It’s all smoke and mirrors...

An economics perspective on how to allocate resources for health care.

Kirsten MajorDirector of Strategic Planning and Performance

NHS Ayrshire and Arran

Introducing your guides...

Jim Jessie

Total Health Care Budget = £5,000

Jim Jessie

£2,500 £2,500

Ah, but...

Jim Jessie

£0 £5,000

Ah, but...

Now we’ve identified and measured their needs for health care - how do we convert to resources??

Need formaternity

care

Need forA&E

Jim 0 1

Jessie 1 0

Jim Jessie

£3,500 £1,500

not equal is equitable

Ah, but...

Jim lives next door to a hospital and even though a complex fracture - discharged home. Actual cost = £2,500.

Jessie lives on an island and is admitted prior to her due date to ‘wait for labour’. Actual cost = £2,500.

Hence if we allocated them equal amounts under these circumstances it would be equitable.

Ah, but...

Jim = £3,500

Jessie = £1,500

Ah, but...

Average cost in Scotland to treat asthma = £1,000 per annum…

Give Jessie an extra £1,000…Jim = £2,500Jessie = £3,500

Living within our means...

Both now have unmet needs, but its equitable!

J im Jessie£2,500/£6,000 £3,500/£6,000

=5/12 =7/125/12 x £5,000 7/12 x £5,000=£2,083.33 =£2,916.67

Ah but...

We’re allocating resources for next year… will Jim break his leg?... will Jessie have asthma?... will Jessie get pregnant?

Need to predict probability of events.

What do we know about Jim and Jessie?

What do we know?

Age, Sex and Where they live…

50 years old 22 years old Male Female Affluent Suburb Deprived, isolated, rural

Probabilities of events...

J im JessieHealth Eventsand Costs Probability of EventsBroken leg(£3,500)

0.01 0.1

Pregnant(£1,500)

0 0.25

Asthma(£1,000)

0.25 0.4

J im JessieHealth Eventsand Costs Probability x Costs of

EventsBroken leg(£3,500)

£35 £350

Pregnant(£1,500)

£0 £375

Asthma(£1,000)

£250 £400

Total £285 £1,125

Jim = £285Jessie = £1,125

What do these mean for a new health budget of £8,000?

New Health Budget

J im Jessie285/1,410

(285+1,125)1125/1,410

=20.2% =79.8%20.2% of £8,000 79.8% of £8,000

=£1,617 =£6,383

Ah but...

Remoteness adjustment

Jim - share before remoteness = 20.2% 28.6% (extent to which costs are lower) x 20.2% = 5.78 20.2 - 5.78 = 14.4%

Jessie - share before remoteness = 79.8% 67% (extent to which costs are higher) x 79.8% = 53.466 79.8 + 53.466 = 133.3%

Jessie = 133.3/147.7 (133.3+14.4) = 90.3% Jim = 14.4/147.7 = 9.7%EQUITABLE!

Every health board has Jims and Jessies...

Health Board A(‘deprived’)

Health Board B(‘affluent’)

60% Jessie 40% Jessie40% J im 60% J im

100,000 population 400,000 population

Health Board A

60,000 Jessies @ 90.3% = 54,180

40,000 Jims @ 9.7% = 3,880

54,180 + 3,880 = 58,060

Health Board B

160,000 Jessies @ 90.3% = 144,480

240,000 Jims @ 9.7% = 23,280

144,480 + 23,280 = 167,760

Health Board Shares

58,060 + 167,760 = 225,820

A - 58,060/225,820 = 25.7%B - 167,760/225,820 = 74.3%

Health Budget = £100,000,000A = £25.7m = £257 per capitaB = £74.3m = £186 per capita

Themes

Equal is not necessarily equitable We need to identify (broken legs, asthma, pregnancy); measure

(what is the probability of those health events) and value (probability x cost of health events) the need for health care.

We need to be able to predict health events for given populations.

Some differences we take account of and others we don’t. We don’t allocate to providers - prospective payment. Unmet needs exist and this matters for a needs (cf. use) based

formula. We’re not calculating the size of the budget, but how to share it

out.