David Buck, Senior Fellow in Public Health and Inequalities at The King’s Fund, explains how health resources are allocated in the English NHS, and how improvements to the process could be made to support a more coherent health and care system.

1. Improving the allocation of health
resources in England: How to decide
who gets what
David Buck and Anna Dixon
The King’s Fund

2. 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?

3. 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.

4. 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’.

5. First steps of the coalition
Primary care trust allocation formulas 2011-12
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.

6. 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).

7. ...combined with the broader reforms means
more fragmentation
Now there are more resource allocation decisions and decision-makers in
the system as a whole.
Simulation of routes for PCT allocations 2010-11 under the new system
Will partners, through health and wellbeing boards, be willing and capable
to reintegrate these allocation routes at local level?

8. 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?

9. ...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?

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

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

12. 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.