Will intermediate care be the undoing of the NHS?

The government has won praise for its new plan for the NHS,¹ where it reaffirms its commitment to the principles of a universal comprehensive health service. Yet for the first time in its history NHS bodies will be able to levy charges for the personal elements of care. The commitment to services free at the point of delivery is absent from the NHS plan.

Following the National Beds Inquiry² the government has announced the creation of 7000 extra NHS beds by 2004, 5000 of which will be intermediate care beds and 1700 non-residential places. Intermediate care will “build a bridge between hospital and home” to speed discharge from acute care and provide a range of recovery and rehabilitation services. Cottage hospitals, private nursing homes, and domiciliary and community settings will form the heart of the new intermediate sector. What has received less attention is how these services will be funded.

In the plan the government also published its response to the Royal Commission on Long Term Care.³ From October 2001 the NHS is committed to meet the costs only of nursing care for nursing home residents; personal care will be charged for. This means that in future nursing care will be free for all of the 160 000 nursing home residents in England who need it, but many other patients may be financially worse off. The future position over the funding of personal care of the 8% of nursing home residents who currently have their care package fully funded by the NHS is unclear⁴—as is the funding of personal care for the 270 000 NHS patients expected to move annually from hospital into intermediate care.

Under the plan, new care trusts will be able to commission and deliver both primary and community health care as well as social care. These trusts (single, multipurpose legal bodies) will hold capped, unified budgets. They will define what is NHS care and what is social care, with the social care elements subject to local authority charging policies. But there is inevitable debate about the boundary between nursing and personal care—when does a bath move from being personal care to nursing care?—and the concern is that leaving the decision to cash strapped primary care trusts will result in reduced NHS provision. In the absence of clear national guidance, the only redress against unfair decisions will be legal action against individual trusts.

Because they can levy charges for personal care, primary care trusts will have clear financial incentives to shift intermediate care into non-NHS settings. The likely result is that intermediate care will follow the same trajectory as long term care in the 1980s.⁵ Then, the UK government pump-primed the massive expansion of private nursing and residential care by allowing patients in such accommodation to use income support to meet the costs of care. Patients in local authority and NHS accommodation could not claim income support for this purpose, so local authorities encouraged residents to opt for the private sector and thus released funds for themselves through reducing expenditure and selling assets.⁶ The main difference between the two cases is that the expansion of the private residential and domiciliary intermediate care market will be funded mainly out of user charges, not social security.

These measures will fundamentally change the principles under which English citizens receive health care. The NHS will cease to be a universal, comprehensive service. The NHS pools the costs of care across the whole population, so that no individual or institution is liable for the risks and costs of care. Devolving unified budgets to primary care trusts reduces the size of the pool and devolves some of the risks to these small institutions. Trusts can minimise their financial risks either by selecting less risky patients or, more likely, by contracting with the private sector, where user charges can be levied.⁷ Private providers minimise their risks, as they always have, by accepting less risky patients or levying higher charges.

In such a situation the funding mechanism governing the payment of providers will be critical. It will signal the government's intent about the principle of universality in the NHS and determine the ability of the new National Care Standards Commission (legislated for in the Care Standards Bill last week) to protect the public against poor quality care in the private sector. Three methods are open to the NHS: reimbursement based on levels of service provision (mainly staffing and equipment); an unadjusted per capita reimbursement, which effectively devolves risk to the provider; or an adjusted per capita reimbursement based on the dependency levels of individual patients. The long term care industry prefers the third option, as does the World Bank, which advocates a move away from systems with universal risk pooling such as the NHS towards targeted, risk adjusted capitation payments typical of private voluntary insurance. Yet such systems have dangers, as experience in the United States and Australia shows.

In the US providers have not been compelled to spend the extra money they receive for higher dependency patients on patient care. Nor have they been required to maintain higher levels of staffing: in US long term care settings 37% of expenditure is on staff; in the NHS the figure is 65%.⁸,⁹ The US experience also shows how tying reimbursement to levels of disability can provide perverse incentives for homes to accept residents who are more disabled and allow them to become more so.¹⁰ A similar picture is emerging in Australia.¹¹ Before 1997 a set percentage of the funding received by care home owners had to be spent on care and could not be diverted to non-care staff, capital maintenance, or profit. This requirement was removed in 1997, and staffing levels have since fallen, with experienced nurses being replaced by those who are less costly to employ. This has led to scandals about the quality of care and claims by the Australian Nursing Federation that the industry is facing a quality of care crisis.¹²

A government committed to a universal, comprehensive, high quality NHS would not embark on this path. It would restore the risk pooling model of universal provision by bringing the nursing and care elements of the workforce in the private sector under NHS control. This would bring it into line with its policies for the rest of the NHS, where under the private finance initiative bricks and mortar are owned and operated by the private sector but clinical services remain under the control of the NHS.