Some equity and efficiency implications of decentralised decision-making in health care resource allocation: a discussion with reference to England

Devolution has become a cornerstone of modern public-service management and this tendency is confirmed by several reforms carried out during the 1990s, namely in Europe, in the health sector. In this context, resource allocation decisions depend on multiple budget holders. Our objective is therefore to discuss possible consequences of relaxing the hypothesis of a single budget, which has been widely adopted in the literature about the equity-efficiency trade-off in health care resource allocation. We compare the baseline case of centralisation with decentralisation. In the former scenario, a fixed budget, M, is allocated to all or some of the individuals that benefit from the available health care technologies (t1 and t2), in order to achieve efficiency and equity. In the case of decentralisation, M is allocated to jurisdictions A and B, giving rise to local budgets, Mj, j=A,B. These budgets are in turn allocated by local budget holders to local residents that benefit from existing technologies, assuming a constant set of objectives of health care. We analyse both contexts of perfect information and uncertainty. If the unique objective of health care is health maximisation, then, in the presence of information asymmetry, decentralisation is likely to improve health outcomes. However, when we consider equity objectives as well, there might be a trade-off between the optimal allocation of M and the optimal allocation of local budgets. To illustrate the pertinence of these questions, we discuss our analysis in the light of the English case, where 75% of NHS resources have been devolved to Primary Care Trusts.