Chapter 3

Financial Resource
Allocation
 Goals of Resource Allocation
• Health care resources: all materials, personnel, facilities,
funds, and anything else that can be used for providing
health care services.
• Health care has long been a limited resource for which there
has been an unlimited demand; everyone needs health care.
• Strategic health care resource allocation in the developed
world is being driven by at least two main goals: efficiency
and equity.
• All around the globe, the aging and rising population
requires continuous attempts to reform the system. These
reforms have attempted to either increase the financial
resources directed to healthcare or to use limited resources
in the best way possible.
 Goals of Resource Allocation
Reform attempts have included efforts to:
1. Increase efficiency: By curtailing waste and unnecessary
care, providers can be more efficient. Methods include
evaluating health technologies and expanding prevention
programs.
2. Distribute resources equitably: The basis of distribution is
value-based and can take many forms: strict equality, access
to a determined level of care, access to an equal opportunity
for care and access based on age or other factors.
 The equity arguments usually reflect the requirement to
secure equal access to healthcare for equal health needs and
equal contributions in the form of premiums or taxes for
equal income or wealth.
Healthcare Allocation Classification
• Healthcare allocations are commonly classified in terms of
two levels of decision making: microallocation and
macroallocation.
1. Microallocation focuses on decisions regarding particular
persons.
 It often involves "patient selection": determining which
patients among those who need a particular scarce resource,
such as a heart transplant, should receive treatment.
 Sometimes, microallocation entails deciding for an individual
patient which of several potentially beneficial treatments to
provide, particularly when only a limited time is available for
treatment.
 Healthcare Allocation Classification
2. Macroallocation entails decisions that determine the amount of
resources available for particular kinds of healthcare services.
 Macroallocation decisions include how particular health-related
institutions such as hospitals or government agencies budget their
spending.
 Macroallocation also encompasses the decisions a nation makes
concerning what resources to devote to particular institutions or,
more broadly, to high-technology curative medicine as opposed
to, for example, research or primary and preventive care.
 The extent to which health is fostered through medical care as
opposed to nonmedical interventions such as environmental
regulation is also a matter of macroallocation, as is the amount of
money, time, and energy a society allocates to the pursuit of health
rather than to education, defense, and other activities.
 Three Levels of Decision-making
• Resource allocation is the distribution of resources
– usually financial - among competing groups of
people or programs.
• When we talk about allocation of funds for
healthcare, we need to consider three distinct levels
of decision-making:
Level 1: Allocating resources to healthcare versus
other social needs (macroallocation)
Level 2: Allocating resources within the healthcare
sector (macroallocation)
Level 3: Allocating resources among individual
patients (microallocation)
 Three Levels of Decision-making
Let's consider an example: A community receives a
gift of $100,000 from a wealthy donor to spend on
healthcare, education and housing. The funds can
be distributed among the three areas or dedicated
to a single area, such as healthcare.
Level 1 : At this level, community members consider
how to distribute the funds among one, two or
three of the competing programs. For example,
should the funding be split in three equal portions
or should one program, possibly under-funded in
the past, get all or most of the money?
 Three Levels of Decision-making
Let's consider an example: A community receives a gift of
$100,000 from a wealthy donor to spend on healthcare,
education and housing. The funds can be distributed among
the three areas or dedicated to a single area, such as
healthcare.
Level 2 : Assuming that healthcare gets a portion of the
$100,000, the next decision community members face is how
best to direct the spending among competing healthcare
interests. Should most or all of the funds go to hospital care
and medical equipment? What about the public education
program that promotes healthy lifestyles and behaviors (like
exercise or immunizations) that prevent disease? Or,
community members could decide to spend the money to
purchase health insurance for those who can't afford it.
 Three Levels of Decision-making
Let's consider an example: A community receives a
gift of $100,000 from a wealthy donor to spend on
healthcare, education and housing. The funds can be
distributed among the three areas or dedicated to a
single area, such as healthcare.
Level 3 : The next level of decision making involves
distributing the financial resources among individuals.
Most communities have policies and guidelines to
insure fairness in these situations. Decisions at this
level include: Who gets the next available heart for
transplant? And, who sees the doctor first when there
are many people waiting in an emergency room?