In the first of a series of articles on the NHS at 60, Alexandra Wyke examines whether the original aims of a health service free at the point of delivery are still achievable. Is greater involvement from the private sector the way forward?

A Labour party promising NHS reforms swept to power in May 1997. At the time, an Economist Intelligence Unit publication, Healthcare Europe, claimed: "No political party will deliberately kill off the National Health Service. This masterpiece of 1940s social equalisation has long been one of the UK's few untouchables." What was true then remains true today.

By almost any business yardstick, the NHS finds itself in a perilous state on the eve of its 60th birthday. Yet campaigns such as Keep Our NHS Public and NHS Together testify to opposition by British voters and health professionals to changes to their beloved service. Even a top manager like Sir Gerry Robinson, former chairman of Granada, supports the cause of the NHS. After working alongside doctors, nurses and patients for a 2007 BBC2 series, Can Gerry Robinson Fix The NHS?, he commented in the Daily Telegraph: "The NHS is not collapsing. It is constantly running out of money. But you do get treatment. What it needs is managing."

Money and the management of money certainly lie at the root of the problems. Soon after Labour took office, the Chancellor, Gordon Brown, pledged to push expenditure on healthcare up to the levels enjoyed by other western European countries (a goal that has almost been reached).

But even while investment was being poured into the NHS, it was running up an ever-growing budget deficit, rapidly heading to billions more than it was receiving. Internal attempts to restrain activities have resulted in cancelled operations, cutbacks to doctors' training, and thousands of job lay-offs. The widespread retrenchment was so effective that by the end of 2007 the NHS was well on the way to making a substantial surplus.

Good news? John Appleby, chief economist at independent charitable foundation the King's Fund, is unconvinced. He argued last November that the surplus is a loss to patients, because it could have been redirected into services. Indeed, a September report by the King's Fund, Our Future Health Secured? A review of NHS funding and performance, concludes that there have been few improvements in productivity during the past five years.

And that is not all. Poor workforce morale has been exacerbated by staggering pay rises for the elite—doctors, consultants and bosses—at a time when other staff face the axe. The Department of Health stands accused of bureaucracy, opacity, and sowing confusion among NHS managers. Customer satisfaction, too, is low. For instance, in 2006-07, the NHS paid out almost £580m to clinical negligence claimants.

Future prospects for an NHS faced with an ageing population and expensive medical technology do not appear much better. According to the London-based Alliance of Health and the Future, an independent organisation that studies the social effects of ageing: "Research across Europe suggests that most healthcare systems are ill-equipped to address the needs of the ageing populations they are meant to serve."

It continues: "Modern healthcare systems were founded on the principles of acute care and are dominated by a focus on growing specialisation, efficiency, and expediency. Yet older patients presenting with chronic illness and co-morbidities require continuity of care that cuts across traditional medical boundaries and care settings." Technologists, meanwhile, predict imminent breakthroughs in the alleviation of sickness and pain—with a high price-tag.

As the proportion of the working population diminishes, so will the taxes needed to pay for the care of the sick and elderly, and expensive new drugs. Stephen Haddrill, director-general of the Association of British Insurers (ABI), points out: "As the cost of providing treatment continues to increase well beyond the rate of inflation and proposed funding, we are likely to see an emerging funding gap."

Many other commentators from different parts of the political spectrum share Haddrill's opinion. One is Sir Derek Wanless, a former chief executive of NatWest Group. In 2002, a report by Sir Derek, Securing our Future Health, helped provide legitimacy to the government's decision to raise healthcare expenditure. At the time, Sir Derek argued that NHS books might be balanced if the increase in investment were coupled with improved productivity and the adoption of healthier lifestyles. But in 2007, as co-author of Our Future Health Secured?, Sir Derek publicly questioned his 2002 conclusions.

The London-based Social Marketing Foundation (SMF) has just conducted a two-year study, The Future of Healthcare, to identify innovative economic and social-policy ideas for the NHS.
"Real choices must be made about how we fund healthcare—especially if public health worsens," says David Furness, SMF health project leader. "We need to start talking now about how we will meet these challenges, and we have to consider whether the NHS model is the best one for the future. That decision should be led by patients and the public, not just by politicians and policy experts."

Do alternatives to the NHS exist?
Healthcare funding schemes outside the UK have fared little better. In Germany, for instance, workers purchase mandatory insurance from government-appointed sickness funds in much the same way as drivers are legally obliged to buy vehicle insurance. Despite cost-containment reforms, the international Organisation for Economic Co-operation and Development (OECD) calculates that the German model is Europe's second most expensive (after Switzerland). Meanwhile, life expectancy in Germany is declining.

Across the Atlantic, the US lacks universal healthcare coverage. Although federal and state governments do support the needs of the very poor and, to an extent, older people, most US citizens rely on a managed-care system that functions within a competitive free market. US insurers double as healthcare providers, and keep an iron fist on their budgets.

The American system is much derided. It absorbs a whopping 15.3 per cent share of GDP, and yet now fails to cover large sections among even the working population, since managed-care premiums have soared well ahead of workers' wages. The US Census Bureau reported last year that 47 million Americans (16 per cent of the population) had no health insurance during 2006. The US launched an ambitious attempt to reform private-sector healthcare in 2004. A tax-incentive programme called health savings accounts (HSAs) asked consumers to judge themselves how to spend what are effectively their own healthcare dollars. The Bush administration hoped that HSAs (similar to schemes found in Singapore and South Africa) would allow consumers to understand the true costs of healthcare.

But when PatientView, a UK research organisation, surveyed US patient organisations in 2005, it found fierce opposition to the new system. One patient group insisted: "In a vain attempt to save money for retirement, a person might not see a physician until they are sicker. By then, the cost of their care will have become much higher to them." Another observed: "HSAs are like gambling. If someone doesn't get sick, they win."

Only eight million HSAs, covering less than three per cent of the US population, are estimated to be in place. Commenting on the ABI's position on such medical savings accounts, Haddrill states: "Ring-fencing money in this way simply makes the arrangement inflexible, and reduces choice at the moment that the money needs to be accessed." But UK policymakers are keeping a close eye on the experiment.

Furness believes that, "There is no perfect existing model we in the UK can adopt." This implies that we need a novel approach, particularly if we are to absorb new demographic and scientific challenges, and rather argues against the merits of the status quo.

What role for the private sector?
A potential new approach could involve greater co-operation with the private sector. Haddrill and other like-minded commercial operators are all for such a move: "We believe that the private sector complements the NHS by attracting more money into the system, relieving the pressure on the NHS, and providing greater consumer choice."

Though unpopular among NHS supporters and the public, the tactic is favoured by both the Labour government and the opposition.

Europe's role

Given healthcare is supposed to be a sovereign matter for member states, it is remarkable just how many activities Brussels is currently undertaking in the area. These range from digitising records to disease prevention, preparation for pandemics and the mobility of healthcare professionals.

David Earnshaw, chairman of PR/lobbying firm Burson-Marsteller Brussels and a visiting professor at the College of Europe in Bruges, points out that there is scope for Europe to do a lot more with those factors that affect all member states, for which "solutions are better found in common than in 27 different varieties".

On October 23, 2007, the European Commission adopted its health strategy for 2008-2013. A key element permits NHS patients to seek appropriate treatment abroad, if not available at home-with the UK footing the bill. Healthcare systems are also to be stacked up against one another, to encourage a level playing field in quality and delivery of health services.

Kajsa Wilhelmsson, director of European affairs at the Brussels-based think-tank Health Consumer Powerhouse, believes that the EU will increasingly look on healthcare as yet another service market, in which national health systems compete for Europe's patients, with the money following the patient. "And if patients can go abroad to have private healthcare paid for by the tax system," she asks, "can they be denied the same in their own country?" Just in case she is right, the NHS has recently opened a major EU office in Brussels.