Learning to live with cash limits--and other financial matters.
Authors: G Greenshields
Journal: BMJ (1984)

Many of the most contentious issues in health care finance stem from cash limits-the maximum amount of cash that a health authority is allowed to spend in any financial year.This limit on the amount of money available to spend on health care in a district, region, or nationally is not new.Cash limits were intro- duced in 1976 but have been applied with increasing vigour in recent years.This restriction means that choices and decisions over competing needs and demands have to be made by clini- cians, managers (a better word than administrators), and mem- bers of health authorities.Whether cash limits should be applied to health care with their consequent rationing effect is and probably will remain a political decision.Nevertheless, so long as health care is a political foot- ball patients are potential losers in the game of cash limits.We must, however, live in the real world, where the costs of medical care dictate that there will be limitations on resources, limitations that will probably continue for the foreseeable future.Thus pragmatism dictates that we should spend more time and effort as managers trying to maximise the service to patients from present resources and less on complaining to all and sundry how difficult it all is.At the end of the day actions speak louder than words.An important distinction in the allocation of NHS resources lies in the way that money is allocated by parliament between the hospital and community and the family practitioner services.Different rules pertain: for the former, strict cash limits are applied; but family practitioner services have an open ended budget-that is, there are no cash limits.This point came home rather forcibly last July when the hospital and community funds were reduced by 10', as part of the public expenditure cuts and originally we were led to believe that this was due to the likely level of overspending on the family practitioner services.'Paradoxically, however, despite cash limits the hospital service has maintained its proportion of the total NHS budget at around 620°of total expenditure.Nevertheless, these different funding rules cause problems and fuel accusations on lack of efficiency and effectiveness between the two factions, a position I believe could deteriorate if family practitioner committees become more independent.Indeed, this division may increase overall NHS expenditure if health authorities introduce policies to transfer responsibility for prescribing drugs, etc, from hospitals to family practitioners as part of their continual quest to reduce costs to enable them to live within their cash limits.It seems * Economy-The practice by management of the virtues of thrift and good housekeeping; an economical entity acquires resources in appropriate quantity and quality at the lowest cost possible.* Efficiency-Ensuring that the maximum useful output is achieved from the resources applied to each activity or, alternatively, that only the minimum level of energy and work is used to achieve a given level of output.* Effectiveness-Ensuring that the output from any given activity is achieving the desired result.