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.
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 incentives for insurers to limit their exposure to variations in patient health states by engaging in active patient pool selection.
The New Zealand scheme is complex, but closely resembles United States insurance-based, risk-rated managed care schemes. The key difference is that unlike classic managed care models, where provider remuneration is determined by the insurer, the historic right for general practitioners to autonomously set patient charges alters the fiscal incentives normally available to managed care organisations. Consequently, the insurance role is being devolved to individual service providers with very small patient pools, who must recoup the premium top-ups from insured individuals. Premium top-ups are being collected only from those individuals consuming care, in proportion to the number of times care is sought. Co-payments thus constitute perfectly risk-rated premium levies set by inefficiently small insurers, raising questions about the efficiency and equity of a 'universal' insurance system pooling total population demands and costs. The efficacy of using financial incentives to constrain costs and encourage innovation when providers retain the right to arbitrarily recoup costs directly from patients, is also questioned.
Initial evidence suggests that total costs are higher than initially expected, and prices to some patients have risen substantially under the NZPHCS. Limited competition and NZPHCS governance requirements mean current institutional arrangements are unlikely to facilitate efficiency improvements. System design changes therefore appear indicated.