Healthcare funding: is there enough to go round?

Virtually every health system in the world is in the midst of major reform - from the US presidential hopefuls' competing plans for universal health insurance to the scheme to move away from a disastrous experiment with free market healthcare in China.

At the root of the problem is the growth in health spending and the difficulty faced by health systems in accessing funds to pay for this.

The cause of this growth in spending is debatable. Ageing populations do not seem to be the major driver. While the consumption of health resources does increase with age, it increases most dramatically in the last few months before death. So improving life expectancy just delays spend, and the increases in spend caused by the greater number of older people are offset by improvements in productivity and reductions in age-related morbidity.

But demographics are a factor in spending. When the NHS was created in 1948, there were six people of working age contributing taxes for every retiree. By 2020 that will be four to one. At some point, the willingness of working citizens to pay to support the economically inactive will reach an absolute limit.

The major causes of health spend increases appear to be epidemiology and technology. As societies become wealthier and life expectancy increases, new technologies emerge that enable people to live longer but only at ever-increasing cost for ever-decreasing incremental health gain.

While the UK has a significant problem in this regard, this is nothing compared to America's. The US accounts for an astounding 45 per cent of global health spend, yet is one of only three countries in the Organisation for Economic Co-operation and Development that does not provide universal access to basic healthcare. Things will have to change. Given the US's dominance of global health spend, the impact of reform will echo around the world.

Who will pay for innovation?

With universal health insurance will come the impetus to control costs. This in turn will have a profound impact on the pharmaceutical industry, as it relies on America to buy expensive drugs that are increasingly being rejected by organisations such as the National Institute of Health and Clinical Excellence. This will impact on the world's access to innovative medicines. If the US will not pay for these innovations, who will?

Every health system is a variation of five basic models. A recent review undertaken by AT Kearney, which examined around 20 different systems, found they are all doing broadly the same things. There appears to be a limited number (15) of ways to address the issues, such as regional planning of health economies or introducing mixed private and public provision.

However, systems implement these 15 ways in a different order, starting with those most acceptable to their particular society. Eventually, once the "least worst" mechanisms have been invoked, only the most unpopular remain. In the UK, after nearly two decades of reform deploying nearly every lever in the book, we end up with the issue that strikes to the heart of the founding principles of the health service. What kind of healthcare should the state provide and how should the rest be financed?

There are no easy answers. In terms of payment systems, the evidence that an insurance-based system is any better than a centrally funded system is weak. In any case, the much admired German insurance based system is reforming to increase state funding. And the even more admired French tax funded insurance system is in reality very similar to the NHS.

Political choices

The idea that these decisions should be depoliticised does not stand scrutiny. Despite NICE's best efforts, spend allocation cannot be determined by health economics alone. The NHS often funds very expensive treatments that have little health gain compared to preventative interventions, because society wishes it. And what the state should provide to citizens using taxpayer funds is one of the most important political decisions any government must face.

However, the idea that there is a boundary to the care that should be paid for through general taxation and that patients should be allowed to spend their own resources on additional care is broadly accepted in most countries around the world. The forthcoming review on top-ups is a finger in an unstable dyke - the first step to mixed funding across the health service.

How these questions are addressed will be a central priority for this and future governments. Both parties would be wise to get their heads around the options and engage the population in serious debate. Populist headline-grabbers might be great for votes, but there are real matters of substance to be discussed and our society will need to make some difficult choices.