Improving the allocation of healthresources in England: How to decide who gets what

David Buck and Anna DixonThe King’s Fund

This paper is about health resource allocation

Reforms to resource allocation and how these interact with the wider health reforms is an under-explored area.

Health resource allocation is the process of getting taxpayers’ money to where it is needed

– Resources allocated from the Treasury to the Department of Health. – The Department of Health uses the money to fund its national and local objectives.– This involves deciding how much each local area gets to provide services and

deliver outcomes.

The focus of our analysis is on the final part of the process– Following the implementation of the Health and Social Care Act on 1 April 2013,

how and why do different clinical commissioning groups (for the majority of health services) and local authorities (for public health) get the level of funding they do? And, what will be the impact of the reforms on this process?

Why it is important to look at how health resource allocation works

Health resource allocation is important to assess now for the following reasons:

– when there is no growth in resources, it is doubly important to ensure that relative funding from what is available is ‘fair’

– the reforms have introduced important but widely unnoticed changes to resource allocation (for both the NHS and for public health) and these need to be assessed

– resource allocation systems should be designed to support the systems in which they sit. The broader health reforms are so large, that a fundamental reassessment of how resource allocation is ‘done’ is required

– the NHS Commissioning Board (now NHS England) announced a review of resource allocation. Our paper is a contribution to the debate.

How resource allocation has been done has had three distinct phases since 1948

1948 to the early 1970s – cost-plus– Hospitals and other services received ‘what they got last year’ plus allowances for

special factors.– It became clear that this took no account of changing needs and distribution of

populations, institutionalising existing practices and patterns of estate and services.

Mid 1970s to the late 1990s – the Resource Allocation Working Party (RAWP) and its successors

– An explicit aim to ensure ‘equal opportunity of access to health care for those at equal risk’.

– A formula based on population characteristics and estimates of relative needs of different populations, known as ‘weighted capitation’ (with adjustments for wage rates, etc), was developed.

– North West and North East Thames regions were ‘over-target’ by >15 per cent.

Late 1990s to the coalition – increasing focus on inequality– An additional objective was to ‘contribute to the reduction of avoidable inequalities in

health’.

First steps of the coalition

A reduction in the weight of the inequalities element of the formula (from 15 per cent to 10 per cent).

This was significant in principle – sending a signal that the focus of the NHS is more on treating need than preventing it.

But less significant in practice, since very little growth in funding across the board, the changes have little effect.

– Shedding

Primary care trust allocation formulas 2011-12

Changes to resource allocation in the reforms…

Splitting NHS and public health allocations for the first time– Clinical commissioning groups (CCGs) and local authorities were told their

separate respective allocations for NHS and public health funding for 2013/14 in late December and early January. Previously, primary care trusts had received one overall allocation for all functions.

NHS England, not the Secretary of State, is responsible for allocating to CCGs– From 1 April 2013, NHS England (formerly the NHS Commissioning Board)

allocates resources to CCGs who take responsibility for a budget of around £65 billion (about 60 per cent of the total NHS budget). NHS England directly commissions the majority of the remainder.

Secretary of State is responsible for new allocations to local authorities for public health– The Secretary of State allocates more than £2.5 billion directly to individual local

authorities (and additional funding to NHS England and Public Health England).

Now there are more resource allocation decisions and decision-makers in the system as a whole.

Will partners, through health and wellbeing boards, be willing and capable to reintegrate these allocation routes at local level?

...combined with the broader reforms means more fragmentation

Simulation of routes for PCT allocations 2010-11 under the new system

There are some improvements that could be made to the existing approach...

Improving the process of resource allocation– Greater transparency and consultation – as has happened with the

recent allocations for public health.– A greater premium on simplification – a materiality test on

refinements.

Improving the content of the formula– Looking again at the measurement of need, and to what extent relying

on indirect measurement and statistical adjustment is better, or not, than direct measurement of need.

Improving the implementation of the formula– A look again at the pace-of-change policy - what are its intentions and

effects?

...but there is a more fundamental question that needs to be addressed

Should resource allocation be seen as a neutral behind-the-scenes exercise or a tool supporting policy objectives?

A neutral process, delivering funds where they are needed?– Areas receive funds related to needs, but with no or few strings attached

An active policy tool– Money more transparently follows core policy objectives, adequately

funding ‘policy asks’ and rewarding success

A covert and unacknowledged policy tool– NHS can be performance managed on one objective and funded on the

basis of another, eg, health inequalities under Labour.– Has resource allocation and pace-of-change policy unwittingly slowed

down much needed reconfiguration by insulating some areas from change?

A clinically-led NHS... should resources be allocated along clinical care pathways that make more sense to clinicians?

An outcomes-focused NHS... should CCGs and local authorities be allocated resources to reflect the outcomes frameworks they are being held to account for delivering?

An NHS dominated by integrated providers... with allocations directly passed onto them to support integrated pathways?

A single local public service health and wellbeing budget... for health and wellbeing boards as custodians of a single budget across public services?

A system with mandatory defined benefits... supported by explicit resources to deliver them at high quality?

Should resource allocation more explicitly support and underpin ‘the future NHS’?

Resource allocation to local authorities is based on differences in the standardised mortality ratio <75 (a measure that reflects the proportion of the population dying early, and therefore need for public health intervention and spending).

But the public health reforms introduce mandated services, with high costs for some areas. Should this be reflected in allocations?

Should public health resource allocation reflect the costs of mandated services?

It is time for a truly fundamental review of health resource allocation

NHS England has recently announced a fundamental review of resource allocation.

There are improvements that can be made to the current approach, as we have outlined, but in our view the review will not live up to its title unless it:– explicitly addresses the question of whether resource allocation is

simply a mechanism for moving funds to local areas or a tool for achieving wider policy goals

– takes into account how resource allocation should be aligned with possible visions of the future for the NHS

– looks beyond its current expected timeline and objectives, of informing CCG allocations for 2014/15.