UK budgetary systems and new health-care technologies

This article outlines the budgetary setting within the UK health-care system.

It is argued that while prospective budgets can give rise to efficient resource allocation outcomes, this relies on the budget being set at an appropriate level and the accompanying incentive structures being efficient. The organizational structures and the interrelationships are critical. The recent history of UK National Health Service reforms and expenditure is outlined. It is suggested that until recently, although the budget system has the potential to promote efficiency, the aggregate budget allocated to the NHS has probably been too low given public expectations, technology advances, and preferences for health care.

The aggregate budget is due to rise considerably over the next 5 years. While some incentive and regulatory provisions will move the budget toward an efficient allocation many microlevel incentive issues remain.

Whether efficient patterns of health-care allocation emerge remains open to debate, however, because the existing incentive mechanisms are not optimal.