Programme Budgeting – Testing The Approach in Scotland

1. Background

1. The Government has set a target to match European Union population growth over the period 2007-2017, supported by increased Healthy Life Expectancy. Levels of healthy life expectancy for women and men have been gradually increasing since 1980.

2. In order to increase healthy life expectancy further, a significant delivery challenge for SG and local authorities is how to promote the necessary resource shifts upstream to prevention and addressing of underlying causes. This can be achieved by:

• Stopping doing things that don't work
• Allocating resources locally to reflect levels of need more accurately
• Getting the balance right between universal and targeted services
• Moving resources to prevention rather than cure.

3. Programme Budgeting and Marginal Analysis (PBMA) offers an analytical framework for assessing the costs and benefits of alternative courses of action, which could assist with identification of the effects of resource shifts and areas for disinvestment among programmes. Programme Budgeting (PB) involves the presentation of estimates of expenditure in 'programmes' across an entire budget. For example within the health budget the programme may reflect different diseases, different levels of care (primary, secondary and tertiary) or different location of care. Marginal Analysis (MA) uses economic evaluation techniques to evaluate incremental changes in costs and consequences when resources in programmes are deployed in different ways. Marginal Analysis focuses solely on the extra costs and benefits of changes in expenditure of resources. It analyses the effects of changing the balance of expenditure. Overall efficiency will increase when the marginal gain in benefit in the expanding programmes exceeds the marginal loss of benefit in the contracting programmes. As a result, Marginal Analysis identifies where additional resources should be targeted, where reductions should be made if expenditure must be cut, and how resources can be reallocated to achieve an overall gain in benefit with no overall change in expenditure.

4. PBMA has been used in a number of countries and settings, including in NHS Boards in Scotland, for more than 30 years^[2]. Recent experience from England suggests that this approach may have been helpful for the Department of Health and PCTs to make better informed decisions about where their limited budgets are being spent^[3] (Appendix B).

5. Ongoing work on Shifting the Balance of Care in Scotland aims to develop and implement a transparent Integrated Resource Framework for health and social care at Locality/CHP level. This will enable partners to be clearer about the cost and quality implications of local professional decision making about care and will provide an evidence base for reducing variation in practice and outcomes for patients / service users. It will also provide Boards and their partners with the information required to strategically plan and review services more effectively, and to enable realignment of resources to support shifts in clinical/care activity within and across health and social care systems.

6. There is a high level of interest in information being provided in a different format than that currently provided by the NHSScotland cost book. MSPs, and other interested parties, frequently request information on the cost attributable to particular diseases or groups of diseases. In June 2010 the Public Audit Committee, in an oral evidence session on the performance of NHSScotland, explored the link between specific activity and costs with Dr Woods, the then NHSScotland Chief Executive. The CMO also referred to PBMA as a way of shifting resources in his oral evidence to the Finance Committee's "Preventative Spending Inquiry" in October 2010.^[4]