Secretary of State for Health and Social Care Wes Streeting has signalled that the new government is serious about a shift to prevention and health creation. Being a healthier nation will also mean being a wealthier one. It is therefore the ambition for the Department of Health and Social Care (DHSC) to make a significant contribution to economic growth by improving the health of citizens so they can live longer, healthier, more productive lives. The government’s growth mission needs the health mission to succeed, and that will not be possible if it continues to allocate the vast majority of the health budget to sickness services alone.
Improving the health of the country and preventing disease can generate substantial benefits for the UK’s economic prosperity. As set out in Prosperity Through Health: The Macroeconomic Case for Investing in Preventative Health Care in the UK, reducing the incidence of six major preventable diseases by 20 per cent could raise GDP by almost 1 per cent within a decade, equating to an annual boost of £26.3 billion. To fully benefit from prevention, changes to the government’s five-year fiscal framework will be required. As discussed in The Economic Case for Reimagining the State, the government’s fiscal rule – which requires debt to be falling as a share of GDP in five years’ time – is too short a horizon to fully capture the macroeconomic benefits of improving health.
For too long, health spending was seen as an ever-rising cost to the state rather than an investment in a productive asset that can help drive economic growth. This paradigm is increasingly outdated and requires establishing a modern, data-driven fiscal framework at the heart of government.
A key objective of a new fiscal model is to provide a mechanism to determine how best to allocate the £180 billion health budget across a range of services, including public health rather than just the National Health Service (NHS), to maximise the return on investment either geographically or across competing elements of the budget.
The government therefore needs a new allocation model that can account for the value of population health and prevention so that it can make informed decisions about where best to invest limited resources for maximum return. This approach has worked in other areas of the economy. For example, it is now possible to understand and account for how improvements in people’s collective skills and education impact economic growth. Similarly, the Office for National Statistics’ (ONS) environmental accounts and natural capital accounts ensure that the economic impacts of climate change can be considered when developing policy and allocating funding. Better data accompanied by scientific and technological breakthroughs that allow an ever more granular understanding of the current and likely future level of health in the population are also enabling this for health. This will require three specific policy shifts:
There will need to be a move to multi-year pooled budgets for all health-related spending, combined with fiscal incentives such as shared savings for Integrated Care Systems (ICSs). This will support a shift away from sickness care and towards prevention by giving longer time horizons and greater fiscal autonomy. It will require the debt rule to be revised ahead of the government’s first major fiscal event this autumn and the Office for Budget Responsibility’s (OBR) forecast horizon to be extended beyond five years to highlight the longer-term payoff of prevention.
The Treasury needs to formally account for an appropriate share of health spending as an investment in a productive asset. Demos, the Health Foundation and the Tony Blair Institute for Global Change have called for the Treasury to designate new spending categories within its existing resource and capital departmental-expenditure limits to distinguish between those that represent investment in productive assets and those based strictly on consumption.
Most importantly, the Treasury needs to establish an actuarial approach to health – a National Health Insurance (NHI) model – of anonymised health-care data to maximise the healthy life expectancy of the nation. Such models are widely used in the context of pension liabilities and life-insurance markets. However, unlike those models (which are mainly concerned with establishing premiums or reserves), a public NHI would aim to maximise health outcomes for the nation. This would allow health to be consistently measured and tracked as a national asset and allow the government to make predictions about future disease burdens and outcomes, thereby guiding policy and investment decisions. The ONS health index data set provides a useful starting point for new programmes to build on, although it has been defunded and needs to be urgently reinstated.
Chapter 1
The NHI model would contain anonymised and securely held data about the nation’s health and allow DHSC to make predictions about future disease risks and outcomes – essentially a macro version of the digital health record. Similar models to stratify risk across a population are already being used by ICSs in a number of countries, including the US, Spain and Germany.
Given the NHI model would be a government-run system, “bad risks” cannot be excluded in the way they can in the private health-insurance market, where those with pre-existing conditions are denied certain aspects of cover. However, the UK has an opportunity to develop this model at a national level and has distinct advantages in terms of its level of data granularity, public acceptance and investment in genome testing and newborn screening. This would significantly improve the predictive power of the NHI model.
The NHI model would need robust governance and oversight to ensure it has the intended impact. One governance option, involving minimal institutional upheaval, would be for the NHI model to be co-developed and co-owned by the Treasury and the DHSC, in a similar way to how pension reform is now led by the Department for Work and Pensions (DWP) and the Treasury. A more radical structural step would be to create an independent National Health Bank, inspired by the governance framework of the Bank of England, which would be focused on funding interventions that promise the best health returns on its investment. In either case, the NHI model should be made available to the OBR so that it can be used as a direct input in its economic and fiscal projections. This would help ensure that health is used as an explicit input in the UK’s economic growth modelling, as a productive asset similar to human or physical capital.
In practice, the NHI will help to improve strategic decision-making and resource allocation in at least five ways:
Making decisions based on total benefits and costs to an individual’s life-long health, rather than limited to specific health interventions. Rather than looking at the impact of a specific health intervention, a life-course model would take opportunity and downstream costs into consideration. For example, the assessment of ending smoking on the composition of health costs: this reduces mortality from lung cancer, but people will still die from other diseases. Such complexity is not currently captured by the quality-adjusted life year (QALY) framework. Another example is novel weight-loss drugs that could be properly judged on their ability to reduce the lifetime risk of a variety of conditions, not just their immediate impact on weight loss. The NHI model would also enable a deeper understanding of the economic and health gains of better managing people with existing health conditions using well-established and proven interventions that are not currently applied systematically or consistently.
Making decisions on the allocation of resources across geographic areas. The NHI model would replace the current Carr-Hill formula in allocating GP funding and reduce or even eliminate political interference. Primary-care resources are currently allocated on an annual basis at a fixed amount per person on each GP list. The NHI model would allow for the more targeted and proactive allocation of financial resources to those areas most in need. This would give ICSs an incentive to keep patients healthy and enable the systematic assessment of risk across the population.
Maximising health benefits by allocating resources efficiently over time. This could be achieved by creating a new category of government expenditure – in the form of a preventative departmental expenditure limit – that treats health spending as a longer-term investment. This would enable the NHS to make targeted interventions for specific cohorts such as those at risk of cardiovascular disease, similar to the way the DWP supports specific inactive or unemployed people with clear and measurable outcomes. It also sends a clear signal to industry by identifying gaps in current treatment options that would have economic returns if interventions were available.
Supporting ICSs to effectively plan local care. Successful international ICSs are based on actuarial models of population health; for ICSs to be successful in the UK, a similar capability will be necessary. However, building the required data and analytical capabilities 42 times – for each existing ICS – is impractical and costly. Instead, the NHI model will allow an ICS to use the relevant outputs of the national model to feed population-health models for its local population.
Making better decisions across government to maximise population health. There is currently no comprehensive way of assessing the fiscal investment required to increase healthy life expectancy or to understand the economic benefits to individuals and the country. The NHI model would make it possible to trade off different outcomes and compare them with other priorities across government. This will be vital to inform the new government missions and ensure they are truly cross-governmental.
Chapter 2
Given the constrained fiscal space in the UK, investment in health needs to be reimagined. The introduction of an NHI model will be necessary to support a mission-led approach to growth and health, provide stability and predictability to health budgets, and fix a system that has been funded by short-sighted investments to plug short-term gaps. By formally and fiscally accounting for the value of prevention and population health, the government can use its finite resources more effectively to help UK citizens live healthier, more productive lives. And this, in turn, can create a healthier and wealthier nation. The existing fiscal model is too inadequate and outdated to be able to provide this necessary shift to sustain a functioning health service. The health mission is unlikely to succeed without changes to the fiscal architecture.