Pooling and allocation of resources are important to increase "equity" and "efficiency" in health care.
Methods of resource allocation (each differ in the degree of risk shifting from the national funder to the health care plan)
- Full retrospective reimbursement for all expenditure incurred: no financial risk on the health care plan
- Reimbursement for all activity based on a fixed fee schedule: risk for treatment costs but not patient numbers on the health care plan
- Prospective funding based on expected future expenditure: the national funder shifts all financial risk to the plan
The European trend has moved away from the first method towards the third along the spectrum of resource allocation mechanisms to improve expenditure control.
Under prospective fixed-budget resource allocation methods, possible ways to distribute funds are to undertake it based on:
- The size of bids from purchaser: it would generally offer plans the incentive to overstate their needs and, with no countervailing incentive to moderation, would inevitably lead to inflation of bids.
- Political negotiation: can offer a comfortable short-term solution to the resource allocation problem but is vulnerable to accusations of political favouritism and has often proved to be unsustainable in the longer term.
- Historical precedent: has been in widespread use, for example in the form of statistical extrapolation of previous expenditure or using budgets based on services available. It is, however, arbitrary and does not encourage efficiency.
- Independent measure of health care needs (capitation): it is preferred in many European countries because it tends to reflect a requirement to secure equal access to health care for equal health needs, and equal payments in the form of premiums or taxes for equal income or wealth. Also, it is considered to increase efficiency because I makes purchasers and providers more responsive to issues of the costs and benefits of their actions.
The first three options have come under strong criticism within most health care systems, and capitation has been increasingly used in the European region.
Methods for capitation
Allocation of resources basically takes three steps. First you will have to decide the amount of public money being redistributed to the plans (mainly a political issue). Secondly, the health care needs factors must be identified. Finally, each needs factors must be weighted to calculate the individual health care needs.
- Identifying needs factors
- The main yardstick in practice is whether it explains actual spending patterns among plans in a statistically significant manner. However, there must be further consideration since modelling existing determinants of health care utilization may not accommodate some aspects of 'unmet' need within the capitation method. Also, if there is 'supplier-induced demand' in the existing practice, this might be reflected in the model.
- A policy context may influence the decision of inclusion. For example, in England, the tradition has been to assume that health plans are unable to control general input prices caused by local economic factors, and so some adjustment to local capitation is made for such variation using general wage data and land prices (caution: at the same time, every effort is made to avoid using health-sectors prices as the basis for adjusting capitation, as these can be influenced by local health plan policy).
- It is desirable to avoid using needs factors that may be vulnerable to manipulation by the recipient agencies or that create perverse incentives. For example, although previous inpatient utilisation is a good predictor of current utilisation, it is often ruled out as a need factor because it is considered vulnerable to manipulation by providers and may create an incentive for providers to offer more care than is strictly necessary, to distort reports of diagnosis or to indulge in other gaming activity to attract higher capitation in the future.
- Difficulty of identifying needs factors rise because of:
- Lacking data
- Lack of research evidence
- Difficulty in establishing the independence of a particular needs factor from others
- Difficulty in disentangling legitimate health care needs factors from other policy and supply influences on utilisation
- Difficulty in empirically identifying the health care costs associated with a proven needs factor
- Plans seeking to influence the choice of needs factors through the political process
- Weighting the needs factors
- Matrix approach: it requires universal and reliable recording of individual-level data.
- Index approach: aggregate measures of the characteristics of a plan's population are combined to create an index that seeks to indicate the aggregate spending needs of the associated population. It is more flexible than the matrix approach because it does not require individual-level data. However there is danger of ecological fallacy.
The prospective allocation of budgets are almost invariable accompanied by a final stage in which it can be altered retrospectively based on actual expenditure experience.
- Renegotiating the budget retrospectively with the central payer
- Running down or contributing to the plan's reserves
- Varying the premiums or local taxes paid by the plan members
- Varying the user charges paid by the patients
- Varying the package of benefits available to patients
- Delaying or rationing health care to the population at risk
Refference
Mossialos, E. (2002). Funding health care : options for Europe. Open University Press.