Conclusions and recommendations
1. In 2014-15, the
Department and NHS England allocated a total of £79 billion
to local commissioners of healthcare, equivalent to £1,400
per person. Following the reforms to the health system in 2013,
there are three separate funding allocations. In 2014-15, NHS
England allocated £64.3 billion to 211 clinical commissioning
groups for hospital, community and mental health services and
£12.0 billion to its 25 area teams for primary care; and
the Department allocated £2.8 billion to 152 local authorities
for public health services. The amount of funding that individual
commissioners are allocated is calculated using 'funding formulae'
that apportion the total funds available. In calculating target
funding allocations, the Department and NHS England aim to give
those local areas with greater healthcare needs a larger share
of the available funding. In deciding actual funding allocations,
the Department and NHS England consider that they should only
move local commissioners gradually from their current funding
levels towards their fair shares, to ensure that local health
economies are not destabilised.
2. The slow progress towards target funding
allocations means the Government has not fulfilled its policy
objective of equal access for equal need.
In 2014-15, nearly two-fifths of clinical commissioning groups
and over three-quarters of local authorities remain more than
5 percentage points above or below their target funding allocations.
Funding for clinical commissioning groups varies from £137
per person below target to £361 per person above target.
This has important implications for the financial sustainability
of the health service as underfunded clinical commissioning groups
are more likely to be in financial deficit: 19 of the 20 groups
with the tightest financial positions at 31 March 2014 had received
less than their target funding allocation. The Department and
NHS England explained that there are trade-offs between moving
commissioners more quickly towards their target funding allocations
and safeguarding the stability of local health economies, and
that making quicker progress would involve real-terms reductions
in funding for some areas. However, the National Audit Office
calculated that, if the slow pace of change were to continue,
it would take around 80 years for all local commissioners to get
close to their target funding allocations. NHS England said that
it wanted to make faster progress and that it aimed to move all
clinical commissioning groups to within 5 percentage points of
their target allocations within around two years. For public health
allocations to local authorities, the Department said that decisions,
including the pace of change, were a matter for the government
of the day.
Recommendations: NHS England should confirm
its commitment to move clinical commissioning groups to within
5 percentage points of their target allocations and set out a
precise timetable. NHS England should also better understand the
correlation between funding allocations and poor performance among
clinical commissioning groups.
The Department should develop an evidence base
to inform government decisions on how quickly public health allocations
to local authorities should move towards their target allocations.
3. Decisions about funding for the different
elements of healthcare and social care have been made without
fully considering the combined effect on local areas.
NHS England accepts that decisions on the three separate health
allocations have, to date, been made in isolation of each other.
It wants to move towards 'place based' funding formulae, whereby
allocations for clinical commissioning groups and primary care,
and potentially the Department's funding to local authorities
for public health, are combined. In addition, local authorities
receive funding which covers social care from the Department for
Communities and Local Government. Many people need both healthcare
and social care, and lower spending in one sector may cause additional
costs in the other. There is growing understanding of the interdependence
of health and social care funding but the causal relationship
between the two is not understand, and the Department and NHS
England did not take account of local authority spending on social
care or the Department for Communities and Local Government's
funding for local authorities in making decisions on health funding.
Recommendation:
The Department and NHS England, working with the Department for
Communities and Local Government, should carry out work to understand
the interaction between the funding of healthcare and social care,
and use this information to inform funding decisions.
4. There is a lack of evidence to underpin
the adjustment that is made for health inequalities.
NHS England adjusts target allocations by 10-15% to move funding
towards areas with lower life expectancies, with the aim of reducing
health inequalities. The current indicator is better able than
the past methodology to detect small pockets of ill-health in
otherwise healthy areas. However, there is no clear health justification
for deciding what weighting should be given to the inequality
indicator. The Advisory Committee on Resource Allocation, which
advises the Department and NHS England, does not consider there
is any evidence that the current health inequalities adjustment
is appropriate. NHS England stressed the importance of retaining
the health inequalities adjustment as a matter of principle, while
acknowledging the lack of supporting evidence on what weight to
give it.
Recommendation:
The Department and NHS England should improve the evidence base
for the health inequalities adjustment, including collecting evidence
on whether their approach is fair and cost-effective and properly
meets the objective of reducing health inequalities.
5. The proportion of total funding devoted
to primary care has fallen, even though primary care is an important
way of tackling health inequalities. NHS
England told us that primary care is expected to have more impact
than clinical commissioning group spending on reducing inequalities.
However, between 2003-04 and 2012-13, the proportion of total
spending committed to primary care fell from 29% to 23% as a consequence
of the NHS prioritising hospital initiatives such as reducing
waiting times. NHS England said it planned to reverse this trend
and increase the proportion of healthcare funding being spent
on primary care. It would also like to bring together the budgets
for clinical commissioning groups and primary care to increase
local flexibility with the intention of better targeting local
priorities.
Recommendation: The Department and NHS England
should set out the rationale for decisions about how funding is
split between different funding streams, including assessing the
implications of any changes in the distribution of funding.
6. The primary care funding formula was developed
with limited input from the advisory body and remains an interim
approach. NHS England has improved the
funding formula for clinical commissioning groups, which is now
based on more detailed data. However, these improvements have
not been made for primary care. NHS England did not seek input
from the Advisory Committee on Resource Allocation until three
months before it had to make decisions about primary care allocations
and there was insufficient time to improve the formula. As a result,
NHS England's approach for primary care allocations to area teams
for 2014-15 and 2015-16 was heavily based on what the Department
had done previously for primary care trusts and is regarded as
interim.
Recommendation:
NHS England should improve the primary care funding formula in
time for the next round of funding allocations for 2016-17, with
early input from the Advisory Committee on Resource Allocation.
7. The target funding allocations may be unreliable
in some areas due to shortcomings in the GP list data which are
used to estimate population size. Population
size is the factor that has the most significant effect on funding
allocations. While there have been some improvements to the population
data, GP list numbers still tend to be inflated as people may
remain on lists after they have moved out of an area. This is
a particular issue in areas with more transient populations. At
the same time, GP lists do not include unregistered patients which
may affect areas with high levels of inward migration. Most of
NHS England's area teams have done some work to validate GP lists,
but NHS England accepts that it needs to do more. It told us that
its area teams will be required to implement detailed guidance
on validating GP lists so that it has more assurance about the
data. It also intends, from spring 2015, to procure a new primary
care services 'back office' that should make GP list validation
consistent across the country.
Recommendation:
NHS England should take immediate action to ensure that all area
teams are complying with its guidance on GP list validation, at
the same as taking forward its longer-term plans to gain greater
assurance over the data.
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