1. How much is enough: what should we be spending on the NHS?
Anita Charlesworth
November 2015

2. UK health spending is about average in the EU
Nov 2016
How much is enough: what should we be spending on the NHS?
UK health spending is about average in the EU
Source: Organisation for Economic Co-operation and Development (OECD ) health statistics, 2016

3. The UK is about average for government/SHI spending
Nov 2016
How much is enough: what should we be spending on the NHS?
The UK is about average for government/SHI spending
Source: Organisation for Economic Co-operation and Development (OECD ) health statistics, 2016

4. Nov 2016
How much is enough: what should we be spending on the NHS?

5. Nov 2016
How much is enough: what should we be spending on the NHS?

6. Nov 2016
How much is enough: what should we be spending on the NHS?
Estimated public spending on health in the UK as a percentage of GDP, 2009/10 to 2020/21
Source: Health Foundation evidence to the House of Lords Committee on the long-term sustainability of the NHS

7. Nov 2016
How much is enough: what should we be spending on the NHS?
Average real terms annual growth in health care expenditure and GDP in 18 OECD countries,
Source: OCED Data

8. Nov 2016
How much is enough: what should we be spending on the NHS?
Drivers of changes in national health care spending are usually considered under four headings:
Demographic pressure: a growing population means more people needing health care; and the good news that average life expectancy is increasing means that a growing proportion of the population is elderly, which in turn means higher health care spending because the need for health care is greatest among the elderly;
Expectations of ever better health care: expectations that increase with income and as scientific and technical progress expands the scope of what health care can do;
New technologies increasing the range of health care that is possible, but also offering opportunities to improve the productivity of health care;
Relative price effects: because much health service spending is on providing care that necessarily requires face to face contact time between health care professionals and individual patients, meaning that productivity is hard to improve in those areas (an hour of care always takes an hour) while health care professionals’ wages must rise in line with those in the rest of the economy.

9. Nov 2016
How much is enough: what should we be spending on the NHS?
Classification by Przywara, 2010, of factors underlying developments in HCE
Source: Przywara, 2010

10. Approaches to modelling health care expenditure
Nov 2016
How much is enough: what should we be spending on the NHS?
Approaches to modelling health care expenditure
Micro-simulation models, which track hypothetical patients through life events and calculate HCE at the individual level. Such models are complex and extremely data intensive, but provide a powerful analytical tool. The authors suggest this type of modelling is particularly useful to test ‘what-if’ policy questions, as individuals can be gathered into policy relevant groups, simulated through their life-time, and analysed accordingly;
Component-based models, which estimate expenditure for different components and then combine these – the different components could be financing agents, providers, goods and services, or groups of individuals (for example different age groups). Component-based models are less demanding in their data requirements than micro-simulation models, and they are also relatively simple to implement and maintain. The impact of policy changes can be assessed through manipulation of any policy parameters. Astolfi et al. speculate that these reasons explain the popularity of this type of model in the policy arena; 
Macro-level models, which typically analyse aggregate health expenditures through regression analysis of time-series data. The authors suggest that macro-level models are often well suited to short-term projection where trends are undisturbed. Projections within macro- level models are either based on the extrapolation of time-series data, or on projected values of key explanatory variables, therefore this type of modelling is less demanding than others in terms of data requirements and computational burden.

11. NHS England five year forward view
Nov 2016
How much is enough: what should we be spending on the NHS?
NHS England five year forward view
Source: NHS England
Source: NHS England

12. The four steps used to project funding pressures
Nov 2016
How much is enough: what should we be spending on the NHS?
The four steps used to project funding pressures

13. Regression results Nov 2016
How much is enough: what should we be spending on the NHS?
Regression results

14. Nov 2016
How much is enough: what should we be spending on the NHS?

15. A comparison of key underlying assumptions for health spending
Nov 2016
How much is enough: what should we be spending on the NHS?
A comparison of key underlying assumptions for health spending
Health status (morbidity)
Income effect (elasticity)
Other cost pressures
OBR (2015)
Implicit expansion 1
Not included
CBO (2016)
Healthy ageing
Converging to 1 per cent by 2046
European Commission (2015) reference scenario
1 year gain in life expectancy = 1/2 year in good health
1.1 in 2013 converging to 1 in 2060
OECD (2013) cost-pressure scenario
1 year gain in life expectancy = 1 year in good health
0.8
1.7 per cent (not country specific)
IMF (2010, 2012)
0.3 (not country specific)
1.5 per cent (country specific)

16. Income elasticities for national HCE (OECD countries)
Nov 2016
How much is enough: what should we be spending on the NHS?
Income elasticities for national HCE (OECD countries)
Sample
Model description
Elasticity
Reference
13 developed countries
Cross section
>1
Newhouse (1977)
19 OECD countries
Leu (1986)
18 OECD countries
Parkin, Mcguire and Yule (1987)
20 OECD countries
Panel data
Close to 1
Hitiris and Posnett (1992)
Time series
No long-term relationship
Hansen and King (1996)
10 OECD countries
Hitiris (1997)
15 OECD countries
<1
Sen (2005)
21 OECD countries
Panel cointegration techniques
Dreger and Reimers (2005)
17 OECD countries
Multivariate regression model
Chakroun (2009)
Baltagi and Moscone (2010)
16 OECD countries
Mehrara, Musai and Amiri (2010)
22 OECD countries
Semiparametric panel varying coefficient model
Liu, Li and Wang (2011)
Source: Lago-Penas et al., 2013

17. Nov 2016
How much is enough: what should we be spending on the NHS?

18. Nov 2016
How much is enough: what should we be spending on the NHS?
A comparison of estimates of NHS efficiency and productivity improvement
Scope
Annual average change
University of York, 2016
England, NHS wide Total Factor Productivity (TFP) with quality adjusted output, 2004/ /14
1.4%
ONS, 2015
UK NHS Wide TFP with quality adjusted output,
0.9%
OBR, 2016
Combined projection of Oliver 2005 and ONS,
1.2%
Deloitte, 2014
English NHS acute hospitals efficiency frontier shift, 2008/ /13 1.2%
The Health Foundation, 2016
Acute Care in English NHS hospitals, 2009/ /14
0.1%
Monitor, 2016
English NHS acute hospitals 2008/ /14
Source HoL Briefing
Source: Health Foundation evidence to the House of Lords Committee on the long-term sustainability of the NHS

19. Nov 2016
How much is enough: what should we be spending on the NHS?
Sensitivity of health spending to alternative productivity assumptions in the health sector

20. Average annual increase UK NHS spending
Nov 2016
How much is enough: what should we be spending on the NHS?
Average annual increase UK NHS spending
Average projected annual increase of UK NHS spending between 2020/21 and 2030/31
OBR, 2016

21. Average per head increase UK NHS spending
Nov 2016
How much is enough: what should we be spending on the NHS?
Average per head increase UK NHS spending
Average projected annual increase of UK NHS spending per head between 2020/21 and 2030/31
OBR, 2016

22. Projected increase UK NHS spending
Nov 2016
How much is enough: what should we be spending on the NHS?
Projected increase UK NHS spending
Projected increase of UK NHS spending between 2020/21 and 2030/31, from OBR and Health Foundation
Source
Assumption
% GDP in 2030/31
Average annual increase, 2020/21 to 2030/31
Average annual increase
per head, 2020/21 to 2030/31
Estimated increase funding from 2015/16 (2016/17 prices)
Health Foundation
No productivity
8.1%
4.2%
3.6%
£80bn
Productivity of 1.0% a year
7.4%
3.3%
2.7%
£61bn
Productivity of 1.5% a year
7.1%
2.8%
2.2%
£53bn
OBR
OBR Central
7.6%
3.5%
2.9%
£67bn
OBR Low productivity
8.3%
4.4%
3.8%
£86bn
OBR Constant other pressures
8.9%
5.1%
4.5%
£102bn
OBR Declining other pressures
8.8%
5.0%
£99bn
OBR, 2016; The Health Foundation, 2016

23. The determinants of public health expenditure in the OECD model
Nov 2016
How much is enough: what should we be spending on the NHS?
The determinants of public health expenditure in the OECD model
Source: de la Maisonneuve and Oliveira Martins, 2013

24. Nov 2016
How much is enough: what should we be spending on the NHS?
Health care expenditure projection models – from Astolfi et al. (2012), updated to include de la Maisonneuve and Oliveira Martins (2013) and European Commission (2015)
Real health spending per capita in 2005 PPP* $US
Age effect
Income effect (income elasticity =0.8)
Residual
Residual with unitary income elasticity
Average annual & change
Average annual % contribution to change in spending
EU15
3.8
0.4
1.5
2.0 UK
4.6
0.2
2.8
2.5 US
3.6
0.3
1.1
2.3
OECD
Average
4.3
0.5
1.8
Source: de la Maisonneuve and Oliveira Martins, 2013

25. Change in age-related spending in the OECD (2010-2060)
Nov 2016
How much is enough: what should we be spending on the NHS?
Change in age-related spending in the OECD ( )