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Setting health care capitations through diagnosis-based risk adjustment: A suitable model for the English NHS?

Listed author(s):
  • Asthana, Sheena
  • Gibson, Alex
Registered author(s):

    The English system of health resource allocation has been described as the apotheosis of the area-level approach to setting health care capitations. However, recent policy developments have changed the scale at which commissioning decisions are made (and budgets allocated) with important implications for resource allocation. Doubts concerning the legitimacy of applying area-based formulae used to distribute resources between Primary Care Trusts (PCTs) to the much smaller scale required by Practice Based Commissioning (PBC) led the English Department of Health (DH) to introduce a new approach to setting health care budgets. To this end, practice-level allocations for acute services are now calculated using a diagnosis-based capitation model of the kind used in the United States and several other systems of competitive social health insurance. The new Coalition Government has proposed that these budgets are directly allocated to GP 'consortia', the new commissioning bodies in the NHS. This paper questions whether this is an appropriate development for a health system in which the major objective of resource allocation is to promote equal opportunity of access for equal needs. The chief reservation raised is that of circularity and the perpetuation of resource bias, the concern being that an existing social, demographic and geographical bias in the use of health care resources will be reinforced through the use of historic utilisation data. Demonstrating that there are legitimate reasons to suspect that this will be the case, the paper poses the question whether health systems internationally should more openly address the key limitations of empirical methods that select risk adjusters on the basis of existing patterns of health service utilisation.

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    Article provided by Elsevier in its journal Health Policy.

    Volume (Year): 101 (2011)
    Issue (Month): 2 (July)
    Pages: 133-139

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    Handle: RePEc:eee:hepoli:v:101:y:2011:i:2:p:133-139
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    1. van de Ven, Wynand P.M.M. & Beck, Konstantin & Van de Voorde, Carine & Wasem, Jurgen & Zmora, Irit, 2007. "Risk adjustment and risk selection in Europe: 6 years later," Health Policy, Elsevier, vol. 83(2-3), pages 162-179, October.
    2. Reid, R. & MacWilliam, L. & Roos, N.P. & Bogdanovich, B. & Black, C., 1999. "Measuring Morbidity in Populations: Performance of the John Hopkins Adjusted Clinical Group (ACG) Case-Mix Adjustment System in Manitoba," Centre for Health Services and Policy Research 99:9, University of British Columbia - Centre for Health Services and Policy Research..
    3. Schokkaert, Erik & Van de Voorde, Carine, 2004. "Risk selection and the specification of the conventional risk adjustment formula," Journal of Health Economics, Elsevier, vol. 23(6), pages 1237-1259, November.
    4. Seshamani, Meena & Gray, Alastair M., 2004. "A longitudinal study of the effects of age and time to death on hospital costs," Journal of Health Economics, Elsevier, vol. 23(2), pages 217-235, March.
    5. Stam, Pieter J.A. & van Vliet, René C.J.A. & van de Ven, Wynand P.M.M., 2010. "A limited-sample benchmark approach to assess and improve the performance of risk equalization models," Journal of Health Economics, Elsevier, vol. 29(3), pages 426-437, May.
    6. Asthana, Sheena & Gibson, Alex & Moon, Graham & Dicker, John & Brigham, Philip, 2004. "The pursuit of equity in NHS resource allocation: should morbidity replace utilisation as the basis for setting health care capitations?," Social Science & Medicine, Elsevier, vol. 58(3), pages 539-551, February.
    7. Vallejo-Torres, Laura & Morris, Stephen & Carr-Hill, Roy & Dixon, Paul & Law, Malcom & Rice, Nigel & Sutton, Matthew, 2009. "Can regional resource shares be based only on prevalence data? An empirical investigation of the proportionality assumption," Social Science & Medicine, Elsevier, vol. 69(11), pages 1634-1642, December.
    8. Steinbusch, Paul J.M. & Oostenbrink, Jan B. & Zuurbier, Joost J. & Schaepkens, Frans J.M., 2007. "The risk of upcoding in casemix systems: A comparative study," Health Policy, Elsevier, vol. 81(2-3), pages 289-299, May.
    9. Mervyn Stone & Jane Galbraith, 2006. "How not to fund hospital and community health services in England," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 169(1), pages 143-164.
    10. Silverman, Elaine & Skinner, Jonathan, 2004. "Medicare upcoding and hospital ownership," Journal of Health Economics, Elsevier, vol. 23(2), pages 369-389, March.
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