1. Background

This article introduces health accounts, a set of statistics providing an analysis of healthcare expenditure, which will be published for the first time in the UK by the Office for National Statistics (ONS) in May 2016. The UK’s health accounts are produced to internationally standardised definitions – the System of Health Accounts 2011 (SHA 2011), which have been developed by the Organisation for Economic Co-operation and Development (OECD), Eurostat – the statistical office of the European Union, and the World Health Organisation (WHO). These definitions are to be used to produce health accounts by almost all OECD and EEA (European Economic Area) member states from 2016 and as a result, it will for the first time, be possible to consistently compare UK healthcare spending with most other European and OECD countries.

There are three dimensions to the health accounts analysis:

  • financing scheme – the source of funding for healthcare; categories include government-funded, private out-of-pocket payments and private healthcare insurance
  • provider organisation – the type of healthcare provider in which care is carried out; categories include hospitals, residential and nursing homes, and ambulatory providers
  • function – the type of care and mode of provision; categories include curative/rehabilitative care, long-term care and preventive care

The definition of healthcare used in health accounts is somewhat broader than that used in previous UK healthcare expenditure analyses (including ONS’s “Expenditure on Healthcare in the UK” publication) and includes a number of services which are typically considered as social care in the UK. This guidance article provides further details on what the health accounts cover and how the health accounts differ from the measures of healthcare expenditure used in the previously published article “Expenditure on Healthcare in the UK”.

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2. What are health accounts and what do they look like?

Health accounts provide an analysis of healthcare expenditure by three different dimensions: mode of financing, provider organisation and function type. Expenditure on each of these dimensions is cross-tabulated with expenditure on the two other dimensions, providing a picture of the structure of the healthcare system.

The three core health accounts tables are:

  • the breakdown of each financing scheme by healthcare function
  • the breakdown of each healthcare function by type of provider
  • the breakdown of each financing scheme by type of provider

In 2016, we will be publishing data for all three tables for government-financed expenditure. Non-government expenditure funded through voluntary insurance schemes, non-profit institutions and out-of-pocket spending will only be analysed by healthcare function in 2016. The UK has a derogation from the regulations covering health accounts which means that the analysis of these financing schemes by healthcare provider and cross-tabulated by both function and provider is not required until 2019.

This attachment illustrates what the health accounts look like. Definitions of the categories used are provided in section 3.

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3. What categories do the health accounts use to analyse healthcare expenditure?

The following categories are used in the analysis of financing scheme (HF code denotes classification in the SHA 2011 definitions):

Government-financed expenditure (HF.1.1) covers healthcare spending by the NHS, local authorities and other government bodies involved in the provision of healthcare. Figures are reported net of client contributions which are included in the out-of-pocket financing scheme (HF.3) and grants to charities which are included in the NPISH (non-profit institutions serving households, HF.2.2) financing scheme.

Compulsory health insurance schemes (HF.1.2) cover the healthcare elements of motor insurance and employers’ liability insurance1. Such insurance is a legal requirement for motorists and employers, and the NHS can reclaim the costs of treatment from the insurers of motorists or employers deemed liable for injury.

Voluntary health insurance schemes (HF.2.1) cover private medical and dental insurance, employer self-insurance schemes, health cash plans, dental capitation plans and the healthcare element of travel insurance.

NPISH financing schemes (non-profit institutions serving households, HF.2.2) cover charity expenditure funded through voluntary donations, grants and investment income, excluding charity expenditure funded through client contributions (classed as out-of-pocket expenditure in health accounts) and purchases of care by public and NHS bodies (classed as government expenditure in health accounts).

Enterprise financing schemes (HF.2.3) cover healthcare activity funded by organisations (primarily employers) outside of an insurance scheme, such as occupational healthcare.

Out-of-pocket payments (HF.3) cover consumer expenditure on healthcare goods and services, outside of health insurance schemes. This includes client contributions for local authority and NHS provided services and prescription charges.

The following categories are used in the analysis of healthcare functions (HC code denotes classification in the SHA 2011 definitions):

Curative/rehabilitative care (HC.1/HC.2) comprises healthcare contacts for which the principal intent is to relieve symptoms of illness or injury, to reduce the severity of an illness or injury, to protect against exacerbation and/or complication of an illness and/or injury that could threaten life or normal function, and to aid the recovery of patients from illness and/or injury. Curative/rehabilitative care is divided between four “modes of provision” of treatment:

  • HC.1.1/HC.2.1: inpatient care
  • HC.1.2/HC.2.2: day care (day cases and regular day and regular night admissions)
  • HC.1.3/HC.2.3: outpatient care
  • HC.1.4/HC.2.4: home-based care

Long-term care (health) (HC.3) covers care provided with the primary purpose of alleviating pain and suffering and reducing or managing the deterioration of health in patients with chronic conditions, where an improvement in their health is not anticipated. This category includes old-age and disability-related health issues, and palliative care. As with curative/rehabilitative care, long-term care is divided between four “modes of provision”:

  • HC.3.1: inpatient care
  • HC.3.2: day care (including regular day and regular night admissions)
  • HC.3.3: outpatient care
  • HC.3.4: home-based care

Ancillary services (non-specified by function) (HC.4) covers ambulance services and patient transport, as well as some laboratory services which cannot be allocated to another function.

Medical goods (non-specified by function) (HC.5) are subdivided into two categories.

  • Pharmaceuticals and other medical non-durable goods (HC.5.1) cover prescription and over-the-counter drugs and other non-durable medical products such as plasters and syringes. This category only covers products acquired by patients for treatment outside of a care setting. Pharmaceuticals and other products consumed as part of a wider course of treatment are included in the costs of that treatment. For example, drugs consumed by a patient as part of an inpatient hospital episode will be included in the expenditure on hospital inpatients.
  • Therapeutic appliances and other medical goods (HC.5.2) cover products such as spectacles and wheelchairs, again where these are not provided as part of a wider course of treatment.

Preventive care (HC.6) covers primary prevention – measures designed to reduce the risk of injury or illness, such as information campaigns and immunisation programmes; and secondary prevention – interventions aimed at the detection of disease enabling earlier treatment, such as screening programmes. Expenditure on tertiary prevention, that is, treatment aimed at reducing the risk of an established illness or injury worsening, is included elsewhere, typically in curative/rehabilitative care.

Governance, and health system financing and administration (HC.7) is subdivided into two categories:

  • Governance and health system administration (HC.7.1) covers:

    • the strategic governance of the healthcare system
    • setting and monitoring standards of care
    • developing healthcare regulations
    • this category does not include expenditure on overhead services, such as commissioning, legal and procurement services, which can be carried out locally or at a shared/national level; expenditure on these services is apportioned pro-rata across the care function and provider categories of health accounts
  • Administration of health financing (HC.7.2) is applicable to insurance schemes and covers expenditure on premiums which is not used to fund claims, instead covering the cost of insurance company administration, interest earned on reserves, profit and Insurance Premium Tax.

The following categories are used in the analysis of healthcare providers (HP code denotes classification in the SHA 2011 definitions):

Hospitals (HP.1) cover general, specialist, teaching and mental health hospitals.

Residential long-term care facilities (HP.2) cover nursing and residential care homes.

Providers of ambulatory healthcare (HP.3) are subdivided into:

  • Offices of general medical practitioners (HP.3.1.1) cover GP practices
  • Dental practices (HP.3.2)
  • Providers of home healthcare services (HP.3.5) include home care services provided by local authorities and independent sector specialist home care providers.
  • Other ambulatory care providers (HP.3.x) cover all other expenditure by providers of ambulatory healthcare not included in HP.3.1.1, HP3.2 or HP.3.5, including providers of community health services

Ambulatory care providers (HP.4) primarily cover ambulance services.

Retailers and other providers of medical goods (HP.5) cover pharmacies, opticians and other medical goods suppliers.

Providers of preventive care (HP.6) include national public health bodies and the cost of preventive health services, such as information programmes, provided by bodies such as the Food Standards Agency and Health and Safety Executive.

Providers of healthcare system administration and financing (HP.7) cover bodies involved in the strategic governance of the healthcare system, setting and monitoring standards of care and developing healthcare regulations.

Rest of economy (HP.8) is subdivided into:

  • Households as providers of home healthcare (HP.8.1) cover households in receipt of Carer’s Allowance
  • All other industries as secondary providers of healthcare (HP.8.2) which covers healthcare provided by bodies whose primary purpose is not healthcare, including the police, schools (through the educational psychology service), and non-specialist transport providers (including taxis) reimbursed through hospital travel costs schemes

Rest of world (HP.9) covers healthcare provided abroad to UK residents.


  1. Legally required for motorists under the Road Traffic Act 1988 and employers under the Employers’ Liability Act 1969.
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4. How are the health accounts produced?

Due to the range of organisations providing healthcare in the UK, these statistics have been developed using a number of different sources for each type of financing scheme.

The main source for measuring total government expenditure in health accounts is the OSCAR (Online System for Central Accounting and Reporting) dataset. The OSCAR dataset is held by HM Treasury and provides a comprehensive record of all government expenditure, and is used in the national accounts and HM Treasury’s Public Expenditure Statistical Analysis (PESA) publication.

However, the OSCAR dataset is not the only source used for total government healthcare expenditure, as there are a number of areas of spending which are classified as healthcare in the System of Health Accounts 2011, but which fall outside the remit of the NHS, Department of Health and health departments of the devolved administrations. Additional data sources specific to these items have been included to cover these areas, with the most significant being local authority expenditure on health-related elements of social care. More detail on these adjustments is provided in section 5: How do the health accounts relate to existing measures of healthcare expenditure?

While the OSCAR dataset supplemented with additional sources is used to calculate total government expenditure, there is an absence of sufficiently detailed data in the OSCAR dataset for the analysis of government healthcare expenditure by the function and provider categories of health accounts. As a result, ONS has worked with experts from the Department of Health, NHS and devolved governments to develop the analysis, using a number of additional data sources such as the NHS reference costs.

Total private sector healthcare expenditure and its analysis by healthcare function has been calculated using a range of sources (Table 1).

Further information on the methodology used to produce a SHA 2011-compliant measure of healthcare expenditure, along with information on how expenditure is split by function and provider categories, will be available in the UK Health Accounts methodological guidance. More information about how the new methodology differs from that used in the “Expenditure on Healthcare in the UK” data series can be found in section 5.

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5. How do the health accounts relate to existing measures of healthcare expenditure?

Adopting the guidelines of the System of Health Accounts 2011 has resulted in a number of changes to the measure of UK current healthcare expenditure1 relative to that used in ONS’s earlier “Expenditure on Healthcare in the UK” publication. The most significant of these changes is the inclusion of health-related elements of social care.

Social care expenditure included in health accounts

Social care expenditure has been included where the need for care is primarily due to a health condition (including old-age related conditions) and where care supporting basic Activities of Daily Living (ADLs, such as bathing, dressing and walking)2 makes up a substantial element of the service provided.

This change has resulted in the inclusion in health accounts of a considerable proportion of local authority-organised adult social care expenditure, including residential and nursing care, home care and direct payments. Excluded are social care services for which the care component is primarily made up of support with Instrumental Activities of Daily Living (IADLs, including shopping, cooking and managing finances)3, such as day care and supported accommodation.

The NHS also provides funding for adult social care services, a proportion of which is used to fund services which are not considered to be healthcare in SHA 2011 using the ADL/IADL distinction. A deduction is made to the government expenditure figures to remove this spending.

Also included in the new health accounts is a small component of children’s social care, again where this meets the criteria of the need for care being primarily due to a health condition, and where support for basic ADLs makes up a substantial part of the care component. This covers a small proportion of children’s residential care and direct payments, in the cases where these are specifically provided as a result of a child’s medical condition, and expenditure on educational psychology services.

In addition to social care services, Carer’s Allowance is included in the health accounts, as it constitutes expenditure by government on funding household provision of long-term care, consistent with the SHA 2011 guidelines.

Other changes to the measure of government expenditure

  • As with the existing healthcare expenditure data, the health accounts make a deduction for education and training expenditure. Under the definitions of the System of Health Accounts 2011, expenditure on future workforce education and training is deducted from the health accounts, but not expenditure on current workforce development. The change in methodology from the old to new measure has resulted in a smaller deduction from healthcare expenditure for education and training costs.

  • Income received by the NHS from public authorities under the Compensation Recovery Scheme has been included in the health accounts measure of government expenditure.

  • As health accounts specifically relate to UK residents, payments made by the UK government to fund the care of eligible former UK residents living in other European Economic Area (EEA)4 nations and eligible dependents (in other EEA nations) of workers employed in the UK, are excluded from health accounts. Payments made by the UK government to other EEA nations to fund the care of UK residents who are injured or fall ill while temporarily in other EEA nations, are included in the health accounts.

  • The cost of healthcare provided in police custody (including police surgeons) is included in the health accounts.

  • Expenditure by elements of the Scottish and Welsh governments responsible for health, and the Healthcare, and Care and Social Services, Inspectorates in Wales are added to health accounts (equivalent bodies in the other UK nations are also included in health accounts, as they were in “Expenditure on Healthcare in the UK”).

  • Preventive healthcare spending by non-health government bodies is added to the health accounts. Elements of the spending of the Food Standards Agency, Health and Safety Executive, Drinking Water Inspectorate and transport authorities, relating to information campaigns, risk analysis and making regulations to protect public health, are included in the health accounts.

Changes to the measurement of healthcare insurance expenditure

Both the new health accounts and the old “Expenditure on Healthcare in the UK” data series measured private medical insurance, health cash plans and dental insurance. A number of additional elements of health insurance have been included in the health accounts, providing consistency with the SHA 2011 definitions:

  • self-insurance – schemes offered by employers to cover employees, where the employer assumes the risks associated with cover
  • dental capitation plans – dental cover plans where dentists set fees and a third party administers the cover
  • the healthcare element of travel insurance
  • the “Expenditure on Healthcare in the UK” data series included claims paid out by health insurers in household spending, as opposed to insurance spending, consistent with national accounts concepts; however, health insurance claims are categorised within the voluntary health insurance financing scheme in health accounts
  • Insurance Premium Tax (IPT) has been included in insurance expenditure in the health accounts

While the “Expenditure on Healthcare in the UK” data series included accident insurance in the insurance expenditure measure, accident insurance is excluded from health accounts.

Changes to the measurement of NPISH (non-profit institutions serving households) healthcare expenditure

The health accounts measure of NPISH expenditure differs from that used in the earlier “Expenditure on Healthcare in the UK” series, as it specifically measures charity expenditure funded through NPISH sources: voluntary donations, grants and investment income. In contrast, the previous “Expenditure on Healthcare in the UK” measure looked at all charity expenditure on healthcare, including that funded through client contributions (classed as out-of-pocket expenditure in health accounts) and purchases of care by public and NHS bodies (classed as government expenditure in health accounts). As with other areas of health accounts, the NPISH expenditure figures now also include long-term care services such as nursing homes.

Changes to the measurement of household out-of-pocket expenditure

In the “Expenditure on Healthcare in the UK” measure, out-of-pocket expenditure was part of household expenditure, along with claims from health insurance, which are reclassified to insurance expenditure in the health accounts. In the new series, claims from insurance are treated as part of voluntary health insurance, consistent with the SHA 2011 guidelines, and out-of-pocket spending is identified separately.

The most substantial addition to out-of-pocket spending in the health accounts is long-term care, which includes out-of-pocket purchases of residential and home-based care provided by the independent sector, and client contributions for local authority services. Additional changes are:

  • change in coverage of hospital spending; a change in source means that private hospital spending had been augmented with out-of-pocket spending on fertility clinics, private screening services and private specialists’ fees not covered by hospitals

  • change in the sources used to measure outpatient services; as the previous measure included insurance claims, this was not suitable for the new SHA financing breakdown – the new measure estimates out-of-pocket spending only and allows outpatient services to be split between SHA functional classifications

Additional financing types included in health accounts

Enterprise financing is an additional financing stream in health accounts, which was not included in the “Expenditure on Healthcare” data series. It covers arrangements where employers directly purchase healthcare for their employees, such as occupational health services. This financing scheme does not include the involvement of insurance-type schemes, meaning employer-provided health insurance and employer self-insurance fall under voluntary health insurance.

Compulsory health insurance is also included in the health accounts. This covers treatment costs recovered by NHS bodies from motor and employers’ insurance schemes where they are liable for the costs of injury.

Summary of changes between “Expenditure on Healthcare in the UK” and health accounts

Table 2 outlines the changes between the old “Expenditure on Healthcare in the UK” series and the new health accounts measure for total current healthcare expenditure.


  1. Capital expenditure, spending on the formation and acquisition of capital, is not included within the health accounts and so the discussion here is on current healthcare expenditure (although the consumption of capital is included in health accounts). ONS will continue to publish the capital expenditure measure used in Expenditure on Healthcare in the UK, alongside the current expenditure measure from that publication in a section of the health accounts publication.

  2. ADLs include activities such as bathing, dressing, grooming, mouth care, toileting, transferring between bed and chair, walking, climbing stairs, eating.

  3. IADLs include activities such as shopping, cooking, managing medications, using the phone and looking up numbers, doing housework, doing laundry, driving or using public transportation, managing finances.

  4. The EEA medical costs scheme covers the majority of EU member states plus Switzerland and Iceland.

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OECD, Eurostat, WHO (2011). A system of health accounts, OECD Publishing
ONS (2015), Expenditure on Healthcare in the UK: 2013
United Nations (2008), A System of National Accounts. United Nations, New York.

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Contact details for this Methodology

James Lewis
Telephone: +44 (0)1633 45 5323