The threat of 'cream skimming' in the post-reform NHS.

The allocation of budgets to general practitioners to enable them to purchase selected hospital services has been one of the most imaginative elements of the recent National Health Service reforms in Britain. However, reliance on 'historic costs budgeting' has weakened the efficiency incentives of fund-holding, while perpetuating the large variations in resource use endemic in general practice. On the other hand, policy changes aimed to introduce elements of capitation funding, although welcome, raise the spectre of 'cream skimming'. The paper explores the potential for protection against 'cream skimming' offered by incorporating chronic health factors into the formula.