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Friday, 14th May 2010

UK: Formulas at war over two sorts of inequality in health funding

Formulas at war over two sorts of inequality in health funding (PDF)
Source: Civitas

England is now in its 16th year in the shadow of an unscientific formula for funding its National Health Service's primary care trusts. Responsibility for that has to be shared by both Conservative and Labour governments. Under Major, the basic construction was the work of a team of health economists at the University of York. Under Blair/Brown, things had to change and the research contract for a radically different formula (AREA) went to another team of health economists based in Scotland. Bits of their research were stuck together by the Department of Health's finance department to make a formula that lasted six years ? until yet another team of health economists in London was engaged to meet powerful academic and political objections to the way the AREA formula took account of regional variations in age- profile.

Their new formula (CARAN) was snubbed because it had not found any grounds for favouring ethnic minorities or 'deprived' areas ? and because the change in the way CARAN took account of the age factor reduced the favour that AREA had given to such areas. The Department of Health's scientific advisers in the Advisory Committee on Resource Allocation (ACRA) accepted the change that worked in favour of age ? a technical inevitability that they may not have expected when they commissioned the CARAN research. But ACRA was also saying that there was some case for adjusting CARAN to swing things back in favour of ethnic minorities and deprived areas. ACRA admitted it had absolutely no idea how big that adjustment should be.

The outcome was that CARAN was not implemented until it had been cut and pasted by Ben Bradshaw, Minister for Health Services. It was left to minister Bradshaw to top-slice 10billion out of the PCT budget of 80billion and allocate it with a special formula so carefully designed that there has been little change from AREA funding, in the broad and politically important on-the-average balance between 'deprived' urban and 'affluent' or rural areas. The minister may have overlooked the fact that averages hide the underlying variation. From 2009, PCTs that have lost out as a result of all these shenanigans joined with previous losers under AREA to begin another round of protest at unscientific formula mongering. This paper is therefore about the funding formula for primary care trusts (PCTs) and the truth about the health inequality issue in particular.



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