Table 1

Errors made in the adjustment of costs for differences between the National Health Service (UK) and Kaiser Permanente (California).

	Adjustments made by Feachem et al

	NHS (UK)	KP (US)	Errors in adjustments	Effect on costs
Gross expenditures/revenue	£58 500 m	$14 200 m
Adjustments for differences in
Capital depreciation	−£1000 m	−$557 m	Cost of capital in the NHS underestimated by £2 billion.^a	Increase NHS costs
Profits (more correctly surplus)	£0	−$668 m	NHS equivalent of ‘profits’ is capital charges, consisting of depreciation and dividends payable on capital. The dividend element in NHS capital charges are not deducted from NHS costs.	Reduce KP costs
Adjustments for differences in benefits
Dental care	−£1190 m	−$10 m	Deduction for NHS (UK) dental costs refers to England only.	Increase NHS costs
Long-term psychiatric care	−£3250 m	$0	Costs for NHS long-term psychiatric care not found in reference cited.	Unknown
Other services			User charges for healthcare services not included in Kaiser's costs. No deduction from NHS costs for wider services not provided by Kaiser.	Reduce KP costs
				Increase NHS costs
Supplementary private health insurance	+£2630 m	$0	No adjustment to Kaiser's costs for supplementary insurance taken out by their members (up to 12% of members insure for care outside the health plan).21	Reduce KP costs
Adjustments for differences in special activities/circumstances
Indirect service obligations	−£3587 m	−$497 m	Indirect costs integral to a health system should not have been deducted: indirect costs borne by US public health authorities should have been added to Kaiser's costs.	Reduce KP costs
Administrative costs	£0	−$586 m	No deduction for NHS administrative costs. £1.9 billion should be deducted for England, with further deductions for Scotland, Wales and Northern Ireland.32	Reduce KP costs
				Increase NHS costs
Net expenditure after adjustments	£52 103 m	$11 900 m
Per capita expenditure	£876	$1951
Adjustment for differences in medical cost environment:
Conversion at rate of exchange	Multiply by 1.6 £876 to $1402	$0	Conversion of £ to $ should have been either in purchasing power parity at 1.52 or at market exchange rate of 1.6, but not both.	Increase NHS costs
Conversion at health sector	Multiply by 1.52		Purchasing power parity health sector cost conversion of 1.52 not found in reference cited.
Purchasing power parity	$1402 to $2130	$0
Adjustment for differences in populations
Age	−$260	$0	NHS age-specific per-capita costs used to reduce NHS costs by 12.2%. Age-specific per capita costs cited by the authors:18 Are out of date (1998–1999) Relate only to hospital and community health services, excluding the costs of prescribing and general medical services As quoted by the authors are lower than those in the reference	Increase NHS costs
Socioeconomic group	−$106	$0	NHS per capita costs reduced by 5% using data from a study of the family expenditure survey: Study mis-cited and attributed; did not contain a breakdown by socioeconomic status nor examine costs to the NHS20 Adjustment limited to people aged under 65 years, with no adjustment for those aged 65 years and over	Increase NHS costs

↵^aCapital charges of £2.6 billion31 plus expenditure on general practice premises of £0.3 billion32 plus revenue consequences of private finance initiative schemes of £0.1 billion,33 minus the £1 billion deducted by Feachem et al.1 KP = Kaiser Permanente; NHS = National Health Service.