Funding Populations and Paying Providers: The Role of Financial Risk in the New Zealand Primary Health Care Strategy (original) (raw)
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RePEc: Research Papers in Economics, 2005
New Zealand's primary health care sector has undergone fundamental changes under the Primary Health Care Strategy announced in 2001 and implemented from 2002. The strategy replaces historic fee-for-service general practitioner subsidies with population-based capitation subsidies, and restructures the key contracting relationships within the sector. Primary Health Organisations take on the responsibilities for contracting with services providers to deliver services, and for contracting with District Health Boards in order to secure funding and ascertain service type and quality requirements for the services delivered to patients. This paper uses the framework of economic contracts to analyse the effects of the changes brought about by the changes to primary health care arrangements in New Zealand. The paper finds that the change in arrangements is likely to lead to higher costs of financial risk and reduction in the level of competition between providers of health care services. When combined with the governance arrangements specified in the strategy, these effects are likely to result in reductions in efficiency in the primary health care sector relative to the arrangements prevailing prior to the change, and are unlikely to lead to the levels of innovation in service delivery anticipated by the strategy. These findings draw into question the extent of value for money that will be delivered from the substantial increases in government funding applied to the new strategy.
Using analysis of the management of 'random' and 'controllable' risk in capitation contracts, this paper critiques the arrangements in the New Zealand Primary Health Care Strategy (NZPHCS) introduced in 2002. Total system costs have undoubtedly risen under the mixed capitation model adopted, relative to fee-for-service. By requiring only those treated to pay all costs not factored into the government's prospective capitation payments, the burden of unanticipated risk-management costs falls disproportionately on the sickest patients. Rather than resources being allocated on the basis of health need, the sickest individuals bear a disproportionate share of the cost of random demand shocks.
Agenda: a journal of policy analysis and reform, 2008
Using analysis of the management of 'random' and 'controllable' risk in capitation contracts, this paper critiques the arrangements in the New Zealand Primary Health Care Strategy (NZPHCS) introduced in 2002. Total system costs have undoubtedly risen under the mixed capitation model adopted, relative to fee-for-service. By requiring only those treated to pay all costs not factored into the government's prospective capitation payments, the burden of unanticipated risk-management costs falls disproportionately on the sickest patients. Rather than resources being allocated on the basis of health need, the sickest individuals bear a disproportionate share of the cost of random demand shocks.
Restructuring Primary Health Care Markets in New Zealand: from Welfare Benefits to Insurance Markets
Australia and New Zealand Health Policy, 2005
Background New Zealand's Primary Health Care Strategy (NZPHCS) was introduced in 2002. Its features are substantial increases in government funding delivered as capitation payments, and newly-created service-purchasing agencies. The objectives are to reduce health disparities and to improve health outcomes. Analysis The NZPHCS changes New Zealand's publicly-funded primary health care payments from targeted welfare benefits to universal, risk-rated insurance premium subsidies. Patient contributions change from fee-for-service top-ups to insurance premium top-ups, and are collected by service providers who, depending upon their contracts with purchasers, may also be either insurance agents or risk-bearing insurance companies. The change invokes the tensions associated with allocating risk-bearing amongst providers, patients and insurance companies that accompany all insurance-based funding instruments. These include increases in existing incentives for over-consumption and new...
This paper uses the literature on the likely outcomes of the use of capitation contracts in primary health care to critique the arrangements in the New Zealand Primary Health Care Strategy (NZPHCS) introduced in 2002. The New Zealand arrangements provide significant challenges to achieving the desired goals of increased equity in the allocation of available resources according to health need, behavioural changes towards more collaborative models of care delivery and an increased focus upon prevention and patient wellness instead of instances of illness. The single capitation instrument chosen to deliver the objectives is unusual in that the capitation funder does not meet the full costs of the commissioned care, the independent, private sector practitioners receiving capitation payments are able to charge the patient for any costs not met by the funder, and the capitation incentive becomes increasingly sharp over time as the funder selectively prioritises different population groups to receive greater proportions of its subsidies. The discussion concludes that the NZPHCS use of capitation is unlikely to be helpful in achieving the desired objectives, but is far more likely to lead to substantial increases in the cost of care relative to the previous system, and distortions in sector interactions that will result in distributional outcomes diametrically opposed to the articulated objectives. If the desired behavioural changes amongst practitioners do occur, this is far more likely to be as a consequence of non-price mechanisms in the NZPHCS than financial incentives.
In 2002, New Zealand's government-funded primary health care payments were changed from a fee-for-service basis to a capitation basis as part of a change towards a populationbased, managed care style of primary health care provision. However, some specific differences characterise the New Zealand system. Government payments meet only a fraction of the costs of care, and as no provisions have been made for alternative cost recovery, all additional costs are paid only by individuals consuming primary care. The managed care entities have been established as nonprofit entities without risk reserves, so pass on capitation payments to general practitioners, who retain the right to charge patients for costs not covered by the capitation payments, albeit subject to some weak forms of government oversight and potential regulation. Moreover, government plans on increasing capitation payments progressively, with commensurate requirements that patient payments be reduced for those patients receiving increased capitation funding.
A Risky Business: Moving New Zealand Towards a Managed-Care Health System
2002 saw perhaps the most fundamental change to New Zealand's primary healthcare system in the last seventy years: the New Zealand Primary Healthcare Strategy (NZPHCS). With this strategy, New Zealand moved to a system where the insurance role is vested in some 80 predominantly provider-owned PHOs-and where variation in patient demand within PHOs is managed by individual GPs who have become 'de facto' insurers. Four years on from this historic change, Bronwyn Howell analyses some of the key issues that will determine the success of the new strategy. In this monograph, she describes the complex interaction between healthcare markets and insurance that lies at the heart of the new arrangements. At issue is how the NZPHCS will manage the trade-off between patient costs and choice of provider, the power of providers to set fees, the interaction between ownership of PHOs and governance arrangements, and equity issues. One of the key risks identified in Bronwyn's analysis is that the current 'interim' arrangements will become entrenched, requiring further legislative change to bring about the NZPHCS's vision of integrated care. 1. The Birth of a Strategy 2. A Managed-Care Model 3. Some Economics of Healthcare Markets 4. The NZPHCS Managed-Care Scheme 5. Competing for Governance 6. For the Future
The impact of funding changes on the implementation of primary health care policy
Primary Health Care Research & Development, 2012
To ascertain how new funding arrangements, introduced in New Zealand's 2001 Primary Health Care (PHC) Strategy, have impacted on the expansion of nurses' role in general practice. Background: Nurses are central to the new policy that was designed to improve the health status of New Zealanders and reduce inequalities in health. Nurses were to be a crucial part of the PHC team, expanding their current roles to provide increased access to appropriate services. This paper investigates how the new funding arrangements, introduced as part of the policy, have impacted on the expansion of nurses' roles and consequently the realisation of the policy goals. Methods: Semi-structured interviews were undertaken with 128 key stakeholders five years after the introduction of the PHC Strategy, and surveys were completed by practice nurses, general practitioners and practice managers in purposively selected practices within the 20 participating Primary Health Organisations. Findings: There has been substantial growth in the development of nursing roles for some nurses in general practice; however, this expansion has not been universal and one of the main reasons for this is the way funding devolves at the practice level. One of the consequences of the policymakers not taking into account the business model of the majority of general practices, is the resulting overarching goal of the strategy not being realised, and inequalities in health status remaining.
Financial and clinical risk in health care reform: a view from below
Journal of Health Services Research & Policy, 2012
Objectives: This paper examines how the interaction between financial and clinical risk at two critical phases of health care reform in England has been experienced by frontline staff caring for vulnerable patients with long term conditions.