Priority initiatives

30. The priority initiatives suggested below will implement the high level direction. As new money is made available, more resources will be targeted to some of the most needy first. The Government's overall share (and, consequently, influence) in primary health care will also increase. At the broadest levels, the priorities will be placed on extending provisions relating to the health needs of low income earners, those with high health needs as based on the NZ Deprivation Index, children and the elderly. The emphasis for 2002 will be on the first and second groups and policy for the other groups will be developed for progressive implementation from 2003 onwards.

Priority 1: High need populations

31. The most urgent need is to target new funding to low income people with high health needs as based on the NZ Deprivation Index. I intend to provide funding to:
    1. assist, where needed, with PHO establishment for primary providers covering these groups
    2. assist these PHOs to lower user charges for all to agreed maximum levels so that CSCs will no longer be needed for members of these PHOs. The Ministry of Health will work with relevant sector groups to determine the best mechanism for achieving this, to meet the goal of affordable health care
    3. assist these PHOs to address non-financial barriers to access, ensure care gets to those who need it, and link with other providers to deliver a range of services to meet population needs. This would include innovative and flexible models and settings for service delivery, wider and more effective roles for nurses in outreach and first contact care, and a wider range of health workers involved in service delivery in the primary care setting
    4. enable these PHOs to be paid in accordance with a formula that reflects their enrolled populations and their low patient charges.

Priority 2: Adjust subsidy rate for children under 6

32. As a short-term measure I propose to increase the general medical services subsidy for general practitioner services to children under six to adjust for inflation since the subsidy was first introduced in July 1997. This increase will apply to all general practitioners from 1 July 2002 and is expected to cost up to $8 million. This will help to maintain free or very low cost access for young children and signal the government's commitment and priority to extending free or low cost primary health care to include all children.

Priority 3: Progressively lowering the cost of access over future years

33. As more funding becomes available it will be applied gradually to extend low cost access. This will happen in two ways:
    1. by progressively increasing the number of PHOs that receive additional funding for low-cost care for all their patients by lowering the threshold for qualifying as a high need population
    2. increasing subsidy levels through the national capitation formula for PHOs so that user charges can be reduced for the rest of the population. This process will again need to be staged and I propose to lower costs first for school age children, then the elderly and others with high health needs.

    Progressive reductions in the reliance on income testing, and therefore the CSC, will be achieved along with gradually more affordable services.

Priority 4: Sustainable rural services

34. Another high priority issue is the sustainability of primary health care in rural areas. I propose to introduce measures that will support the introduction of the Primary Health Care Strategy in rural areas. These will include providing PHOs that cover rural areas with a flexible resource so that, in concert with the DHB, they can reach the best local arrangements. Measures will need to address workforce retention and support for the primary health care team.

Priority 5: PHOs across the country

35. While the top priority will be given to PHOs that include the most needy in their enrolled populations, the aim is to implement the Primary Health Care Strategy across the whole country and eventually to make low-cost access available to all. I will make this clear from the outset and encourage the establishment of PHOs across the country, although it will not be possible to fund them all to provide low cost access initially.

36. PHOs in areas where the enrolled populations do not reach the high needs level will initially be funded to extend their services to include population health services to improve and maintain health. They will also receive funding according to the number of low-income people with high health needs as based on the NZ Deprivation Index, so that they can work to address health inequalities. Their services will be funded according to their enrolled population and funding levels may not at first allow for a reduction in patient fees. The move to population-based funding will allow for the development of alternative modes of practice and encourage better utilisation of all practitioners. Team approaches to care delivery have been shown to increase the range, accessibility and appropriateness of services.

Priority 6: Changes to Community Services and High Use Health Card

37. The changes I propose mean that the CSC and High User Health Card (HUHC) will gradually be used less and less as PHOs serving high need populations are funded to charge all their enrolled patients the same low fees regardless of income. However, initially these arrangements will not be very widespread. Outside these high need enrolled populations there will still be the need to ensure that individuals and families on low-incomes can afford care. The CSC and HUHC will continue to be needed to identify individuals entitled to lower charges because of their income.

38. As discussed in paragraph 27 above, I plan to make changes to the CSC to improve its effectiveness until such time as it is no longer needed. The specific changes were listed above. Improvements in HUHC will also be implemented.

Application of new funding

39. A key part of my proposal is to improve health and reduce inequalities by making sure the Primary Health Care Strategy is put into place. To assist this to happen, funding for new services and lower cost access (apart from the adjustment to the under-sixes subsidy) will be made available only to PHOs (and associated providers). This will establish strong incentives for both providers and consumers to join PHOs.

40. Other general principles applying to new funding are that:
    1. PHOs will be funded according to the characteristics and needs of their enrolled populations rather than the number of services supplied;
    2. service agreements with PHOs will include agreements about the services to be provided and their cost to patients (as noted above, the Ministry will work with relevant sector groups on the best ways to achieve affordable services, particularly for low income New Zealanders);
    3. I will monitor DHB performance in improving affordability of and access to primary health care services.

Risks from continuing variability of user charges

41. Over the short term the scheme I am proposing to lower cost barriers will not treat all like individuals in the same way. A person's ability to get publicly-funded cheaper access to care will depend upon where they live, whether there is a local PHO that meets the requirements for higher funding, and whether they enrol in that PHO. Individuals who enrol in a PHO covering identified high deprivation areas will benefit from public funding that allows them to get cheaper access; similar individuals enrolling in a PHO covering less deprived areas may continue to pay higher fees until low cost access can be applied nationally. These variations may be criticised as unfair by both providers and patients.

42. In response to this, it is important to recognise that funding arrangements and user charges already vary considerably around the country. For example, capitation formulae have varied across regions, and have existed alongside fee-for-service funding arrangements. With respect to user charges, some providers, for example, require minimal contributions from patients, while in some practices, particularly in urban areas, charges for a GP visit can be up to $50.

43. Uneven funding and charges will be more acceptable to individuals and to providers if they can be clearly seen as a transitional step to a more equitable system in the longer term. This is why it is also important to state that the Government's ultimate aim is to move to a system where everyone gets affordable access to primary health care.

44. When I report back in April seeking agreement to more detailed proposals and costings, I will also report on strategies for managing these implementation risks.

CONSULTATION

45. Comments on this paper have been received from Treasury, DPMC, Te Puni Kokiri, Ministry of Pacific Island Affairs, Ministry of Women's Affairs, and the Ministry of Social Development. Changes have been included in the paper that reflect most of the views expressed by these agencies.

FINANCIAL IMPLICATIONS

46. Agreement to a funding path for these proposals will be sought in a Cabinet paper on the Health Funding Package in February 2002. Subject to Cabinet agreeing the high level approach set out in this paper, I will present a further paper setting out more detail, and costings for the initiatives described above, for agreement in April 2002. I expect to be seeking agreement for the allocation of around $50 million in 2002/03 - this is the indicative level included in the Health Funding Package for the first year of the implementation of the Primary Health Care Strategy.

LEGISLATIVE IMPLICATIONS

47. There are no legislative implications.

HUMAN RIGHTS

48. These proposals involve funding PHOs according to the ethnicity of their enrolled populations because of the known associations between health service need and ethnicity. However reduced charges for an individual will not depend on their ethnicity. Different charges according to age are technically discriminatory but are clearly permissible under the Bill of Rights as a matter of public policy.

REGULATORY IMPACT AND COMPLIANCE COST STATEMENT

49. A regulatory impact statement is not required. The proposals include changes that will reduce some compliance costs for providers and I will fund the extra information costs associated with the move to population funding.

GENDER IMPLICATIONS

50. The funding formula that will be used to fund PHOs will recognise the higher needs for service of women of reproductive age. The funding formula and the Primary Health Care Strategy's emphasis on meeting population needs also mean more support and funding will reach women since they predominate among carers of young children and the elderly.

PUBLICITY

51. I propose to publicise in general terms the Government's plans to fund the implementation of the Primary Health Care Strategy and better access to services.