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Can regional resource shares be based only on prevalence data? An empirical investigation of the proportionality assumption

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  • Vallejo-Torres, Laura
  • Morris, Stephen
  • Carr-Hill, Roy
  • Dixon, Paul
  • Law, Malcom
  • Rice, Nigel
  • Sutton, Matthew

Abstract

The needs component of the current formulae for allocating resources for hospital services and prescribing in England is based on a utilisation approach. This assumes that expenditure on NHS activity in different geographical areas reflects relative needs and supply conditions, and that these can be disentangled by regression models to yield an estimate of relative need. These assumptions have been challenged on the grounds that the needs of some groups may be systematically 'unmet'. Critics have suggested an alternative based on variations in the prevalence of health conditions, called the 'epidemiological approach'. The epidemiological approach uses direct measures of morbidity to allocate health care resources. It divides the total national budget into disease programmes based on primary diagnosis, computes the proportion of total cases for each programme in each geographical area, and then allocates budgets to geographical areas proportional to their share of total cases. The main obstacle to the epidemiological approach has been seen as its very demanding data requirements. But it also faces methodological challenges. These centre on the assumption of proportionality which, at the area level to which resources will be allocated, requires that the average level of need for 'cases' within each disease programme is the same in every area. We illustrate the epidemiological approach, and test the proportionality assumption underpinning it, using data from the 2002-2004 rounds of the Health Survey for England. We find regional variation in disease severity for major diseases, which suggests that health care needs for some conditions vary by area. Further analysis suggests that the epidemiological approach might systematically underallocate resources to rural areas, areas with younger populations, and deprived areas. Since the proportionality assumption underpinning the epidemiological approach does not hold, its adoption would fail to take account of variations in severity. This casts some doubt on the utility of the approach for resource allocation at the present time.

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  • 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.
    • Handle: RePEc:eee:socmed:v:69:y:2009:i:11:p:1634-1642
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    References listed on IDEAS

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    1. Nigel Rice & Peter Smith, 1999. "Approaches to capitation and risk adjustment in health care: an international survey," Working Papers 038cheop, Centre for Health Economics, University of York.
    2. Sutton, Matthew & Carr-Hill, Roy & Gravelle, Hugh & Rice, Nigel, 1999. "Do measures of self-reported morbidity bias the estimation of the determinants of health care utilisation?," Social Science & Medicine, Elsevier, vol. 49(7), pages 867-878, October.
    3. Chernichovsky, Dov & van de Ven, Wynand P. M. M., 2003. "Risk adjustment in Europe," Health Policy, Elsevier, vol. 65(1), pages 1-3, July.
    4. Peter C. Smith & Nigel Rice & Roy Carr‐Hill, 2001. "Capitation funding in the public sector," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 164(2), pages 217-257.
    5. 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, January.
    6. 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, December.
    7. 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.
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    1. Asthana, Sheena & Gibson, Alex, 2011. "Setting health care capitations through diagnosis-based risk adjustment: A suitable model for the English NHS?," Health Policy, Elsevier, vol. 101(2), pages 133-139, July.
    2. Urwin, Sean & Anselmi, Laura & Mentzakis, Emmanouil & Lau, Yiu-Shing & Sutton, Matt, 2024. "Adjusting the risk-adjustment: Accounting for variation between organisations in the responsiveness of their expenditure to need," Social Science & Medicine, Elsevier, vol. 361(C).
    3. Per-Åke Andersson & Daniel Bruce & Anders Walander & Inga Viberg, 2011. "Time for a new budget allocation model for hospital care in Stockholm?," Health Care Management Science, Springer, vol. 14(1), pages 36-55, March.

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