A founding principle of the NHS is that health care is accessible to all legal United Kingdom residents, based on clinical need, regardless of their ability to pay. This major strength of the NHS means that United Kingdom residents enjoy one of the highest levels of protection against the financial consequences of ill health in the world (see section 7.3 Financial protection) Any resident can use NHS health care services, usually without paying at the point of access. Rules vary slightly across the United Kingdom in the definitions, but generally, “ordinarily” resident people can access health care anywhere in the United Kingdom. “Ordinarily” means that the residence is not temporary and that the individual is in the country legally. Overseas visitors can receive emergency medical treatment for free, but subsequent care is usually charged. Other services provided free of charge irrespective of residence status include primary care services, family planning services, treatment for some infectious diseases and compulsory psychiatric treatment (UK Government, 2021e). Despite lobbying by the Royal College of Midwives (Wise, 2019), maternity care results in charges for non-ordinarily residents, creating barriers for many vulnerable and pregnant women to access cost-effective and preventive care.
Before the United Kingdom leaving the EU, members of the EEA were able to access all NHS services free of charge, with reciprocal arrangements in place for United Kingdom nationals living abroad. However, after 31 December 2020, EEA nationals are subject to the same rules as non-EEA nationals when accessing NHS services (UK Government, 2020e). Certain groups are exempt from charges when accessing NHS services irrespective of their nationality, including refugees, asylum seekers, children looked after by a local authority and victims of modern slavery or human trafficking (UK Government, 2021e). Barriers exist for undocumented migrants accessing NHS services, such as the fear that their data would be shared with immigration authorities. However, in 2018, after significant public backlash, the United Kingdom Government suspended a memorandum of understanding with the NHS Digital whereby patient data were being shared with the Home Office to track people breaking immigration rules (Campbell, 2018).
The NHS does not have an explicit list of benefits; instead there is legislation that outlines broad categories of health care services that should or could be provided in the NHS (Mason, 2005). As discussed, there are benefits that are explicitly excluded, including prescription charges in England, dental care and optometry (NHS England, 2021p). However, exemptions exist for young and older people, and for those on low incomes. The NHS Constitution for England in 2009 established a set of rights for people working for and using the NHS, but this constitution mostly pulled together laws and rights that were already established (see Section 2.8.3, Patient rights). Similar constitutions do not exist in Scotland, Wales or Northern Ireland. Instead, a set of published core principles and values are intended to guide governance and service delivery in these countries. Increasingly as ICSs and sustainability transformation partnerships have been developed across England, there have been calls to clarify and strengthen legislation regarding their responsibilities and patient rights.
Through delegation, the various health boards in England, Scotland, Wales and Northern Ireland decide what treatments will be funded when commissioning (purchasing) and delivering (providing) services. At the local level, commissioning bodies or health boards also have some autonomy in making decisions about what services they will provide to their populations, given budgetary constraints. This has led to complaints of postcode lotteries, wherein some areas will cover certain services or treatments that are not available in a neighbouring region. This is the case for services such as fertility treatment (Fertility Fairness, 2021) and some elective surgical procedures (Royal College of Surgeons of England, 2014). Several initiatives have been developed, which aim to even out postcode lotteries, address unwarranted clinical variation and improve equity between regions. From the health technology assessment perspective, NICE provides NHS organizations in England, Northern Ireland and Wales with cost-effectiveness analyses that can serve as guidance on how to allocate resources most efficiently (see section 2.7.2 Regulation and governance of provision). Scotland refers to the Scottish Intercollegiate Guidelines Network for such guidance. Initiatives to address unwarranted clinical variation and reduce provision of low-value care include the Getting it Right the First Time (NHS England, 2021h) and the Evidence-Based Interventions programme in England (NHS England, 2020c), Realistic Medicine in Scotland (NHS Scotland, 2018) and Prudent Healthcare in Wales (NHS Wales, 2019b).
As noted above, NHS provides care free at the point of access to all, covering the spectrum from prevention, treatment, rehabilitation and palliation. Out-of-pocket payments do exist and include co-payments, and costs shared with the NHS for dental care and, in England, outpatient prescription charges (Table3.4). Direct payments can include private treatment, social care, general ophthalmic services and over-the-counter medicines. In total, out-of-pocket payments account for 16.7% of health expenditure in the United Kingdom (Table3.3). It should be noted that the largest component is on long-term care, which is likely to reflect out-of-pocket payments to access adult social care, accounting for 5.3% of total health expenditure in the United Kingdom. For these reasons, out-of-pocket payments to access NHS services are likely to reflect a much lower percentage of total health expenditure. Broadly, the NHS provides a high level of protection from the financial consequences of ill health, but important exceptions do contribute to inequity of access (Box3.1).
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Box3.1
Nearly all public funds are sourced from taxes, collected by HMRC, the three largest being income tax (26% of revenue), national insurance contributions (19% of revenue) and value-added tax (18% of revenue) (Adam, 2019). This financing system has been shown to be progressive overall (Box3.2). Collecting funds via general taxation means that the cost of collection is low; however, so is the degree of transparency in how individual payments are linked to individual benefits. Scotland, Wales and Northern Ireland receive funding from HM Treasury in block grants determined by the Barnett formula (see section 3.3.3 Pooling and allocation of funds). However, since devolution, the United Kingdom Parliament has passed legislation granting the devolved administrations increasing autonomy in their tax raising powers (Institute for Government, 2021). For some time, these were not used. However, in recent years they have resulted in small differences in stamp duty rates in Wales and Scotland, and most notably in income tax rates in Scotland (Institute for Government, 2021).
Box3.2
Once funds are collected, they are pooled by the HMRC at the United Kingdom level. HMRC allocates a block grant to the DHSC. Further block grants that fund all devolved services (not only health) are also allocated to Northern Ireland, Scotland and Wales, which subsequently allocate a portion of funding to health. Box3.3 discusses whether resources are put where they are most effective.
Box3.3
In England, the DHSC allocates funds to the Office for Health Improvement and Disparities (previously Public Health England), which distributes the public health grant to local authorities and to NHS England, which distributes funds to CCGs as well as to specialist and primary care services (Fig3.7). Further allocations are made to Health Education England, which is responsible for workforce development, and to other arm’s-length bodies, such as NICE, the Care Quality Commission and NHS Resolution (National Audit Office, 2017b).
Fig3.7
The public health grant allocated to local authorities is intended to be ring-fenced for specific public health services; however, some local authorities have resorted to diverting ring-fenced funds to wider council services such as trading standards, Citizens’ Advice Bureaux, domestic abuse services, housing, parks and green spaces, and sport and leisure centres, all of which have experienced significant reductions in their budget (Iacobucci, 2014). It is difficult to ascertain to what extent this has occurred because these reallocations have taken place under the remit of improving public health and in many cases may have achieved their stated goals. However, the combined effect of these reallocations and continued reductions in public health funding (it is estimated that, by the end of 2020/2021, the public health grant will require an additional £1 billion per year to restore it to 2015/2016 levels) (Buck, 2020) has resulted in challenges in adequately funding statutory public health services, such as those for substance misuse, sexual health, smoking cessation, obesity and school nursing (Buck, 2020).
CCGs, which receive block grants from NHS England, subsequently contract for community and mental health services, as well as for general hospital services in their districts. As of April 2015, following a recommendation contained in the NHS Five Year Forward View (NHS England, 2014), CCGs have also been able to play a greater role in commissioning primary care services, if they choose to do so. NHS England uses weighted capitation to determine funding levels for CCGs. The needs of each CCG population are weighted according to age, input costs (such as staff and building expenses), social factors (such as deprivation) and measures of health status, as regularly reviewed and altered by the Advisory Committee on Resource Allocation. The level of funding for CCGs remained relatively unchanged from establishment until 2018/2019; however, allocations are expected to increase annually by 2.3% in real terms between 2018/2019 and 2023/2024 (Harker, 2019). As allocations for public health and Health Education England are separate to CCGs, and they were not included within the most recent NHS funding settlement in 2018 (UK Government, 2018b), their funding has not increased in line with broader NHS funding.
In an effort to provide more integrated social and health care, especially for older and disabled people, the Better Care Fund was announced in 2013. As of 2020/2021, the fund consists of £6.7 billion, collected from CCGs and local authorities. CCGs and local authorities are expected to agree a combined spending plan, which focuses on integrating care and avoiding hospital admissions by supporting people at home. Subsequent evaluations have concluded that while the fund has not achieved the expected reductions in emergency admissions to hospital or delayed transfers of care, the fund has encouraged integration of health and social care at the local level (National Audit Office, 2017a).
The Barnett formula was devised in 1978 as a temporary measure, but it has carried through to this day as the main method by which the Treasury allocates funding to Northern Ireland, Scotland and Wales. The Treasury determines what changes in spending will be made in England, and then distributes funds according to a comparability percentage, which takes account of which powers are devolved, and population proportions. Each devolved administration receives a block grant, which is then distributed to departments such as health and education according to its own priorities and processes. This means that if England were to make increases to the NHS budget, overall funding to Scotland, Wales and Northern Ireland would be increased as well, but the devolved administrations do not have to make increases in funding to the same department.
The formula is controversial because it is not based on the assessed needs of each United Kingdom constituent country but instead on the aforementioned devolved powers and population proportions. For example, the formula does not take account of differing health needs between United Kingdom constituent countries, despite significant differences in health outcomes (see section 7.5 Health system outcomes). As the formula only applies to uplifts in funding rather than historical allocations, it has resulted in higher spend per capita in the devolved nations compared with England (Keep, 2020). Although, over time there has been a convergence in spending per capita between all four United Kingdom constituent countries, referred to as the Barnett squeeze. The rate of this convergence has slowed over the last decade as public spending has grown only marginally in real terms. The Holtham Commission, established in 2008, emphasized how funding for Wales was continuing to converge to levels seen in England despite higher need (Independent Commission on Funding & Finance for Wales, 2010). The Commission recommended the replacement of the Barnett formula with a needs-based formula; taking into account poverty levels, age of population and other factors, it estimated that Wales’s additional need mean that its relative block grant funding per head needs to be around 114% to 117% of equivalent funding per head in England. In response, the United Kingdom and Welsh governments have agreed to gradually implement a needs-based factor for Wales, currently set at 105%, and it is intended to gradually increase this to 115% (Keep, 2020). To date, similar arrangements do not exist for Northern Ireland or Scotland.
Northern Ireland, Scotland and Wales, similar to England, allocate funds to their health boards and trusts (in the case of Wales) using weighted capitation formulae. In Northern Ireland, the approach differs in some respects, notably in the inclusion of an economies-of-scale adjustment that effectively links funds to the local hospital stock (McGregor & O’Neill, 2014). In Scotland, approximately 70% of health funding is distributed by the Health and Social Care Directorate to regional health boards according to a weighted capitation resource allocation formula designed and continually refined by the NHS Scotland Resource Allocation Committee (Public Health Scotland, 2021d). In Wales, there has been ongoing controversy regarding this resource allocation formula and whether it adequately reflects the costs of providing health services in rural and deprived areas, and before the COVID-19 pandemic there had been ongoing consultation regarding a potential reform (Public Accounts Committee: Revisiting NHS Finances, 2019).
There is no purchaser–provider split in Scotland and Wales, meaning that the NHS boards in Scotland and the LHBs in Wales both plan and fund services. In Northern Ireland, the purchaser–provider split has been maintained, in principle, but generally not enacted.
The purchaser–provider split also remains in place in England. Under the 2012 Health and Social Care Act in England, the internal market, which was established in 1991 by a Conservative government and adjusted in 1997 by a Labour government (after it had tried to abolish it), was reinforced. The more recent internal market in England consists of the purchasers (CCGs) and the providers of mostly non-primary care services. Section 75 of the 2012 Health and Social Care Act requires CCGs to put out to tender all medium to large size contracts (UK Government, 2012). The intended aim of encouraging competition among providers was to incentivize improving quality of service and containing costs. However, as the agenda has shifted more towards encouraging integration of services, the direction of travel in England has been to encourage partnerships at local level rather than competition. In November 2020, NHS England published a series of proposals to encourage integration, including the creation of 42 ICSs, each responsible for the planning and delivery of health and care services to populations of 1–3 million people, and revoking Section 75 of the 2012 Health and Social Care Act (NHS England, 2020e). In 2021, the government published proposals for a Health and Care Bill which, among other measures, outlined a commitment to revoke Section 75 of the 2012 Health and Social Care Act (UK Government, 2021d).
The Any Qualified Provider (AQP) policy was introduced in 2012 in England, in an effort to give patients more choice of which service providers they access for a variety of community services and routine elective care. The policy pre-dates the 2012 Health and Social Act, as it was initially developed but not widely implemented under the previous Labour administration as the Any Willing Provider policy. In order to be on the AQP list, a provider must meet the following requirements: be registered with the Care Quality Commission; meet the terms and conditions of the NHS Standard Contract; accept NHS pricing (pricing is standard across AQP providers so that patient choice is based on quality, not price); be able to deliver the agreed services; and assist local commissioners in meeting referral thresholds and patient protocols. It remains unclear to what degree the AQP policy has impacted patient choice, competition or quality of care. Some qualitative research has indicated confusion among managers and commissioners regarding their role in implementing the AQP policy (Jones & Mays, 2013; Walumbe, Swinglehurst & Shaw, 2016).