Joint analysis between LCP Health Analytics and the Institute for Public Policy Research (IPPR) published today has found that improvements in population health and in healthcare productivity could significantly slow the projected increase in healthcare costs. This could lead to a saving of around £44bn annually by 2033/34, approximately the size of the current defence budget. 

New modelling from LCP Health Analytics shows that healthcare costs as a proportion of GDP in England will increase rapidly over the next decade due to cost inflation and an ageing and growing population with increasing needs and expectations around healthcare. However, the modelling, published alongside today’s new report for the cross-party IPPR Commission on Health and Prosperity, shows the potential for significant cost savings if prevention and productivity are prioritised.

LCP modelled a range of scenarios for the future development of the healthcare system, three of which are explored in IPPR’s report:

• “Repeating history”: if productivity and other factors grow in line with historic trends, we would expect government-funded healthcare costs to reach 10.7% of GDP in 2033/34.
• “Post-pandemic new normal”: if productivity flatlines, we would expect expenditure to reach 11.2% of GDP in 2033/34.
• “Reform”: if productivity grows 0.5% pa faster than historic trends and healthy life expectancy begins rising from 2027/28 in line with the gains seen in the 2000s, we project expenditure of 9.9% of GDP in 2033/34.

All modelled scenarios project increasing real-terms healthcare costs. Above-inflation cost increases arise because of changing patterns of healthcare utilisation and demographics – the ageing and growth of the population.

The difference in cost in 2033/34 between the “post-pandemic new normal” scenario (£370bn) and the “reform” scenario (£326bn) is £44bn. For a sense of scale, this is about equivalent to the current UK defence budget. Of this, £35bn relates to improvements in productivity (assumed to be 1% pa in the “reform” scenario), with the remaining £9bn due to improvements in healthy life expectancy, illustrating the longer-term benefits of shifting to a “prevention-first” healthcare model.

Stuart McDonald, Head of Longevity and Demographic Insights at LCP, commented:

“The NHS faces growing demand from an ageing population with increasing healthcare needs. As expectations regarding healthcare continue to rise, finding ways to maintain good health for longer becomes ever more important. Our modelling reveals the extent to which achieving this goal, by prioritising measures which prevent or delay the onset of ill health, can significantly reduce government healthcare spending. In addition to this, our past studies have demonstrated how improving the overall health of the population can have a significant positive impact on the wider economy.”