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Blog: Who pays for the NHS?


28 December 2015

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I tried to explain to my 15-year-old son how the NHS was paid for and how it works to help him understand the intricacies of the funding system. The Government tax the population and businesses and decide then how to allocate that funding to the different departments, who in turn decide how to spend it. Each department lobbies for a greater share each time and in keeping with the BBC comedy programme Yes Minister, the one with the biggest budget is thought to be the most powerful. Health has been protected from austerity cuts but only if it can demonstrate the return on investment. There has not been the usual annual uplift of 7% to the NHS budget that has happened since 1948 but the demand has grown without the funds to pay for it.

If the tax in is less than the spending plans the Government has to borrow from the International Monetary Fund (IMF) with clear plans how to pay it back. If the IMF doesn’t have confidence in the plans then the pound would get devalued, which makes buying goods from overseas more expensive. This has a knock on effect on the rest of the economy. So when people suggest we just need to spend more on health the money has to come from somewhere. There is no endless pot.

The money that is allocated to health is then divvied up to the different areas depending on multiple factors such as deprivation, health needs outcomes and dare I say it political expediency. The formulas used to determine how the money is allocated rarely change, such as the Carr Hill Formula introduced for the contract changes in 2004 to determine how much general practice gets per patient and how much guarantee the practices had over their income.

In my practice I have 13,000 patients but am only funded to care for 11,500. I met a GP from Yorkshire who has 13,000 patients but is funded for 14,500. I did a calculation and audit in my practice on how many contacts there are and who attended. I was shocked to find we offer approximately 75,000 contacts either with doctors, nurses or healthcare assistants per year but more alarming was that only 1,900 individuals were seen. That meant 11,100 registered patients did not have contact with the practice. I wonder what would happen if we declined to see the 1,500 we were not funded for. I would have a quiet life.

General practice is not allowed to charge patients for any activity available on the NHS even if their local commissioning group has decided it will no longer fund that activity. There are schemes to fund extra activity but each area can determine how much they are willing to pay. So, locally commissioned services (LCSs) differ depending on where you practice. As providers it is up to the individual practice to determine if it will provide that service. Otherwise it is up to commissioners to find an alternative. Usually there is a drive to send work out of hospitals into primary care to make it less expensive and less work for the busy trusts. The false perception is that there is spare capacity to deliver that work and that it can be done for free. After all, it is one NHS and we are all pulling together aren’t we? My analogy is it is like a supermarket asking a corner shop to sell coal for them but pay the supermarket not the corner shop. Unless the costs are covered and the corner shop can make some profit it won’t happen.

And there is that dirty word, profit. In the NHS it is called surplus to be re-invested but the business model is still the same. There has to be some incentive to deliver a service as altruism does not pay the bills. The NHS is a socialist ideology trying to be delivered by capitalist business models where everyone is given a different allocation but expected to deliver the same outcomes. Sadly, we only look at the bottom right hand column to measure success. Positive you are ok negative and you’re for the firing squad. It does not matter what went in at the top or what happens in the middle if the numbers don’t add up you are deemed to have failed. I still hear from NHS management the time honoured excuses of ‘the money is the money’ and ‘we are where we are’, but unless the public is made aware that the allocations are so vastly different and the business models are not aligned, they cannot expect a consistent national service. Margaret Thatcher, Prime Minister from 1979 to 1990, and the leader of the Conservative Party from 1975 to 1990, famously said: “The problem with socialism is that eventually you run out of spending other people’s money.”

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