Professor Alan Maynard wonders whether the funding pressures facing the NHS are properly understood by policymakers, whose proposals promise to increase them.

Re-disorganising the NHS is a favourite pastime of all politicians, as witnessed by dozens of structural reforms over many decades. The common characteristic of these reforms has been unbounded political optimism, with very little beneficial effect in the processes of patient care and on users’ outcomes.

Each of these re-disorganisations has consumed billions of pounds and always tends to divert attention from the core issues of NHS management i.e. staying within budget and hitting waiting time targets.

These are the core issues for politicians.

It is these issues that have resulted in the Cabinet Office now reviewing the Lansley reforms, to ensure that in 2011 and beyond there will be no lack of focus on them as management attention is diverted into rolling out mergers and new structures.

There is a nice debate about NHS resourcing. The Coalition promised ring-fencing and real resource increases. Their figures indicate a small increase of around 0.5% in real funding over the next four years.

However some of the assumptions behind these figures are debatable: the social care money is in effect compensation for local authority cuts in spending, and will offer little benefit to cash strapped NHS providers.

The overall conclusion is that NHS spend in the next four years will decline by about 0.5% in real terms, and that these pressures will be driven into the system by PbR tariff pressures and hopeful advocacy of the ill-defined benefits of competition and privatisation.

There is acute risk that the drive for increased “productivity” will be submerged by desperate management needing to cut service quality and quantity: QIPP may just become the equivalent of cuts!

Lansley has decided not to continue with national targets, and so Whitehall may hope that any erosion of waiting time performance may be disguised.

Fortunately, John Appleby, chief economist at the Kings Fund, is now collecting all the local data to ensure there is national monitoring.

So Whitehall evasion may be more difficult.

But how will the money be managed within cash limits? The Coalition’s policies are not always helpful.

Waiting for NICE policy
We await a policy proposal on NICE. Ministers have already declared “NICE is dead. Long live NICE!”

That is, they have said that NICE will no longer mandate new treatments for the NHS.

Such choices will be informed by NICE’s appraisal systems - but decisions will be taken locally by GP commissioning consortia. This is a lovely recipe for “postcode lottery” hysterics and inefficient use of resources.

Some may conclude this is what the Coalition want! Indeed such a conclusion is supported by the nonsense of the National Cancer Drugs Fund. This allocates £200 million to cancer drugs which are not cost-effective but which patients, supported by industry, want.

This drives a coach and horses through efforts to ration access to care on the basis of cost-effectiveness - and will create enormous pressure for other groups to be treated specially e.g. diabetes.

The notion of opportunity cost has been lost amongst political vote-buying with unfair and discriminatory consequences.

Avoidable funding pressures
These victories for industry put avoidable pressures on NHS funding.

Other pressures are less avoidable. With high public expectations and the ageing of the population, it is generally assumed that the NHS needs 2-3% annual growth in funding to remain solvent.

The Coalition seems to assume that amidst re-structuring, the NHS can cope with a small real cut in funding and stay solvent and meet now well embedded targets for waiting for electives. It will be interesting. to see whether this is so.

Being careful what you wish for
Will competition and privatisation help meet these pressures? Proceed with care!

For instance: if GP consortia go out to tend for services such as diabetes, dermatology and COPD, they may break up service delivery arrangements and erode economies of scale that enables hospitals to be least cost providers.

Alternatively if unions of GP consortia tender together for pathology and pharmacy, this may enable larger-scale production of these services, which generate improved efficiency through exploitation of economies of scale.

The nice issue, as ever, is whether the new organisations will have the capacity to distinguish between these choices efficiently, and so improve value for money – or worsen it.

The primary issues for the next few months will be the NHS Bill, due late in January and the solvency of the NHS. The latter will dominate the news in the immediate future, with the Department of Health confident in this week’s Operating Framework for 2011-12 that all will be well.

With wages frozen (but incremental drift still potentially a considerable pressure), the full effects of constrained funding may be muted in the short run, but not eradicated. Politically the issues of financial balance and waiting times will dominate as Lansley’s reforms absorb scarce management skills.