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Ryan Bourne @MrRBourne
, 16 tweets, 2 min read Read on Twitter
People seem to want an "honest conversation" about the NHS. So let's have an honest conversation about some basic economics of the model of healthcare in the UK:
1. Pricing healthcare at the point of use at zero means demand will exceed supply. Period. Services have to be rationed, via queuing.
2. Absent price mechanisms, resources get allocated by planning and projected demands. When demands differ from projections, you get acute shortages and severe queuing.
3. You can chase demand with continual increases in taxpayer funds to boost supply, but you will never "solve" this fundamental issue.
4. And taxes have intergenerational consequences and deadweight costs.
5. Those who say "the NHS should be depoliticised" are dreamers! You can't get more political that taking money by force and spending it.
6. Since the NHS is provided free at the point of use and from taxpayers, there is little pressure for harnessing technological innovations for cost-cutting, which is why cost-inflating innovations dominate.
7. Admittedly, Simon Stevens recognises this, and has been pretty heroic at improving NHS efficiency in recent years after a decade of bloat.
8. Efficiency is not the same thing as spending. Yes, the NHS spends less than amount spent in other countries on healthcare. But efficiency is about outputs relative to inputs, and NHS (though improving) performs relatively poorly on that.
9. The fact that the NHS is a tax-funded system leads to a significant lack of transparency, since it is almost impossible for a taxpayer to work out how much they actually pay for healthcare.
10. Since the NHS is financed on a pure pay-as-you-go basis, all current expenditure is paid out of from current tax revenue. Against the backdrop of an ageing population, this is a very unstable financing method.
11. Could pressures be eased by spending more? Probably. But there are huge structural issues here - which even those who acknowledge the current problem sweep under the carpet.
12. Hence you have articles that talk about "crisis" and "breakdown" but then say "the NHS generally works well". Because you have to genuflect to the NHS god.
13. If it works well, why do these articles call for reform? On what criterion does it work well? It doesn't seem to be in health outcomes data.
14. Most people say they want an honest debate, but in fact what they mean is they just want the government to spend more.
15. As the population ages, and the country gets richer - all evidence suggests people will need and want to spend more on healthcare. Healthcare is income elastic. Paradoxically, a tax-funded PAYGO system makes that harder.
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