New NHS funding allocations cause controversy

A new system of allocating NHS funding towards areas that contain larger numbers of the elderly have been criticised for diverting money away from poorer regions of the country. David Kingman explainsUK spending cuts

The Coalition Government has recently made a significant but little-noticed change to the way in which NHS funding is allocated between the different regions in England, which could have strong implications for the health of people living in poorer areas. What exactly have they done? And why has it been controversial?

What is the NHS funding formula?

In England (the other parts of the United Kingdom use different systems), roughly £65 billion of the total NHS budget of around £96 billion is currently allocated by the Department of Health each year to what are called “Clinical Commissioning Groups” (CCGs), who then purchase health services from local providers such as GPs’ partnerships. This funding is divided between the different regions of the country using a formula, the methodology behind which has recently been changed.

Obviously, deciding how to divide such a large amount of money between different areas isn’t easy. The formula has to take account of a number of different factors which all play a role in determining how much need the people who live in these areas are likely to require from healthcare services. Two of the most important of these factors are the demographic profile of the population (because the elderly are the biggest consumers of healthcare resources on average) and the level of economic deprivation (which is linked to poor health).

The change which has been implemented involves shifting the weighting of the formula so that the number of elderly people living in an area has become a more important factor, and the level of economic deprivation has become less important. This may sound like rather an esoteric matter for people to be getting hot under the collar about, but in practice the change involves shifting millions of pounds between different parts of the country each year.

Why is this controversial?

The controversy stems from the fact that areas with larger numbers of elderly people living in them are likely to be wealthier, on average, than more deprived areas where life expectancy tends to be lower. As a result, one way of looking at this change is to see it as transferring money away from poorer areas in order to benefit wealthier ones.

An article about the changes in The Guardian quoted research undertaken by the House of Commons Library which attempted to model how the changes will affect people in practice:

Research by the House of Commons library suggested the north would lose £721.6m from its allocation from the NHS from April, and the capital £222m – a total of £943.6m. The south of England would gain £283.3m, while the Midlands and east would receive an extra £660.2m to spend on NHS services… If the changes go through as the House of Commons library expects, Wigan in Lancashire would lose £31 for each one of its patients while Windsor in Berkshire would gain £106 per head. Similarly, south eastern Hampshire, where healthy life expectancy is 68 years for women, would gain £164 per head. However, Sunderland, where women can expect to live free of ill-health only until they are 58, would lose £146 per local patient.

However, the government has claimed that the formula used by the House of Commons research does not reflect the way in which this scheme would be implemented in practice because they haven’t yet decided on the exact formula they are going to use. Nevertheless, there appears to be no doubt that transfers of this kind would be the main impact of the change.

The change was first proposed in September 2012 by the then Health Secretary Andrew Lansley, who claimed that “age is the principal determinant of health need in an area.However, it has been criticised by a number of figures on the political Left, including Andy Burnham, the shadow Health secretary, who said it was “a dangerous road to be going down because [if age is prioritised and deprivation downgraded] it breaches a fundamental principle of the NHS that need is the prime consideration.”

One of the most interesting responses to the funding change came from former Labour cabinet minister David Blunkett, who said, writing in The Guardian:

“This money will go into areas where yes, there are more people who are retired, but there are very many more people who are retired comfortably. They have support systems, with the income to buy in the kind of help that keeps you active, interested and alive. The statistics prove it.”

This almost sounds as if he is endorsing means-testing of the NHS, or at least introducing some method which would take account of how wealthy the people who live in an area are when determining how much state assistance they should receive with paying for their healthcare. This is an unusual position for a left-wing politician to take, as they are usually seen as more ideologically committed to the principle of free healthcare for all, while it is supposed to be those on the Right who are less in favour of it; yet some commentators have detected an element of political calculation in the NHS funding decision, as older, wealthier regions are likely to contain more Conservative voters.

Could access to free healthcare become a key political battleground between the parties as the population ages? There is a chance this could be just the first step.

Posted on: 3 January, 2014