briefing on the funding of the nhs in scotland
Methods of resource allocation
At present two allocation formulae are used for elements of the Scottish health budget:
- Scottish Health Authorities Revenue Equalisation (SHARE) Formula for Hospital and Community Health Services
- GP Prescribing Formula
The distribution of allocations under SHARE is currently frozen pending the introduction of new methods recommended by the National Review of Resource Allocation for the NHS in Scotland. This is discussed in more detail below.
SHARE
This formula was introduced in 1978 to allocate HCHS resources to health boards on the basis of the differing healthcare needs of their respective populations. The weighted formula currently distributes around 61% of the total health budget in Scotland. The formula uses four measures in calculating an appropriate distribution of resources:
1) A measure of population served by each board.
2) A measure of the composition of each board’s population in terms of age and sex.
3) A measure of the relative health needs over and above the size, age and sex of the population existing with each board (mainly due to differences in the morbidity of board populations).
4) A measure of any unavoidable excess costs of delivering healthcare in sparsely populated areas.
GP prescribing formula
This was introduced in 1996 to attain a more equitable allocation of prescribing budgets to health boards and GP practices in the Indicative Prescribing Scheme. It relies on the following three factors to allocate resources:
1) A measure of the population.
2) An adjustment to the population to account for its composition in terms of age and sex.
3) A measure to reflect any relative need due to morbidity and temporary resident demand (over and above the size, age and sex of the population) for GP prescribing among health board populations.
The National Review of Resource Allocation for the NHS in Scotland
The White Paper on health, Designed to Care, published in December 1997 initiated the current review of resource allocation. The review, chaired by Sir John Arbuthnott, was given the following remit:
"To advise the Secretary of State for Scotland on methods for allocating the resources available to both the National Health Service in Scotland, including both primary and secondary care, which are as objective and needs-based as available data and techniques permit, with the aim of promoting equitable access to health care; and to bring forward recommendations to Ministers by June 1999."
There are two points worth noting in relation to the remit of the review. Firstly, the review was exclusively concerned with designing a fair and equitable method of distributing the current health budget. It had no locus on the overall size of the budget and the decision- making process employed by health boards in spending their respective shares. Secondly, the review included the GP prescribing budget and General Medical Services, which as noted above, were excluded from the SHARE formula. Therefore the review covers around 80% of the net Scottish NHS health budget but excludes general dental services, general ophthalmic services, pharmacists’ remuneration and a number of centrally allocated budgets.
The review was guided by eight basic criteria which were translated into the following principles: (Fair Shares for All - The Report of the National Review of Resource Allocation for the NHS in Scotland, Scottish Executive Health Department, July 1999, p17.)
- The need to achieve greater equity in the allocation of resources, by reflecting as precisely as possible the variation in health need across the country.
- The development of an allocation formula that is evidence-based.
- The development of an allocation formula that is sufficiently transparent to be made truly accountable.
- The development of an allocation formula that is practicable and delivers continuing stability for health boards.
The Review concluded that the four factors underpinning the SHARE formula should be retained, subject to revision, as the core measures for the new formula. The Review stated that the new formula should be applied to the HCHS budget, GP prescribing budget and cash limited section of the GMS budget (covering premises, equipment, staff, etc). In contrast, the results of the formula for the non-cash limited section of the GMS budget (covering GPs’ income) should remain indicative in guiding the Scottish Medical Practice Committee who are responsible for the distribution of general medical practices.
The application of the formula may result in some large projected changes in budgets as they currently stand. For example, the new formula originally proposed reductions in the cash limited section of the GMS budget of 15.7% in the Borders, 25.3% in Grampian, 20.7% in Lothian and 13.1% in Tayside. Bearing in mind the scale of some of the projected changes in budgets, the Review recognises the need to phase these changes in over time. In terms of the HCHS and GP prescribing budgets, it is envisaged that the movement to what is called “parity” could be achieved in six years. The larger changes suggested in the cash limited GMS budgets are recognised as requiring a longer transition period than six years.
The Review stressed that the application of the formula should be viewed as a means of a general levelling-up of allocations. This would be achieved on the basis of differential growth i.e. those boards presently above parity would receive smaller rates of growth in their allocations in comparison to those boards currently regarded as being below parity until parity is reached by all. In this respect, the Review cautions against the identification of “winners” and “losers” in simple number terms and states that “all Scotland wins if a more equitable distribution of resources for all the country’s citizens can be achieved – that is the real prize of delivering fair shares for all”. (Fair Shares for All - A Short Guide, Scottish Executive Health Department, July 1999, p20.)
The Review’s recommendations have come under close scrutiny since being presented to the Scottish Executive for consideration. The Health and Community Care Committee (HCCC) of the Scottish Parliament, while welcoming the report as an advance on the SHARE formulae, concluded that due to a number of methodological shortcomings, the implementation of the Arbuthnott formula should be postponed until further information and research is available. These conclusions very much mirror those of the BMA in Scotland who gave written and oral evidence to the HCCC. In particular, the BMA was concerned that the GMS section relies heavily on data gathered from the Continuous Morbidity Recording (CMR) project. This is a self-selecting collection of around sixty GP practices who entered the project as volunteers. The representativeness of the sixty practices has been questioned along with the validity and suitability of using data not designed or intended for the purpose of a resource allocation review. The Health Minister has acknowledged the concerns expressed and has asked the Arbuthnott Committee to undertake further work in the meantime. The Scottish General Practitioners Committee is actively involved with the Arbuthnott team in revisiting the GMS section.