Hospital and Community Health Services Weighted Capitation Formula (Hansard, 18 March 1998)

§ The Minister of State, Department of Health (Baroness Jay of Paddington)

SinceSharing Resources for Health in England: Report of the Resource Allocation Working Party was published in 1976, there has been a clear objective for Hospital and Community Health Services resource allocation—namely, "to secure equal opportunity of access to healthcare for people at equal risk". RAWP recommended distributing resources on the basis of population, weighted according to two basic criteria: need—adjustments were to be made for perceived differences in the need for healthcare; cost—unavoidable differences in the cost of providing services were to be taken into account.

The current Hospital and Community Health Services weighted capitation formula contains three basic elements. The first element is an age-related need 209WA adjustment. As well as the size of the population, its age structure is also important as patterns of morbidity (levels of sickness) vary by age group. The very young and the elderly, whose populations are not evenly distributed throughout the country, make more use of health services than the rest of the population.

Even when differences due to age are taken into account, populations of the same size and age distribution display different morbidity characteristics. The second element of the formula is an additional adjustment for need, over and above that accounted for by age. This adjustment takes the form of three indices of need for different services: acute, psychiatric and community. The needs indices include a wide range of health and socio-economic indicators associated with the need for healthcare—e.g., unemployment, elderly living alone, single carers, lone parent households, households with no central heating, etc. The percentage weighting of the indices is determined by reference to a three-year average of the latest available national expenditure figures. Fairness has been put as the top

HCHS Weighted Capitation Formula 1977/78—1998/99
	1977/78—Resource Allocation Working Party (RAWP)	1980/81—Advisory Group on Resource Allocation (AGRA)	1990/91—Working for Patients	1995/96—1994 review	1997/98—Resource Allocation Group (RAG)	1998/99—RAG
Age Related Need	Age/sex utilisation	Age/sex utilisation	Age-cost curve (sex dropped)	More sensitive age-cost curve	Age-cost curve	Age-cost curve
Additional Need	Condition-specific all ages Standardised	Condition-specific all ages SMR	Square root SMR, under 75 years of age	Two needs indices introduced:	New needs index introduced:	100% weighting for need:
	Mortality Ratio (SMR)			general and acute 64% psychiatric 12% no weight 24%	Community Health Services (CHS) 11% acute index 64% psychiatric index 11% no weight 14%	acute index 70% psychiatric index 18% CHS 12%
Cost—Staff	London Weighting	London Weighting	London Weighting	London Weighting (Medical and Dental)	London Weighting (Medical and Dental)	London Weighting (Medical and Dental)
		MFF introduced, 3 pay zones:	MFF 3 pay zones: Greater London;	MFF 4 pay zones: Inner London;	61 pay zones	Pay zones reduced to 51
		Greater London;	Rest of Thames;	Outer London;
		Rest of Thames.	Rest of England.	Rest of SE England; Rest of England.		Introduction of geographical cost adjustment for emergency ambulances.
			Staff groups; maintenance; admin & clerical; unqualified nurses; ambulance staff.	Rest of England.
		Staff groups: maintenance; admin. & clerical; unqualified nurses; ambulance staff.	Staff groups extended to include qualified nurses; PAMS; and midwives.
			North Thames 3% supplement and South Thames 1% supplement.
Cost—Capital				Capital Charges integrated with HCHS revenue.	Revised Capital Charges MFF
				Land and buildings MFF introduced.

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priority and the allocations formula has been changed to reflect fully the health needs of local populations. For the first time in 1998–99 expenditure was weighted 100 per cent. for need.

The third element of the formula is a geographical cost adjustment to take account of the fact that the cost of providing healthcare is not the same everywhere due to the impact of local market forces on staff and capital costs. In 1998–99, a further cost adjustment was introduced into the formula to reflect the fact that the cost of providing emergency ambulance services varies across the country.

The Government have put in place new mechanisms to distribute NHS cash more fairly. A new Advisory Committee on Resource Allocation was established in September 1997, with the intention to further improve the arrangements for distributing resource for both primary and secondary care. The healthcare needs of populations, including the impact of deprivation, will be the driving force in determining where cash goes.

Changes to the formula since 1976 are shown in the following table.