Making money ‘talk’ for integration, prevention and place-based care


By Dr Eleanor Roy, CIPFA Policy Manager Health and Social Care

While we all know that the health and social care sector is under serious financial pressure, the problems we face are not just ‘all about the money’. Funding boosts may provide a short-term fix, but in the end this is just papering over the underlying issues. What is more important is how funding is allocated and used, and the underlying financial architecture. 

Currently we have a financial framework which does not support the government’s policy rhetoric on greater integration and prevention, or help us move towards place-based care with a focus on outcomes. This will be plain as day to anyone seeking to affect change, and represents a serious barrier for effective reform in health and social care.

It should be recognised in recent years there have been some gains made in the way funding flows through the health system, with the operation of the internal market and national tariffs having increased competition and choice, but achieving the government’s vision requires more fundamental change.

A whole-system approach to finance in health and social care must be used to allow a realigning of spending, and ensure the public purse is being used to provide the right services, in the right place, at the right time – and will continue to be able to do so in the future. This will remove a number of road blocks to progress.

One is our approach to financial control, which creates uncertainty and encourages short-term decisions. We see this in the continuing use of sustainability and transformation funding and risk reserves to achieve financial balance, which ultimately has been coming at the expense of long-term financial sustainability and value for money.

Another is the need to work across two different financial systems, health on the one hand, and local government on the other. Even the dichotomy of eligibility requirements, with health care free at point of use, and social care being means-tested, complicates service planning for the needs of individuals.

In areas where we have seen improvements in productivity within the NHS over the last few years, it has been largely the result of pay restraint and reductions in the tariff. However it should be apparent this is not a sustainable source for future improvement. 

What is clear is that the status quo is not a feasible option – and tough choices will have to be made. It is imperative that the government takes forward the NAO’s recommendations on taking a longer-term view, with a focus on outcomes and value for money.  

While a long-term plan for the NHS is imminent, with a commitment to reform the financial framework, and a green paper is expected to propose new funding models for social care, there remains an immediate and critical need to address these issues now.

At a local level, this need for reform is being recognised as some authorities begin to favour the use of a more population-based approach to funding flows which removes the direct relationship between activity and payment, and focuses more on incentivising prevention and outcomes. 

Meanwhile on a national level, a blended payment approach has been proposed for urgent and emergency care in the 2019-20 system.

However, if the government is serious about following through on its vision, more must be done. As the saying goes, ‘money talks’. The way funds are distributed, and the associated objectives, drives the behaviour of individuals and organisations within the system. 

A good step in the right direction to take now would be to increase public health budgets, and set aside funding to make the upfront investment required to transform services for the future, without undermining the short term position of services.

There also remains a need for a more stable and sustainable approach to funding the health and care system. Various options have already been proposed, including realigning spending across the whole system, rationing services, introducing charges, raising taxation or apportioning a proportion of GDP spent on health and social care.

Overall what is apparent is that ‘front-loading’ NHS funding has not changed the underlying position - and since 2010 additional funding for health has come at the expense of other government spending. In future a more fundamental question may need to be asked on whether health funding can continue to be increased at the expense of other services.

This article first appeared in the Health Service Journal. 

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