The Inelastic Health

At the start of this Parliament, resource spending on healthcare was £133bn. Today’s Spending Review confirms that by the end of this Parliament, it will increase by £44bn to over £177bn.
And the extra revenue we’re now forecast to raise from the Health and Social Care Levy is going direct to the NHS and social care as promised.
The health capital budget will be the largest since 2010.
Record investment in health R&D, including better new-born screening…
…as campaigned for by the Member for the Cities of London and Westminster.
40 new hospitals.
70 hospital upgrades.
More operating theatres to tackle the backlog.
And 100 community diagnostic centres.
All staffed by a bigger, better-trained workforce, with 50,000 more nurses and 50 million more primary care appointments.

– Budget Speech (Oct 2021) by Rishi Sunak []

Healthcare is a tough topic to deal with. It impacts everyone, directly or indirectly. Therefore, I wanted to analyse the part of the budget speech that dealt with healthcare and NHS (see quote above).

We can break down the above quote into promises that:

  1. Increase Supply:
    1. Building up infrastructure (new hospitals, upgrades etc.)
    2. Creating a skilled labour pool (more doctors, nurses etc.)
  2. Reduce Demand:
    1. Offloading (outreach to promote healthy living options etc.)

The overall promise is about £44 billion over next 3 years (approx.). So let us see how this money could be used and how realistic this is.

Building Infrastructure and Creating a Skilled Labour Pool

Hospitals take a long time to build, upgrades can happen faster. But all of that will need more staff to operate. More specialised nurses, doctors and technicians. It also takes time to train/onboard healthcare professionals. Therefore the supply of healthcare cannot be expanded quickly (and it is ‘inelastic’ in economic speak).

As per [REF] the number of doctors increased by 6,600 and nurses by 10,900 in the year 2020 (Dec. 2020). The intake target for Medicine during the 2021-22 academic year is 8,313 [REF]. If that sounds impressive remember the UK has one of the lowest doctors per capita [REF] in the OECD group of countries. In 2020-21 1,358 doctors (GPs and Hospital doctors) retired [REF]. Taking into account drop-outs (from data about 10-11%), retirement and people leaving the profession, we should get about the same amount of increase per year (6,500). This gives us a supply of about 19,500 over next 3 years.

So if we were to create 40 more hospitals and upgrade 70 others and improve access to healthcare then we need:

  1. 80-100 doctors per new hospital (say)
  2. 10-20 doctors per upgraded hospital (say)
  3. 3 GPs to replace 1 current GP [REF]

Lets take lower numbers over next 3 years:

80 doctors per new hospital = 40*80 = 3,200 doctors for those new hospitals

10 doctors per upgraded hospital = 70*10 = 700 doctors for the upgraded hospitals

Replacement rate of 20% of current GP (35,000 approx.) to account for retirement and increasing demand – far lower than the 3 for 1 = 7,000 GPs per year = 21,000 GPs over 3 years

Total over 3 years: 25,000 doctors over the next 3 years.

At 10% replacement rate: about 3,500 GPs per year = 11,000 GPs over 3 years giving a total requirement, over the same period of about 15,000 doctors.

At 15% replacement rate: about 16,000 GPs over 3 years giving a total requirement, over the same period of about 20,000 doctors.

In the worst case we are looking at a shortfall of 500-5000 doctors. In the best case a surplus of about 4000. Given the current issues with waiting times and delays across the board a surplus scenario looks unlikely.

How to fill the gap?

Assuming a small gap of say 500 doctors – we would need to fill it from outside the UK. That means a small but significant part of the £44 billion might go towards Visa infrastructure and Enforcement. There will be earnings from this as well because there are usually visa fees involved which will offset some of the spending. Currently about 15% of NHS staff are not British Citizens [REF]

This will have a second order impact though in the country of origin. It will lead to brain-drain as typically the best doctors and nurses will qualify to work in the UK. This will result in a higher required replacement rate in the country of origin. Since the biggest source of such talent is India, it will be interesting to study the effect this has on the quality of healthcare there. This is when India specifically is already dealing with a shortage of doctors [REF].

Other Solutions

It is always good to give ideas alongside investigating issues. So I want to make some effort to present some ideas:

  • Create 1000 medical seats per year in UK universities, provide full scholarship and chance to work in the NHS to the students selected for it. Can target international students or a mix through a common entrance exam. This will attract the best talent from around the world.
  • Push offloading measures such as promoting healthier lifestyle – e.g. subsidy on exercise equipment, financial incentives for weight loss and ‘cashback’ type of benefits if you have not used the NHS.
  • Increase automation and connected healthcare – where sensors can be used to monitor those at risk
  • Increasing salaries of NHS Staff to attract more people (it is dangerous to pay more and expect longer working hours because that can lead to mistakes, stress and burnouts)

Interesting Fact:

Currently India’s Doctor per 1000 people ratio is about 0.7 [REF], WHO recommends 1.0, if all the Indian origin doctors (i.e. doctors trained in India) were to go back to India this would [REF] make a big impact on the shortfall.