The UK is not the only country facing arctic financial conditions. The NHS can learn a lot from Europe and beyond

The NHS is facing the toughest financial climate in the postwar period - far worse than recessions in the 1970s and 1990s.

EU members like Latvia, Estonia, Hungary, Romania and others are looking into the abyss

What seemed at first like a phoney war - no changes until the comprehensive spending review and politicians promising to protect health spending - is becoming real, as the brakes go on public spending, and money is clawed back from budgets and from reserves. The prospects for 2010-11 are looking arctic.

The economic crisis that has caused the squeeze on the NHS is a global one; healthcare systems in most other developed countries are facing hard times as well. So, how are they coping and what are they doing to manage in an age of austerity?

First, the crisis has not hit all countries equally. The UK economy was very reliant on the financial sector, and our government was running a big deficit before the crisis struck, so we are probably facing tougher times than many other countries.

In some places, such as Austria and Germany, the government is planning to spend more on health and social care to stimulate their economies. They believe that health spending, because it results in domestic consumption and has economic benefits (like employing people) is a better stimulus than, for example, car scrappage schemes.

The richest countries of western and northern Europe, which spend the most on their healthcare systems, are probably well placed to protect them.

It is EU members like Latvia, Estonia, Hungary, Romania and others that are looking into the abyss. Their economies have nosedived, their currencies have been devalued and they mostly have fragile social insurance based healthcare systems that were created in the 1990s to replace Soviet-era public healthcare. Health insurance funds are going into deficit, spending on care is being cut and co-payment rates are soaring.

Second, the economic crisis is likely to damage health. Crises in Russia, Asia and Argentina in the 1990s all show that rapid adverse economic changes result in a variety of difficulties, from alcoholism and mental health problems, to worsening access to acute care and rising morbidity and mortality.

Data from past crises suggests that health problems result not because GDP falls, but because economic costs fall unequally on some groups - the unemployed, the elderly, unskilled workers, migrants, ethnic minorities and so on.

Governments can do a lot to mitigate adverse effects, by spending not only on healthcare directly but also on social programmes and education; in particular, they can keep people in work through labour protection schemes. The evidence from past crises suggests that investment in health, education, and social welfare should be what economists call “counter cyclical” - so, in a depression, governments should aim to spend more, not less.

Third, some healthcare systems are more resilient than others. Those with a single source of income (like the NHS) or whose income is tied to employment (like employer funded insurance in the US) are much more vulnerable than those with financial reserves and which are funded by a mix of taxation, social insurance, co-payment and other sources, where cross-subsidisation can be used.

It is easier to cut budgets in systems that are centrally controlled by governments, but decentralised healthcare systems with greater local autonomy are better placed to respond to economic pressures rapidly, and with initiative and creativity.

Slave to the wage

Fourth, many countries are trying to use the crisis to get things done that they might not be able to achieve in normal circumstances. Because about two thirds of the healthcare costs are accounted for by the wage bill, in most countries that means re-examining how clinical work is organised and who does what. For the NHS, with the highest paid doctors in Europe, we may have to revise radically the deals for GPs, consultants and other NHS staff that were negotiated in a time of plenty.

But, given the NHS is awash with rumours about savage cuts, perhaps the main message to be taken from other countries’ experience is that the crisis should not be allowed to result in a covert shifting of costs onto individual patients, which would increase inequality and disadvantage, nor a knee-jerk cutting of healthcare funding and provision.

In an economic downturn, health spending represents great value both as a short term economic stimulus and for its long term economic benefits.