UK - Report Forecasts Future for NHS Funding

A report into the possible future of NHS funding was published in July 2009. The report, How cold will it be? Prospects for NHS Funding: 2011-17, by The King’s Fund and Institute for Fiscal Studies, analyses how much of an impact the economic recession could have on NHS funding. Public spending will be inevitably hit by the financial crisis, and the report analyses the different outcomes this could have on the NHS in England between 2011/12 to 2016/17.

There are three possible funding outcomes over the next two spending review periods:

• ‘Tepid’ – annual real increases of 2% for the first three years, increasing to 3% for the final three years;
• ‘Cold’ – zero real change; and
• ‘Arctic’ – annual real reductions of 2% for the first three years, falling to 1% for the final three years.

The financial future of the NHS remains uncertain, and depends on the extent of tax increases and productivity levels. The report notes that over the next spending review period (2011/12-2013/14) the budget could reduce for all government areas, including the NHS, by an average of 2.3% per year. If the NHS were to be protected by a greater or lesser degree, this could result in greater cuts for other departments, although this could be lessened by an increase in taxes.

The changes to the budget could have implications on taxation. Even the ‘tepid’ scenario would require an increase in taxation (or reduction in spending on social security benefits and tax credits) of £6.9 billion, which would be equivalent to £220 extra per family, or raised through a 1.6% increase in the level of VAT.

The report notes that demographic pressures, including a rising and ageing population, are likely to cost the NHS around £1.0-1.4 billion extra each year at 2010/11 prices, and would require funding increases of around 1.1% to maintain quality. Only the ‘tepid’ scenario would provide enough money to cover this. These pressures are also adding to the demands placed on the healthcare system, and the report argues that productivity gains are essential, regardless of the future funding of the NHS.

The report notes that the NHS could fill this gap in funding with increased productivity levels. However, these would need to be significant if they were to make an impact. The report states that over the period between 2011 and 2017, the NHS would need to make gains of between £21.6 billion and £47.0 billion, equivalent to improvements of 3.4% to 7.4% per year, or £3.6 billion to £7.8 billion per year.

The report argues that the NHS in England is in some ways better prepared than ever to deal with the downturn. Current funding levels mean that it has employed more professionals, there have been huge improvements in the infrastructure and waiting times have been dramatically reduced.

Further reading - An in-depth analysis of the UK medical device market, including some background information on NHS funding, is available from Espicom: The Medical Device Market: United Kingdom (published June 2009)

USA - Hospitals to Contribute US$155 billion to Healthcare Reform

Three major hospital associations have agreed to contribute US$155 billion over ten years to the healthcare reform, it was announced on 8th July 2009.

Vice President Joe Biden did not provide specific details, but said the savings would come from delivery system reforms and trimming the annual inflationary adjustments to hospital reimbursement payments from two government health programmes.

It is expected that around US$100 billion will come from lower Medicare and Medicaid payments to hospitals, while a further US$40 billion will be saved by reducing the subsidies paid to hospitals to care for the uninsured.

The three hospital associations participating in the deal are the American Hospital Association, the Hospital Corporation of America and the Catholic Health Association of the United States.

The deal is similar to the agreement made with the pharmaceutical industry in June 2009, under which drug companies agreed to contribute US$80 billion over ten years towards the costs of the healthcare reform. However, both deals are contingent on the healthcare reform legislation being passed.

Further reading - An in-depth review of the US medical device market, including some background information on the healthcare system, is available from Espicom: The Medical Device Market: USA (published March 2009)

USA - Public Health Insurance Bill Unveiled, June 2009

President Obama has indicated that he views major reform of the US healthcare system as a priority, arguing in February 2009 that it ‘…cannot wait, it must not wait, and it will not wait another year’. Details are slow in emerging, although a number of basic principles have been laid down:

• Reduce long-term growth of health care costs for businesses and government
• Protect families from bankruptcy or debt because of health care costs
• Guarantee choice of doctors and health plans
• Invest in prevention and wellness
• Improve patient safety and quality of care
• Assure affordable, quality health coverage for all Americans
• Maintain coverage when you change or lose your job
• End barriers to coverage for people with pre-existing medical conditions

Reducing the number of uninsured Americans is a key, and contentious, component of this. One element became a little clearer in June 2009, with the introduction into the House of Bill H.R. 2668, the Choice in Health Options Insures Care for Everyone (CHOICE) Act. This is being sponsored by Chris Murphy (D-Conn.), and co-sponsored by Peter Welch (D-Vermont) and Bruce Braley (D-Iowa).

The bill would create a Federal public health insurance plan for the first time in the USA. It would not be compulsory, but would compete with private health plans for members. It was introduced in the House on June 2nd 2009 and referred to the House Committee on Energy and Commerce, which has jurisdiction over healthcare legislation, and also the House Ways and Means Committee. It will probably form part of a wider health reform plan currently being prepared in Congress by the Democrats.

The proposed public plan (the American Trust Health Plan) would be operated by the DHHS and would be self-financing. Anyone eligible to purchase private health insurance would be able to enroll. All healthcare providers providing services under Medicare would be required to participate. Premiums would be set by the DHHS. Regional variations in premiums will be allowed, as will other variations in accordance with existing norms.

The bill’s sponsors hope that the public plan will give private providers an incentive to reduce costs and make health insurance more affordable. Critics see it as a first step on the road to a compulsory public system, similar to that proposed by President Clinton in 1993. That effort failed as a result of a concerted lobbying effort by the healthcare industry. The current bill may face a more benign Congress, but pressure from the private insurance industry and its allies is sure to be strong, and will test the resolve of Democrats to present a united front.

Further reading - An in-depth review of the US medical device market, including some background information on the healthcare system, is available from Espicom: The Medical Device Market: USA (published March 2009)