and planning doesn’t. We tried this out in that grand economic experiment called the 20th century. The socialist, non-market, economies managed to increase total factor productivity by between not a lot and nothing. The market economies gained some 80% of their growth over the century from that increasing productivity.

So, we want more markets in the NHS.

We’ve even tried this, NHS England has had more markets than NHS Scotland or NHS Wales. NHS England has increased productivity more than NHS Wales or NHS Scotland.

Excellent, that the NHS requires ever more real resources every year is proof perfect that we need more markets in the NHS.

The second number:

A major increase in health investment spending is needed to bring the UK up to the OECD average.

We are at the OECD average. From the BMJ:

The UK had the lowest healthcare expenditure per capita relative to our comparator countries (UK, $3825 (£2972; €3392); study average, $5700), although this was roughly in line with the average healthcare expenditure of the OECD member states ($3854) and the EU member states ($3616).

Sure, numbers are important but so is understanding what they’re actually saying. We’ll even allow that perhaps NHS spending should rise by $29 a head of population in order to hit that OECD average.

But then we’ll still be left with the major problem the NHS has. Not enough markets in it……

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JimQuentin VoleTim WorstallMichael van der RietGavin Longmuir Recent comment authors
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jgh
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jgh

This “we need to spend more on healthcare!!11!!!” is playing right into the hands of “Ok, US drugs cost twice UK drugs, let’s buy them then”.

Leo Savantt
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Leo Savantt

In what way?

Spike
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Spike

Yes, results divided by inputs equals productivity. Except when raw inputs equals degree of compassion. So “given who he is,” he draws the exactly correct conclusion; in fact, the conclusion he had arrived at before even reviewing the numbers!

One quibble: It’s problematic to do a long-term study of health spending, because the definition of health is changing. Maladies from farsightedness to hep-c are curable, but it’ll cost you.

Rhoda Klapp
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Rhoda Klapp

RM does not and is not likely to suffer from farsightedness.

Jim
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Jim

Isn’t the output of the NHS assumed to be the amount of cash poured in at the top, just like all State spending? Ergo doubling every salary in the NHS would result in a massive ‘productivity’ rise, even if not one extra patient was attended to? And similarly if someone invented a robot doctor who could treat patients 24/7 at a fraction of the cost of human ones, that would show up as a productivity decrease?

Spike
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Spike

No, as The Doctor continually teaches here, salaries are a cost, not a benefit (except to politicians touting the number of jobs they have “created”). A robot doctor, like machines that help doctors measure and operate precisely, would be the epitome of productivity increase.

Jim
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Jim

My point is that (as I understand it) the NHS (and indeed all State employees) are not measured for GDP output purposes by any verifiable output measure, merely their salary. Thus if the entire NHS treated not one person, as far as the National accounts were concerned they would be just as productive as if they treated millions. There is no measurement of practical output to create a productivity figure.

Gavin Longmuir
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Gavin Longmuir

To get serious for a moment, markets are great ‘n all. But “health care” also has social and moral dimensions. Irrefutable fact — every one of us will die. Sadly, many of us have known people whose miserable lives were extended by medical interventions, giving them extra weeks/months/years of painful low quality life. A number of people have confided to me that, after seeing what happened to their parents or grandparents, they will take the Smith & Wesson route rather than let the medical establishment burnish their statistics by extending their lives unreasonably. Some reports suggest that half of the… Read more »

Spike
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Spike

Not only are we all going to die, but there will come a time when the cost to lengthen our lives will be infeasible, and no matter how somberly anyone agrees to pay it in exchange for your insurance premium or taxes. Even if your own money, you will probably not want to end giving all of it to the medical system.

Hillary Clinton as First Lady made that observation about the expenses of the final 6 months. This is not a key to good management unless you assume that Doctor Hillary can identify them in advance.

Gavin Longmuir
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Gavin Longmuir

I first saw a comment about the heavy back-end weighting of lifetime health care costs in something that Ben Stein wrote years ago — and not much seems to have changed since then. There is a world of financial difference between (a) saving the life of a sick 18-year old with a shot of penicillin, who then goes on to be a productive member of society for decades, and (b) extending the life of a sick 70 year old who will never again be economically productive. As long as sick people are spending their own money — no problem. When… Read more »

Michael van der Riet
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Michael van der Riet

Who wants to be a millionaire? Huh! Millionaire! Kid stuff! Serious money is opening a cancer clinic, naming it after some medical pioneer, and charging patients everything they’ve got to extend (or not) their lives by another three months. I wound up a former girlfriend’s estate after she got suckered into that and after the God Syndrome Clinic had taken their cut, there was about sixpence left.