Report 37: Personalisation, productivity and efficiency

Evidence from direct payments

'Direct payments enable a more effective use of scarce resources - but with opinion divided as to whether this actually reduces overall costs, or merely achieves better outcomes for the same amount of money' (33)

The initial and ongoing policy assumption was that direct payments should be at least cost-neutral, if not yielding cost savings, when compared with traditional services. Although initial findings on outcomes are positive, there are few studies which have examined the costs associated with implementing and administering the schemes and the financial returns and other benefits that result (7).

To the extent that they have been reported, there appears to be a wide variation in implementation costs. Ongoing costs and variables also include what is covered by direct payments (start-up, contingency or support costs), which will impact on what can be spent directly on care and support.

There is evidence to suggest that, if direct payments are administered effectively and efficiently, they have the potential to achieve greater efficiency, while giving people who use services greater control over their care and support. The potential for efficiency gains can only begin to be realised if the changes are supported by improved information, market development and choice in care and support provision.

The 2007 PSSRU UK direct payments survey gives some indications of efficiency and effectiveness of direct payments for different service user groups and different support packages (34). It supports research which shows that user-led organisations or centres for independent living are an essential part of the infrastructure to support the efficient and effective use of direct payments (34, 35). The findings indicate a wide variation in implementation and ongoing costs. Based on the percentage of community care budget spent on direct payments for each group compared with the percentage of users on direct payments, the survey showed that direct payments were cheaper for learning disability, slightly more expensive for physical and sensory disability and mixed for older people (no conclusive data was available for people with mental health problems). However, cost variables also depended on what was included in the direct payment (that is, start-up, contingency or support costs), which will have an impact on what a direct payments user can spend directly on support services.

• Points for potential savingsOpen

  The Audit Commission's 2006 'Choosing well' survey of direct payments deployment in 11 local authorities identified the following points for potential savings:

  • In a cost-benefit analysis, these asserted costs and benefits would be compared. There would be good before-and-after management information that modelled how volume of business and planned efficiency gains would vary according to the volume of business and other factors.
  • Costs and benefits are always present if greater choice is to be introduced, and these should be thoroughly assessed, but that local authorities lack the means of quantifying them. Greater choice can bring benefits to users in the form of higher-quality service. Local authorities will incur costs when providing more choice, although there is scope to reduce these, particularly through collaboration.
  • Local authorities must determine that the benefits obtained through choice outweigh or justify the additional costs. (13)

• Achieving value for moneyOpen

  CSED's briefing on the cost-effective implementation of direct payments which is based on local authority experience shows that, to achieve cost effectiveness and value for money:

  • DPs [Direct payments] must be embraced as a core component of delivering support – not as an exception or incremental process – so that savings from traditional service provision may be realised
  • There will be initial costs associated with setting up or commissioning an effective DP Support Service (DPSS) and training staff in DP processes
  • Once fully operational, DPs should be cost neutral. There may even be savings associated with no longer having to undertake the three-way process of purchase orders, timesheets and invoices and generate variable payments to providers. Instead, the Council will simply send a regular monthly payment to the customer.
  • It is important to focus on cost control during the progressive move to a DP environment. This means:
    • taking resources out of the traditional care provision process as the volumes decrease
    • ensuring that any outsourced services (eg DPSS, payroll) are cost effective
    • considering a “light touch” audit and review of DP customers.

  They should be measured or judged by outcome for people who use services, as well as by cost: simplistic comparisons with cost and time are not appropriate.

• Case study: Independent Living SupportOpen

  A study of two Welsh local authorities that jointly funded an Independent Living Support scheme (direct payments and a local user-led organisation to assist people using direct payments, mostly serving people with physical disabilities who were under the age of 65) concluded that:

  This study ... can provide strong support for the emerging consensus in the literature that DP [direct payments], if implemented effectively, need not be any more costly than traditional services, and may over time prove to be less costly. (7)

  Supported by the Independent Living Scheme, the DP [direct payments] schemes studied represent a substantial improvement over traditional arrangements from a cost and resource utilisation perspective. There is strong evidence to suggest that greater opportunity cost savings can be anticipated if schemes become more fully integrated into practice and procedures, when certain policy and procedural issues are addressed. (7)

  Overall, direct comparisons showed the 'DP [direct payment] was clearly less costly than in-house services ... the comparison with independent sector rates suggests that DP was roughly equivalent in cost to average independent sector rates' (7).

  However, the study also identified some important variables and procedures that influenced additional cost savings and value for money based on improved user outcomes:

  • efficiency is greatly reduced and costs increased if people are required to use traditional services while waiting for direct payments to be set up
  • if properly embedded and funded, the user-led organisation can reduce administrative and 'on-costs' (such as support package management, information and training for service users)
  • proportionate auditing, with some record keeping administered by user-led organisations, supports increased efficiency
  • a user's more flexible and creative use of funds and increased control over support can result in less staff time and resource wastage
  • initial set-up needs to be intense, with care manager input reducing over time
  • efficiencies are likely to be gained once direct payments are embedded and care managers have experience and skills
  • tailored packages for individuals mean staff working allocated hours, thereby reducing waste.