Education And Debate

Resource allocation to health authorities: the quest for an equitable formula in Britain and Sweden

BMJ 1997; 315 doi: (Published 04 October 1997) Cite this as: BMJ 1997;315:875
  1. Finn Diderichsen (, professora,
  2. Eva Varde, statisticiana,
  3. Margaret Whitehead, visiting fellowa
  1. a Department of Public Health Sciences, Division of Social Medicine, Karolinska Institute, S-172 83 Sundbyberg, Sweden
  1. Correspondence to: Professor Diderichsen
  • Accepted 6 March 1997


In recent years countries with very different healthcare systems have been showing increasing interest in resource allocation policies based on weighted capitation. In countries whose healthcare systems have competing health insurers the main concern has been to construct capitation formulas that prevent favourable risk selection or “cherrypicking.” Reforms to the American Medicare programme and Dutch healthcare proposals have stimulated renewed efforts to find a way of overcoming this problem.1 2 3 4

Countries with national health services, such as the United Kingdom and Sweden, have also experienced far-reaching reforms of health care, with important implications for equity in access to care.5 6 Risk selection should be less of a problem, at least with health authority purchasing, as the population is assigned to a purchaser based on area of residence. The new role of local purchaser, however, calls for more exact methods to allocate “purchasing power,” because local areas will show stronger variation in relative need than regions and counties.

We outline British experiences in attempting to devise an equitable formula then present the new model that we have developed in Sweden for Stockholm County Council. We discuss what lessons these experiences hold for other countries facing a similar challenge.

British developments

In Britain serious attempts to devise more equitable mechanisms for resource allocation for the NHS date back to the 1970s, when it became clear that funding to the regions based on historical activity had perpetuated the inequalities in funding that existed before the NHS. Since then, development work has gone through three distinct phases.7

In the first phase the formula created by the Resource Allocation Working Party was developed for distributing resources from central government to regions. It used mortality in each area as an indicator of healthcare need.8 The formula was in use from 1977–90 and …

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