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Modelling supply and demand influences on the use of health care: implications for deriving a needs-based capitation formula

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  • Hugh Gravelle

    (National Primary Care Research and Development Centre, Centre for Health Economics, University of York, UK)

  • Matthew Sutton

    (General Practice and Primary Care, Community-Based Sciences, University of Glasgow and Primary Care Information Group, ISDScotland, Edinburgh, UK)

  • Stephen Morris

    (The Business School, Imperial College London, UK)

  • Frank Windmeijer

    (Institute for Fiscal Studies, London, UK)

  • Alastair Leyland

    (MRC Social and Public Health Sciences Unit, University of Glasgow, UK)

  • Chris Dibben

    (Department of Social Policy and Social Work, University of Oxford, UK)

  • Mike Muirhead

    (Consultancy Team, ISDScotland, Edinburgh, UK)

Abstract

Many health-care systems allocate funding according to measures of need. The utilisation approach for measuring need rests on the assumptions that use of health care is determined by demand and supply and that need is an important element of demand. By estimating utilisation models which allow for supply it is possible to isolate the socio-economic and health characteristics which affect demand. A subset of these variables can then be identified by a combination of judgement and further analysis as needs variables to inform funding allocations. We estimate utilisation models using newly assembled data on admissions to acute hospitals, measures of supply, morbidity and socio-economic characteristics for 8414 small geographical areas in England. We make a number of methodological innovations including deriving additional measures of specific morbidities at small area level from individual level survey data. We compare models with different specifications for the effect of waiting times and provider characteristics, with total, planned and unplanned hospital admissions, and estimated at small area (ward) and primary care organisation (general practice) level. After allowing for waiting times, distance, capacity and the availability of private health care, measures of mortality, self-reported morbidity, low education and low income increase the use of health care. We find evidence of horizontal inequity with respect to ethnicity and employment and suggest a method for reducing its effects when deriving a needs-based allocation formula. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Hugh Gravelle & Matthew Sutton & Stephen Morris & Frank Windmeijer & Alastair Leyland & Chris Dibben & Mike Muirhead, 2003. "Modelling supply and demand influences on the use of health care: implications for deriving a needs-based capitation formula," Health Economics, John Wiley & Sons, Ltd., vol. 12(12), pages 985-1004.
  • Handle: RePEc:wly:hlthec:v:12:y:2003:i:12:p:985-1004
    DOI: 10.1002/hec.830
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    References listed on IDEAS

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    Cited by:

    1. Arnab Bhattacharjee & Taps Maiti & Dennis Petrie, 2014. "Spatial structures of health outcomes and health behaviours in Scotland: Evidence from the Scottish Health Survey," SEEC Discussion Papers 1401, Spatial Economics and Econometrics Centre, Heriot Watt University.
    2. Anselmi, Laura & Lagarde, Mylène & Hanson, Kara, 2015. "Going beyond horizontal equity: An analysis of health expenditure allocation across geographic areas in Mozambique," Social Science & Medicine, Elsevier, vol. 130(C), pages 216-224.
    3. De Luca, Giuliana & Ponzo, Michela, 2009. "Primary care utilisation and workers’ opportunity costs. Evidence from Italy," MPRA Paper 24201, University Library of Munich, Germany.
    4. Mason, Thomas & Sutton, Matt & Whittaker, William & Birch, Stephen, 2015. "Exploring the limitations of age-based models for health care planning," Social Science & Medicine, Elsevier, vol. 132(C), pages 11-19.
    5. Morris, Stephen, 2006. "Body mass index and occupational attainment," Journal of Health Economics, Elsevier, vol. 25(2), pages 347-364, March.
    6. Richard Cookson & Mauro Laudicella & Paolo Li Donni, 2011. "Measuring change in health care equity using small area administrative data – evidence from the English NHS 2001-8," Working Papers 067cherp, Centre for Health Economics, University of York.
    7. Tor Iversen & Hilde Lurås, 2012. "Capitation and Incentives in Primary Care," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 26 Edward Elgar Publishing.
    8. Fredrik Carlsen & Jostein Grytten & Julie Kjelvik & Irene Skau, 2007. "Better primary physician services lead to fewer hospital admissions," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 8(1), pages 17-24, March.
    9. Cookson, Richard & Laudicella, Mauro & Donni, Paolo Li, 2012. "Measuring change in health care equity using small-area administrative data – Evidence from the English NHS 2001–2008," Social Science & Medicine, Elsevier, vol. 75(8), pages 1514-1522.
    10. Asada, Yukiko & Kephart, George & Hurley, Jeremiah & Yoshida, Yoko & Smith, Andrea & Bornstein, Stephen, 2012. "The role of proximity to death in need-based approaches to health care," Health Policy, Elsevier, vol. 106(3), pages 291-302.
    11. Monica Oliveira, 2004. "Modelling demand and supply influences on utilization: A flow demand model to predict hospital utilization at the small area level," Applied Economics, Taylor & Francis Journals, vol. 36(20), pages 2237-2251.
    12. Fabio Pammolli & Francesco Porcelli & Francesco Vidoli & Monica Auteri & Guido Borà, 2017. "La spesa sanitaria delle Regioni in Italia - Saniregio 2017," Working Papers CERM 01-2017, Competitività, Regole, Mercati (CERM).
    13. Alessio Petrelli & Roberta Picariello & Giuseppe Costa, 2010. "Toward a needs based mechanism for capitation purposes in Italy: the role of socioeconomic level in explaining differences in the use of health services," International Journal of Health Economics and Management, Springer, vol. 10(1), pages 29-42, March.
    14. De Luca, Giuliana & Ponzo, Michela, 2009. "Access to primary care and workers’ opportunity costs. Evidence from Italy," MPRA Paper 15479, University Library of Munich, Germany.
    15. Hugh Gravelle & Stephen Morris & Matt Sutton, 2012. "Economic Studies of Equity in the Consumption of Health Care," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 18 Edward Elgar Publishing.
    16. Schokkaert, Erik & Van de Voorde, Carine, 2009. "Direct versus indirect standardization in risk adjustment," Journal of Health Economics, Elsevier, vol. 28(2), pages 361-374, March.
    17. Morris, Stephen, 2007. "The impact of obesity on employment," Labour Economics, Elsevier, vol. 14(3), pages 413-433, June.
    18. Jones, A.M, 2010. "Models For Health Care," Health, Econometrics and Data Group (HEDG) Working Papers 10/01, HEDG, c/o Department of Economics, University of York.
    19. Eleonora Fichera & Hugh Gravelle & Mario Pezzino & Matt Sutton, 2012. "Specification of financial incentives for quality in health care contracts," The School of Economics Discussion Paper Series 1218, Economics, The University of Manchester.
    20. Morris, Stephen & Gravelle, Hugh, 2008. "GP supply and obesity," Journal of Health Economics, Elsevier, vol. 27(5), pages 1357-1367, September.
    21. 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.
    22. Bhattacharjee, Arnab & Maiti, Taps & Petrie, Dennis, 2014. "General equilibrium effects of spatial structure: Health outcomes and health behaviours in Scotland," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 286-297.

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