Should we start preparing for a decade of austerity in the NHS?: The NHS could have a £50bn funding gap by 2022 if it can't deliver unprecedented productivity, says a Nuffield Trust report
The NHS in England is almost halfway into its four-year drive to make £20bn of efficiency savings by 2014/15. These savings of 4% a year are needed if the NHS is to meet rising demands and maintain quality, with funding effectively frozen in real terms during the current spending review period.
So far, it is on track. However, NHS finance directors believe there is a high risk that the target will not be met, as it becomes increasingly difficult to make additional productivity gains, and the current public sector pay freeze comes to an end.
And while "£20bn by 2014/15" is etched in the minds of NHS leaders, what happens after this?
At the Nuffield Trust, we are taking a longer-term view, and have examined the funding pressures facing the NHS over the next decade to 2021/22. These rising pressures are coming from a growing and ageing population, increasing prevalence of chronic conditions, and rising costs of healthcare.
NHS funding after 2014/15 will not be determined until the next spending review. With no clear signs of economic recovery, it is looking increasingly unlikely that the current period of austerity will come to an end on March 31 2015.
If the 2014/15 challenge is not met, this gap would be closer to £50bn.
Without unprecedented and sustained productivity improvements, there will be cuts to services or a decrease in the quality of care. But this is in an NHS already stretched to achieve necessary efficiency savings by 2014/15.
Some healthcare activity costs cannot be brought down in direct proportion to any reduction in those activities. For example, staff who were previously needed may be on fixed-term contracts, or responsible for other remaining activity.
In the longer term, however, it may be possible to release these costs. If this was achieved by 2021/22, the funding gap would shrink by £6bn in our model.
Secondly, managing demand for hospital care for chronic conditions will be critical. If a person's likelihood of being admitted to hospital with a chronic condition remains at the 2009/10 level, rather than rising at the rate seen prior to this, the gap will be reduced by a further £6bn.
Finally, although a continued pay freeze for NHS staff until 2021/22 would not be realistic, it is important that no period of catch-up pay growth occurs to make up for the current freeze, as this would only further increase the gap.
This still leaves a shortfall of £16-19bn in 2021/22, though, which would require efficiency savings of 2% a year for a further seven years. If this is the case, NHS leaders will have to look past 2014/15 and start planning now for savings throughout the next decade.
With further productivity improvements becoming increasingly difficult, more work is now urgently needed to identify where additional savings might be achieved. This may include service reconfiguration, better integration of care (including social care), greater use of assistive technologies and long-term prevention of chronic conditions.
The opportunity exists therefore to design a health care service for England which is better aligned to the needs of its population. But the impact of such changes on the future balance of health services and the skill mix of the workforce must be planned for now.
Dr Louise Marshall is a specialty registrar in public health at the Nuffield Trust and one of the authors of the report A decade of austerity: the funding pressures facing the NHS from 2010/11 to 2021/22.
Guardian Professional.
The NHS in England is almost halfway into its four-year drive to make £20bn of efficiency savings by 2014/15. These savings of 4% a year are needed if the NHS is to meet rising demands and maintain quality, with funding effectively frozen in real terms during the current spending review period.
So far, it is on track. However, NHS finance directors believe there is a high risk that the target will not be met, as it becomes increasingly difficult to make additional productivity gains, and the current public sector pay freeze comes to an end.
And while "£20bn by 2014/15" is etched in the minds of NHS leaders, what happens after this?
At the Nuffield Trust, we are taking a longer-term view, and have examined the funding pressures facing the NHS over the next decade to 2021/22. These rising pressures are coming from a growing and ageing population, increasing prevalence of chronic conditions, and rising costs of healthcare.
NHS funding after 2014/15 will not be determined until the next spending review. With no clear signs of economic recovery, it is looking increasingly unlikely that the current period of austerity will come to an end on March 31 2015.
What would this mean for the NHS in England?
Assuming £20bn of savings are achieved and the books are balanced in 2014/15, our report A decade of austerity: the funding pressures facing the NHS from 2010/11 to 2021/22 found that the NHS will face a shortfall of around £30bn in 2021/22 if funding remains flat in real terms, and if pressures increase in line with recent trends. This would require continued efficiency savings of 4% a year.If the 2014/15 challenge is not met, this gap would be closer to £50bn.
Without unprecedented and sustained productivity improvements, there will be cuts to services or a decrease in the quality of care. But this is in an NHS already stretched to achieve necessary efficiency savings by 2014/15.
What can the NHS do if the squeeze is prolonged?
Benefits of the productivity improvements made prior to 2014/15 must be maximised by ensuring that the full cash savings are released over time.Some healthcare activity costs cannot be brought down in direct proportion to any reduction in those activities. For example, staff who were previously needed may be on fixed-term contracts, or responsible for other remaining activity.
In the longer term, however, it may be possible to release these costs. If this was achieved by 2021/22, the funding gap would shrink by £6bn in our model.
Secondly, managing demand for hospital care for chronic conditions will be critical. If a person's likelihood of being admitted to hospital with a chronic condition remains at the 2009/10 level, rather than rising at the rate seen prior to this, the gap will be reduced by a further £6bn.
Finally, although a continued pay freeze for NHS staff until 2021/22 would not be realistic, it is important that no period of catch-up pay growth occurs to make up for the current freeze, as this would only further increase the gap.
This still leaves a shortfall of £16-19bn in 2021/22, though, which would require efficiency savings of 2% a year for a further seven years. If this is the case, NHS leaders will have to look past 2014/15 and start planning now for savings throughout the next decade.
With further productivity improvements becoming increasingly difficult, more work is now urgently needed to identify where additional savings might be achieved. This may include service reconfiguration, better integration of care (including social care), greater use of assistive technologies and long-term prevention of chronic conditions.
Looking forward
The positive in all of this, however, is that many of these changes would be consistent with good practice for managing today's leading causes of ill health.The opportunity exists therefore to design a health care service for England which is better aligned to the needs of its population. But the impact of such changes on the future balance of health services and the skill mix of the workforce must be planned for now.
Dr Louise Marshall is a specialty registrar in public health at the Nuffield Trust and one of the authors of the report A decade of austerity: the funding pressures facing the NHS from 2010/11 to 2021/22.
Guardian Professional.
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