Prior to the introduction of the PHCS, the New Zealand government provided partial, targeted, fee-for-service subsidies for visits to general practitioners (GPs), with around half the New Zealand population eligible for such support. Access to subsidised care was provided for all children under six years of age, with subsidy rates ($32.50 per visit in 2002) expected to cover the full cost of services provided to children. For young people aged 6–17 and for adults, partially subsidised care was available to those with subsidy cards, either a community services card (CSC), available to those families on lower incomes, or a high user health card (HUHC), available for people who had an on-going health condition and who had visited the GP 12 or more times in the previous 12 months. For young people, subsidies of $15 and $20 were available respectively for those with and without subsidy cards; for adults, subsidies of $15 per visit were available for those with cards. In most cases, people with subsidy cards also paid a fee to their primary health care provider. Adults without a subsidy card paid the full cost of primary health care themselves, which could vary, at the GP's discretion, from nothing to around $60 for a standard GP consultation in 2002 before the Strategy began to be implemented.
This approach based on fee-for-service government subsidies coupled with patients paying unregulated fees has been criticised for many years, particularly on the grounds that it contributed to poor access to first contact care for some groups in the population, arising from financial, as well as cultural and other barriers [4
]. Surveys undertaken by the Commonwealth Fund in 1998 and 2001, for example, found that 20% of New Zealanders reported financial barriers to getting primary medical care, with statistically significantly higher rates for those on below-average incomes [10
]. The New Zealand Health Survey showed that 12% of New Zealanders reported that they needed to see a GP, but did not do so in 2002/03, 48% of these due to the cost of a GP consultation. The rate of unmet need was higher for particular groups in the community, such as Maori (21%) and Pacific groups (17%) and those in lower socio-economic areas (quintiles 4 and 5 14% and 15%, respectively) [12
The Primary Health Care Strategy aims to achieve a new vision of primary care over five to ten years in which, "people will be part of local primary health care services that improve their health, keep them well, are easy to get to and co-ordinate their ongoing care" and which, "will focus on better health for a population and actively work to reduce health inequalities between different groups" [1
Six key policy directions support the vision: work with local communities and enrolled populations; identify and remove health inequalities; offer access to comprehensive services to improve, maintain and restore people's health; co-ordinate care across service areas; develop the primary health care workforce; and continuously improve quality using good information [1
Key priorities for early action were to reduce barriers, particularly financial barriers, to the use of services for the population groups with the greatest health need; support the development of PHOs; encourage multi-disciplinary approaches to services and decision-making; support the development of services by Maori and Pacific providers; and educate the public about enrolment and PHOs [1
In terms of the funding of primary health care, the PHCS signals a move away from a targeted approach where the government only provides funding to support access to primary health care for some New Zealanders to a more universal approach where all New Zealanders are eligible for some public funding for primary health care. To ensure that the new funding set aside for the PHCS was more likely to go initially to those most in need, the government chose to create two forms of funding – known as Access and Interim funding. Access PHOs generally served higher needs population, and were defined as those PHOs where more than 50% of the enrolled population was Maori, Pacific, or from lower socio-economic areas. All other PHOs were Interim PHOs.
PHOs are funded for first contact services via a funding formula which estimates the average number of expected primary health care visits per annum for different age groups, and, since 2002, has paid a base capitation amount of $25 per expected visit per enrolee (there are also adjustments each year to maintain the value of the subsidies). At first, Access PHOs were funded at higher capitation rates than Interim PHOs. Since 2003, the government has provided further funding, gradually increasing the capitation payment rates to Interim PHOs for particular groups in the population to the rates paid for those in Access PHOs. New funding was provided to Interim PHOs, for those aged 6–17 years of age (from 1 October 2003), those aged 65 and over (from 1 July 2004), those aged 18–24 from 1 July 2005, those aged 45–64 from 1 July 2006, and those aged 25–44 from 1 July 2007.
It was agreed that GP practices would be able to continue to set their own fees, even as the government rolled out the new funding for primary health care services. New Zealand competition law requires practices to not collude in setting patient fees. This means that practitioners have, so far, retained the right to set their own fees and thereby shape their incomes, and it also maintains a degree of competition between GPs in terms of the remaining fees faced by patients. As a result, fees continue to vary between practices. However, the government also stated that it expected that its increased capitation payments would be reflected in low or reduced costs to patients [13
]. In practice, this policy was implemented through discussions between Ministry of Health officials, District Health Board (DHB) staff and PHO staff, and local PHO informal negotiations with GPs.
In Access PHOs, these discussions focused on setting 'usual' fees within specific communities and were informed by the Ministry's view that a 'low' fee should generally be a zero fee for those aged six years and under; $7–$10 for those aged 6–17; and $15–$20 for adults. In Interim PHOs and practices, for the roll out of new funding for those aged 6–17 years of age, there was a signalled desire for fees to be reduced in line with the increase in subsidies (ie a $5 increase for those with subsidy cards; $10 for those without subsidy cards). In the July 2004 roll out of new funding for those aged 65 years and over, it was expected that PHOs would reduce their charges for those people without subsidy cards by $25 and for those with subsidy cards by $10. In addition, all those eligible for the new, higher subsidy levels also became eligible for cheaper pharmaceutical services – with the patient contribution for fully subsidised items falling to $3 per prescription item.
In October 2006, a further change was made to the funding levels for PHOs, such that all those PHOs offering very low cost access (ie very low fees) became eligible for even higher levels of subsidies. At October 2006, this required zero fees for children under 6 years; a $10 maximum for children 6–17 years and a $15 maximum for all adults 18 years and over. Additional funding was provided to practices agreeing to provide 'very low cost access' from October 2007, with the aim of keeping child visits free, visits for those aged 6–17 at no more than $10.50 and adult fees at a maximum of $15.50 [14
]. In January 2008, capitation payments for visits for children were increased by $6 to $45.70 where PHOs and practices agreed not to charge patients for child visits [14
A number of other funding sources are also available for primary health care. In response to concerns that some New Zealanders with high needs, but not in Access PHOs, might continue to miss out on higher subsidies while the new funding was rolled out, and because GPs did not wish to manage the full financial risk of chronic illness from their publicly funded capitation payment and private user fees, a separate funding arrangement was established for those with chronic illnesses. Called Care Plus, this funding is targeted towards individuals who need to visit their GP or practice nurse often, due to significant chronic conditions or a terminal illness. Additional funding has been provided to support rural practice. The government has also introduced a performance management programme and funding to support clinical governance and continuous quality improvement in primary health care. Some PHOs have had further funding to support programmes to reduce inequalities, to promote innovations in nursing services, and to promote innovations in primary mental health care services [15
Overall, the government has committed an additional $2.2 billion over the seven years from 2002/03 for implementation of the Strategy. This is a significant injection of funding for primary health care, providing around $300 million additional new funding per annum on top of an annual spend on general practitioner services of about $337 million in 2002/03 [16