1. Risk adjustment in a centralised public health care system: The case of Englands NHS Adam Oliver LSE Health and Social Care London School of Economics and Political Science

2. Introduction Most health care systems are characterised by purchasers and providers When purchasers bear financial risk incentives for cream skimming Risk adjustment often used to mitigate these incentives Important in competitive health insurance markets (e.g. Belgium, the Netherlands, Germany, Israel, Switzerland)

3. Centralised public systems? (e.g. the UK countries, Italy, NZ, NSW, Alberta) Purchasers (e.g. health authorities) are non- competitive System is usually financed out of general taxation Management of the system usually organised on a geographical basis Does risk-adjustment have a role?

4. Yes (if geographical equity is important) Each purchaser is responsible for a different local population Each local population will have different health care needs Equity principle: equal access according to health care needs Adjust resource allocations for these needs (and differential costs in accessing care)

5. Is geographical equity important? In many centralised public systems, yes Objectives of capitated allocations NSW: To monitor progress towards the achievement of fairness in health funding Italy: To overcome territorial inequalities in social and health conditions NZ: To divide funding equitably between the four regions England: To secure equal opportunity of access to those at equal risk

6. Summary Competitive health insurance market: risk adjustment is a response to inappropriate incentives Centralised public systems: risk adjustment is a plan to promote geographical equity

7. The case of Englands NHS Slightly different rules for England, Scotland, Wales and Northern Ireland England: purchasers - used to be 100 health authorities Now 250 primary care trusts (PCTs) England (1976): Resource allocation working party (RAWP) - promote equal access for equal need

8. Current adjustment factors Age, costs (e.g. between London and the rest of the country) and needs Needs factors differ a bit between acute, psychiatric and community mental and non- mental health sectors But generally include indicators of mortality, morbidity, unemployment, elderly living alone, ethnicity and socio- economic status

9. To finish: some problems The adjustment factors are estimated on the basis of hospital utilisation – does utilisation reflect need? Many of the factors are chosen because of availability of data Even if allocation does comply with equal access for equal need, does provision? Is equal access for equal need an appropriate policy goal? (reducing avoidable inequalities)