Policymakers were too optimistic about the better care fund

This week’s report from the National Audit Office into the better care fund makes sobering reading – not just because it shows the extent to which policy initiatives are prone to delivery failure, but because it shows just how far we have to go in reforming the health service.

‘The better care fund has suffered from a lack of a proper sense of the process, as well as a lack of procedure’

The danger is that what started off as a pretty marginal attempt to chip away at the peripheries of the health and social care divide ends up undermining the case for, and the pace of, change.

The better care fund was established to incentivise local health and social care commissioners to make better use of funding. The aim was to allow a shift of resources from spending on acute services to spending on social and preventative care. The theory of this is good. Commissioning health and social care separately is hugely inefficient and leads to poor outcomes.

In terms of the specifics, there were two main aspects to the reform:

• the government established an allocation of £3.8bn that local commissioners were to spend as pooled budgets held jointly by local health and social care commissioners; and
• an incentive pot of £1bn, drawn from expected savings, was to be paid out to those local areas that succeeded best in reducing pressure on acute health services.

The NAO report gives a thorough account of failings that led to the delay in the programme:

• poor engagement across the care divide (hardly surprising given this is the problem that the initiative aims to overcome);
• over-optimism among local commissioners on the savings they said they could achieve (perhaps predictable given that there was an incentive on offer); and
• insufficient oversight, preparation and planning for the initiative.

These are problems of procedure and process. But, arguably, the scheme has suffered just as much from a lack of a proper sense of what is possible.

Realistic expectations

National policymakers were absurdly over-optimistic about the level of savings the exchequer could bank immediately from the initiative and they were unambitious about the sums of money they wanted local commissioners to pool.

‘The idea that savings of £1bn are likely to emerge immediately flies in the face of the evidence’

On the first point, it is alarming that anyone thought huge savings could be achieved in the short term from integration. Crudely, the assumption seemed to be: spend £3.8bn more efficiently (via pooling budgets and commissioning) and save £1bn. However, the idea that savings of this order are likely to emerge immediately flies in the face of the evidence.

Yes, integrated care should create efficiencies, such as by reducing the amount expended on acute care and moving emphasis towards (cheaper) community, primary, preventative and home based care and support. But, there is little evidence that integration can do more than reduce the upward trend in the demand for care services.

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In the immediate term, integration will often mean running services in parallel – that is, keeping the hospital ward open while investing in more preventative care.

Overall, findings indicate that cost savings are not as likely a by-product of integrated care as improved patient outcomes or patient satisfaction. So, there are very good reasons to integrate. But, we can’t expect an immediate or massive cash windfall.

NHS number crunchers now expect the initiative to save around £55m (a 1 per cent efficiency, which is not an insignificant inroad into Simon Stevens’ goal of 3 per cent annual efficiencies).

‘NHS number crunchers now expect the initiative to save around £55m’

While the government was overly optimistic about the level of cashable savings achievable, it was insufficiently enterprising on the scale of pooled budgets. It has stated that integrated care should be the norm by 2018. Most commentators argue that having a single commissioner across health and social care (ie: combining the funding and accountability) is a precondition for integrated care.

Yet, the £1.9bn transferred from the clinical commissioning groups to the pooled funds (their half of the £3.8bn total) comprises just 4 per cent of expenditure on hospital services. If establishing a single commissioner is a good thing to do then let’s get on with it.

As it happens, the fact that some CCGs and councils were ready to go above what was required – so the £3.8bn pot swelled to £5.3bn – suggests there is untapped appetite and the government could push much harder.

Achieving targets

The outcome of all of this is that we have moved much slower to the goal the government was hoping to achieve and we are going to extract much lower levels of savings than the Treasury was expecting. Together these undermine our progress towards a highly desirable policy goal. We can’t afford that.

In his party conference speech last month, the care minister Norman Lamb said: “I want the entire health and care budget pooled by 2018. The divide makes no sense.” He’s right. But the question remains: how to get there?

Two options are worth thinking about. One – strangely absent so far in the debate – is mandation. Subsequent to the Care Act 2014, NHS England can force CCGs to pool their budgets with other partners locally. Why not? Alternatively, a more gradualist move would be to offer a straightforward cash top-up for all areas that pool their budgets, say 5p for every £1 pooled.

This week the care minister, Norman Lamb, spoke about the need to find £1.5bn of funding for the NHS immediately. If he can get his hands on it, then this might be a good way of distributing it.

Nigel Keohane is research director at the Social Market Foundation