Friday, 20 May 2011

Some free advice on achieving 'world class NHS productivity' McKinsey style

Following on from my previous post on McKinsey's recommendations to save money in the NHS, I don't think they've been ambitious enough - where's that blue sky thinking we've come to expect from the cream of Oxford's 20-something PPE graduates?

As I mentioned before, McKinsey's approach is to list every institution in order of cost/efficiency/whatever and claim that lots of money could be saved if all those 'poor performers' performed at the level of the median. I think this technique can be taken even further, and I'll offer my advice for free!

The UK spends phenomenal amounts of money per capita on healthcare compared to most countries in the world - using some figures I had leftover from this set of posts on 'The Spirit Level' - we can see that in 2006 the UK spent some $2.5k per capita on healthcare compared to a world median of around $200! That's a potential saving of over £80bn!

What is that you say, other countries don't necessarily have great healthcare from that $200? Well McKinsey don't deal in trifles like cost-effectiveness and health outcomes, but I suppose I can stretch to looking at that if you insist - I like to think all those years at university were good for something. Using that leftover data I was talking about above we can see what sort of return you get for $200 versus $2.5k. Below is a figure plotting data for life expectancy (in 2007) versus health expenditure per capita (in 2006):

I've fitted a regression line (which is logarithmic to better reflect the shape of the data). At $2434 the UK gets a life expectancy of 79yrs (versus the predicted 81yrs) while the median spend of $218 would predict a life expectancy of 69yrs (versus a median world life expectancy of 72yrs) - countries spending around $200 include Venezuala (74yrs), Malaysia (74yrs), Kazakhstan (65yrs), Thailand (69yrs), Tunisia (74yrs), Tonga (72yrs), Gabon (60yrs), Fiji (69yrs), Guyana (67yrs), Equatorial Guinea (50yrs), Namibia (60yrs), and Swaziland (45yrs).

So there you go, save £80bn and 'cut the deficit' or bail out the banks, and it'll only cost you a predicted loss of 10yrs in life expectancy - good value I'm sure you'll agree. No? Maybe that's a bit too radical for you, but there's another approach we could take - look at that figure above again, doesn't seem like you get much of a return for you investment when your expenditure goes past around $1.5k per capita (where the graph flattens out) does it? If we cut our expenditure to $1.5k per capita we would predict a life expectancy of 78yrs and save £36n - thats a reduction of life expectancy of 1-3yrs for billions saved, an absolute billy bargain!.*

So basically I cannot see how nearly halving UK health expenditure could possibly have any down sides - I've proved it with numbers and graphs and everything! I wonder if McKinsey are recruiting?

* If you think this proposal is a joke, consider that it is the natural consequence of the putatively 'progressive'  reasoning used in 'The Spirit Level' that increased health expenditure has no beneficial effect on health outcomes like life expectancy for richer countries such as the UK (I disagree) - no wonder David Cameron likes it.


Zeno said...

What a missed opportunity. What needs to go hand-in-hand with this is the immediate raising of the retirement age to 69, thus solving the pensions crises at the same time. That would be a win-win situation for Cameron.

pj said...

I think that's what all this talk of the 'challenges' of an ageing population is all about - softening us up for Logan's Run.

Neuroskeptic said...


mike said...

Personally I'd happily go with the $1500 per capita option, although it's likely that the money is being spent far more efficiently in the smaller budget healthcare systems than in the UK. Healthcare is pretty poor value for money in prolonging both life and quality of life, compared with education and behaviour change on such things as diet and exercise.

pj said...

mike - I think you're confusing the potential benefits of education and the actual practical impact because plenty of money's been spent on public health initiatives of this sort without much useful impact.