Analysis of the ability of the new needs adjustment formula to improve the setting of weighted capitation prescribing budgets in English general practice

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Abstract
Editorial by Majeed General practice p 284 In April 1991 prescribing budgets were introduced into English general practice as part of the fundholding and indicative prescribing schemes.1 The schemes were designed to control the growth in public expenditure on drugs and to reduce the variation in prescribing costs that existed between general practitioners in different parts of the country. Initially, practice level prescribing budgets were set on a historical cost basis. This approach was criticised, however, for being inequitable and for possibly rewarding high cost, inefficient practices with more funds.2 In response, a move to budgets set on a weighted capitation basis was recommended as a means of promoting equity while ensuring that funding levels reflected the needs of patients locally. The identification of several limitations of the weighted capitation formula that was used to help set prescribing budgets in England from 1993–4 onwards led to a debate about the desirability of using such an approach. Majeed argued that variations in general practice prescribing costs were too large to be explained in this way.3 He suggested that the rigid, inflexible application of weighted capitation formulas to help set practice level prescribing budgets should be avoided. In a similar vein, Majeed and Head argued that weighted capitation formulas were very crude tools for determining general practice prescribing budgets and should be used only as a guide to allocations.4 Greenhalgh concluded that such formulas should not be used as substitutes for factors such as reflection or negotiation during the budget setting process.5 Maxwell, Howie, and Pryde reported that the formula used to help set practice level budgets failed to take account of factors such as patients' values, beliefs, and expectations.6 Finally, Smith argued that the formula did not reflect all patient related variations in costs, random …