Funding formula based on health needs planned for Wales

Radical changes in the way that NHS resources are allocated are being planned for Wales. Proposals for a new formula that would allocate money to different areas according to the health needs of the population have been presented to the National Assembly's Health and Social Services Committee.

The formula would be based on the Welsh health survey, which gives detailed information about the health of a substantial representative sample of the population of Wales.

Professor Peter Townsend, chairman of the national steering group, which prepared the report, said that changes are needed to reverse growing inequalities in health.

“The UK government signed up to the World Health Organization programme of ‘Health for All’ in 1985 to reduce inequalities in health by the year 2000. Instead, inequalities have grown. They continue to grow. Premature death and disability affect many thousands. We need to bear down on the causes and not divert the population and ourselves with mild placebos,” he said.

He added, “Structural action outside the NHS as well as within it is necessary to halt, and then reverse, this trend that damages us all. I hope that my report will contribute to the determined work that is going on in Wales.”

Jane Hutt, the Welsh health minister, said, “This report is an important step towards developing a more targeted system of funding for health services, ensuring that the different needs of different communities are met as fully as possible. We will now be consulting on these proposals.”

The report said that the new, direct formula is a departure from the approach used in recent years and that its implementation will have to be closely monitored. It said that if successful, the formula, which will now be the subject of consultation, has implications for other regions of the United Kingdom and the European Commission dealing with problems of inequality.

It said that current methodology used for resource allocations is an indirect way of establishing healthcare needs because data on the use of services by different age groups and social groups is used as a proxy for health needs.

The report continued: “It can also be described as indirect because mortality rates are often used as a proxy for rates of ill health and disability, rather than direct observations or records of present conditions. Rates of death by area and socio-economic condition in any year are not exact representations of rates of illness and disability by area and social-economic condition. Some who die suddenly may make little or no demand on the health care services. Others who have chronic illnesses or disabilities for many years, and survive to an advanced age, may involve the services in very substantial long-term costs.”

Another disadvantage, it said, is that data about service use are collected by many different organisations, with variable reliability and accuracy. The report recommends that the direct method of measuring area needs for health care should be introduced in 2003-4, giving time for consultations with practitioners, managers, and others in and outside the NHS. It suggested that the changes could be implemented in three to five years.

NHS Resource Allocation Review: Targeting Poor Health, National Assembly for Wales.