Accounting for care

The NHS is a service that all of us use, most of us pay into, and that provides everything from a GP check-up for a sore knee to the most advanced stem cell therapy – all of which has to be paid for. This is to support people with their right to health, and support their desire for wellbeing. So, it’s no surprise that how much we spend is a topic of debate.

The Office of National Statistics’ (ONS) health accounts (published on Thursday) would normally only be of interest to public finance fans. But this year is a little different­ – not least as it comes in the midst of a debate about NHS funding. The ONS have used the OECD’s new-ish methodology for defining (public and private) health spending. This new method tries to focus in on what we really mean by spending on ‘health’. While many countries have adopted it already, the UK is finally catching up and we can see how UK spending compares using this updated and upgraded definition.

Part of the reason that there’s so much debate is that not only is deciding how much to spend on health is hard, but it’s also really hard to define ‘health’.

How much of your income do you spend on your health? Defined to include wellbeing, most of it. But when it comes to specifically on health it’s hard to say. Does your gym membership count? What about the vitamin drink you bought? What about the money you gave to charity the other day?

When it comes to the UK’s spending it’s also hard to pin down – this line between health and health care is equally tricky.

Up until now a safe bet has been 8.8%, from the data the ONS submitted to the OECD last year about 2013 spending. This is based on the OECD’s old definition of health spending, which has been pretty similar since 2001.

New data from the ONS suggests that by this old definition, spending has fallen to about 8.7% of GDP in 2014.

But there’s a new definition which says we’re spending 9.9% of GDP on health (rather than 8.7%). As changes of definitions go this is a big one, worth about £20bn.

So where does this jump come from?

The new definition includes some things that weren’t included before, but also drops some things.

The big decrease is the removal of capital spending from the definition (spending on things like building and infrastructure – worth £5.6bn, 0.3% of GDP), as part of an ongoing move to using ‘day-to-day’ spending for comparability reasons. There’s also a change in the way health spending by charities is defined, to more accurately reflect spending on health.

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As you can see in the chart, the big increase is health-related social care (this still isn’t all social care), adding £13.5bn (0.7% of GDP). The other big increase is long-term care (£9.5bn, 0.5% of GDP). These two figures are a key reason why it’s worth sitting up and taking note of the new definition. It has a very different sense to it: a sense in which health isn’t just health care, and social and long-term care are a fundamental part of our national commitment to health. Countless policy documents have reiterated that the NHS cannot operate as a silo, and its sustainability relies on the rest of the health and care system being properly financed. The OECD definition seems to agree.

A famous philosopher, Quine, described compilers of dictionaries as empirical scientists: creating definitions by merely affirming in writing facts which were true before they wrote them down. The job of health account taxonomists is pretty similar. Care spending was already part of our spending on health, really – the new accounts merely affirm this in writing.

Does the new definition make our spending more normal?

The debate on how much we spend on health is so often comparative, and this is the second key reason why the latest figures are so important. While we were using the old definition we have always been an outlier compared to other similar countries. This adds credibility to the claims that we’re not spending enough; with people such as Don Berwick saying that funding the NHS any less as a percentage of GDP was ‘way out on the edge’ and a ‘risky’ ‘ongoing experiment’. Clearly almost 10% sounds very different – it’s what we’re used to countries like Germany and France spending on health.

While we’ve got to wait for a while to compare all countries with the new definition, we’ve clearly narrowed the gap a little for comparable countries ­– similar to Austria and Belgium, but still below France and Germany. To close the gap on France and Germany would require an increase in health spending of over 10%. 

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The new definition hasn’t pulled £20bn out of thin air. No one is healthier today because of it, and hospitals haven’t stopped being in deficit nor have GPs stopped being stressed. But it makes clear that social and long-term care are fundamental parts of health, that the NHS cannot operate as a silo, and its sustainability relies on the rest of the health and care system being properly financed. We still aren’t a high spender by a long chalk, but the new definition will recast the debate from just needing more money to understanding how we can use resources better.

Ben Gershlick (@BenGershlick) is an economist at the Health Foundation