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Bankrupt Health Care
Crisis in the NHS as £2 Billion Shortfall Hits

The UK’s National Health Service is facing a potential £2 billion shortfall for 2015-16, with about 80 percent of hospital trusts expected to post losses. This is raising concerns that the system’s finances are currently unsustainable. David Bennett, a chief regulator in the UK’s health system, has instructed NHS foundation trusts to review their budgets for places to cut money and has said that they should only fill “essential” vacant staff positions. The government has promised to spend £8bn more annually on the service, but also requested £22bn in cuts.

The challenge in the UK, as in the U.S., is that an inexorably rising demand for health care is bringing higher costs with it. The Times (of London):

Chris Hopson, the chief executive of NHS Providers, which represents NHS trusts, said: “What’s happened is that demand in the NHS has grown by 4 per cent per year—and it’s done that ever since the NHS was first founded—and whilst the government has increased funding over the last six years, it’s only been by 1 per cent, so we now have this 3 per cent gap,” Mr Hopson told BBC Radio 4’sToday programme.

“We’re now in a position where if we’re going to make the NHS budget in 2015/16, we need to do some really urgent things and what the letter from Monitor says is, to all trust chief executive and to trust boards, is to think carefully about any vacancies that are currently not filled and whether they should be filled or not.”

Hopson added that the NHS’ financial situation will become even more pressing during the coming winter.

The health care crisis, as we’ve pointed out before, is to some degree a global phenomenon. No matter what kind of system one has, costs are rising across the industrialized world. Having a more public system doesn’t appear to halt that trend. The U.S. and the rest of the West are in the same position in that respect: Governments need to find ways of making health care cheaper and better by revamping outdated and dysfunctional service delivery. If they don’t, the NHS fiscal crisis may seem mild next to what the future holds for the health care systems of the industrialized world.

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  • f1b0nacc1

    Wait….I thought that only evil CORPORATIONS where the source of rising healthcare costs? Don’t we save money once we get the profit factor out?
    Never mind….

    • Andrew Allison

      One could make a pretty good argument that the evil health insurance companies are the reason that US healthcare costs twice as much in the US as in the rest of the West (while producing inferior results). Our Libertarian friend makes the point that costs fall dramatically when the treatment is not covered by insurance rather well.

      • f1b0nacc1

        Of course they do….when it is your own skin in the game (forgive the pun) you are a lot more careful about what you spend your money on. An insurance company is simply a way to avoid that feedback.
        Regarding the comment about costs vs outcomes, we must disagree. Most of the ‘outcomes’ are not even measured the same way in the US vs the rest of the world (look at infant mortality rates, for example), or are based upon dissimilar populations, where other factors confound the comparisons. An example would be while Swedes live longer than Americans, Swedes in America live longer than Swedes in Sweden. We can do this for hours if you want, but the truth of the matter is that by and large American healthcare is far superior, even after factoring costs in. That doesn’t mean I am fond of the insurance companies (I am not), but having experienced it pretty much everywhere in the civilized world….this is the best place to be sick (grin)….

        • Andrew Allison

          I think that the actual evidence evidence is overwhelming. Happily, we are those among those here who can agree to disagree.

  • Jacksonian_Libertarian

    Only free markets have the “Feedback of Competition” that forces continuous improvements in Quality, Service, and Price. The Government Monopoly like all Monopolies even limited Monopolies suffers from the same disease, the lack of the “Feedback of Competition”.

    As an example take the improvements in Quality, Service, and Price of Lasik Eye Surgery which isn’t paid for by health insurance. In 30 years Lasik went from hospitalized radial keratotomy eye surgery which cost thousands of dollars, to outpatient laser eye surgery (Lasik) that takes about an hour and costs $298 per eye (about the price of designer prescription eye glasses). If the entire medical industry was a free market like eye surgery, can you imagine the advances in Healthcare Quality, Service, and Price mankind would have made over the same time period?

    The lack of the “Feedback of Competition” in the healthcare industry is literally killing us, and doing so in the most expensive way. There is only one law of economics “Supply and Demand”. Free markets are the only way to keep “Supply and Demand” in balance. Whenever Demand exceeds supply queues (waiting lines) form, so whenever you see queues you know the market is broken and not Free. Go to any hospital emergency room, or socialist country, and you will see that the market is broken as there are waiting lines everywhere as Demand exceeds Supply.

    • OldNHMan

      This principle has already been proved out by physicians/clinics who have converted their practices to cash-only, so-called ‘concierge’ practices. They take no insurance, post their fees out in the office, and will take retainers to provide some level of service, all at costs a fraction of what it costs practices that take insurance. It’s amazing what happens to the costs of basic health care when a huge portion of the insurer restrictions/paperwork and most of the government mandates disappear.

      I know this from first hand as my doctor of 20-years left the clinic where he practiced and joined a cash-only clinic. It’s surprising how some services at the clinic cost less than the co-pay from my insurance.

      • Andrew Allison

        You are correct that primary care physicians are beginning to figure out that payment in full at the time of service enables then to reduce their fees for service (there are several in my area (Central Coast California) that charge $50 for an office visit). The problem arises with catastrophic needs. There are two solutions: junk ACA and provide a range of catastrophic insurance policies which allow the consumer to make the trade-off between deductible and premium, or Medicare for all. ACA removes this option by fixing the both deductible and the catastrophic limit. In theory, consumers can make a trade-off between premia and co-pay, but in fact, 85% of those enrolled via exchanges receive taxpayer-paid subsidies based on income, not the premia. In other words, the actual premium is irrelevant to 85% of the participants. This is nonsensical.

  • Andrew Allison

    The U.S. and the rest of the West are in NOT the same position: they have the same problem (increasing demand), but the US spends twice as much on it (% of GDP) as the rest of the West.

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  • Robert McManus

    “Governments need to find ways of making health care cheaper and better by revamping outdated and dysfunctional service delivery.”

    No, no, no. Gov’t needs to get out of the health care business as explained by Jacksonian_Libertarian a few days ago.

    As importantly, we should get insurance companies back into the insurance business and out of the prepaid healthcare business. As the discussion below covers, when it is your money, you are careful with it. If all routine healthcare were cash business, it would be FAR cheaper, and insurance could go back to truly being insurance against catastrophes and would also become much cheaper.

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