46. The following agencies were consulted in preparation of this paper: the Health Funding Authority, Crown Company Monitoring Advisory Unit, Department of the Prime Minister and Cabinet, The Treasury, Te Puni Kokiri, and the State Services Commission.

47. Full identification of one-off costs and ongoing fiscal impacts of the proposed structural changes will be reported by 31 March 2000 [Cab 00 M2/4 refers].

48. The net financial implications of proposals in this paper relate principally to the level of investment needed to equip DHBs with the required capability and ongoing transactions (including monitoring and co-ordination) costs and administrative costs. These include costs and savings from:
    • changes in the nature, quantity, and frequency of agreements between DHBs and providers, and between DHBs and the centre:
    • more collaboration and common service agencies may reduce transactions costs
    • coordination costs may be greater in a more devolved sector
    • 22 DHBs will increase overall monitoring costs (assuming the nature and scope of Crown health assets monitoring activity stays largely unchanged)
    • changes in administrative costs in terms of the number of staff and infrastructure required by DHBs, and the size of the central administration (the sum of the Ministry of Health, HFA, CCMAU).

LEGISLATIVE IMPLICATIONS

49. The legislation required forms part of the New Zealand Public Health Services and Health Reforms (Transfer and Transitions Provisions) Bill.

COMPLIANCE COSTS STATEMENT

50. The proposals do not have compliance costs implications beyond those identified as part of financial implications above.

REGULATORY IMPACT STATEMENT

51. A Regulatory Impact Statement is attached.

HUMAN RIGHTS IMPLICATIONS

52. The proposals do not have Human Rights Act 1993 implications.

PUBLICITY

53. Publicity on matters related to this paper is managed as part of the Communications Strategy that forms part of the wider work on health and disability change.

CABINET:

1. agreed that the objective is that District Health Boards (DHBs) will have responsibility for making decisions on the mix, level, and quality of health and disability services, within the parameters of the New Zealand Health Strategy, Disability Strategy and nationwide minimum service coverage and safety standards (such as the Health and Disability Code of Rights and existing minimum quality standards);

2. agreed that the DHBs' environment will initially be highly regulated and prescribed but will then be progressively relaxed as each DHB is progressed towards the maximum envisaged degree of autonomy;

3. agreed that the role of the Minister of Health, assisted by the Ministry of Health and in consultation with the DHBs, will be to:
   1. define strategic directions for the health and disability sector;
   2. define nationwide minimum service coverage and safety standards;
   3. define the operating environment;
   4. enter into funding agreements with DHBs containing the DHB-specific agreed performance targets;
   5. exercise reserve powers (such as the ability to direct DHBs or appoint a commissioner in case of repeated performance failures [SPH (00) M 6/4 refers];

4. noted that an outline of the DHB development framework is part of the 30 March 2000 report-back on DHB accountability arrangements to the Ad Hoc Ministerial Committee;

5. agreed that the Ministry of Health, in consultation with officials, report to the Minister of Health by November 2000 with a detailed DHB development framework, setting out the criteria and process by which individual DHBs will move to the maximum degree of autonomy;

6. directed the Health Sector Development Officials Group to report back to the Ad Hoc Ministerial Committee by 30 June 2000 on the process for establishing DHBs, addressing issues such as internal DHB structural arrangements and the initial level of DHB autonomy;

7. directed the Health Sector Development Officials Group to report back to the Ad Hoc Ministerial Committee by the end of April 2000 with in-principle advice on a more detailed service-by-service division of roles, to inform the 30 June 2000 report back on funding arrangements.

REGULATORY IMPACT STATEMENT

Objective

1. The policy objectives are:
   • to improve the health and independence of the population and reduce disparities
   • to improve health and disability service delivery
   • to increase community say over health and disability services
   • to encourage a collaborative health and disability sector
   • to reduce administrative costs.

2. The objective of this paper is to clarify the roles of DHBs and the Minister and Ministry of Health, and in particular how much autonomy fully capable DHBs would be expected to have when they perform well.

Statement of the problem and the need for action

3. Given the objectives and functions of DHBs, the issue is how much decision-making authority DHBs should have, which decisions are to be made by the Minister of Health and which decisions are shared.

4. Clarity on what degree of autonomy is envisaged for DHBs will assist in the more detailed division of roles between DHBs and the Ministry of Health.

Feasible options to achieve desired objectives

5. The paper sets out two main scenarios between the extremes of a very centralised and a fully autonomous health and disability sector. The key differences are in:
   • whether the Minister of Health or DHBs decide on the detailed mix, level, and quality of health and disability support services:
   • whether DHBs evolve to a state of autonomy, or whether all DHBs will start from the maximum degree of autonomy envisaged by Ministers.

6. The proposals are that:
   • DHBs will be responsible for deciding on the mix, level, and quality of health and disability services, within the parameters of the New Zealand Health Strategy, NZ Disability Strategy and nationwide minimum service coverage and quality standards (such as the Health and Disability Code of Rights and existing minimum quality standards)
   • DHBs will evolve towards the maximum desired degree of autonomy.

7. The proposal defines the Minister of Health's role and this must be included in the New Zealand Public Health Services Bill. No satisfactory non-regulatory mechanism exists which would achieve this.

8. The degree of autonomy for DHBs flows from the Minister of Health's role. Achievement of the maximum desired level of autonomy and the specification of a development path do not require regulatory measures.

Regulatory measures

9. A definition of the Minister of Health's role must be included in the New Zealand Public Health Services Bill to ensure clarity of roles and responsibilities in the publicly funded health and disability sector.

Statement of the net benefits of the proposals

10. The comparison of the main advantages and disadvantages of shifting decision-making authority along the spectrum from the centre to the DHBs, shows that it:
    • decreases the Minister's role in detailed decisions if DHBs perform well, and increasingly emphasises the Minister's role as strategic direction setter
    • decreases the leverage of the Minister of Health, but increases the role and responsibility of the Board and the ability of the community to be involved in decisions about local services
    • increases DHB staff and infrastructure (and reduces the size of the Ministry of Health) and the need for co-ordination across districts which may increase the costs over a system where activities are carried out centrally, but also increases the likelihood that services are tailored to local needs and preferences and are better co-ordinated within districts
    • decreases the likelihood that there is nationwide consistency in who gets what for all health and disability services, but increases the likelihood that the service mix reflects local values and is targeted at local needs
    • reduces central control over detailed fiscal management but increases local awareness of, and responsibility for, making trade-offs within a budget.

11. On balance, the benefits of allowing DHBs to move as close to full autonomy as possible, subject to certain nationwide minimum requirements, are expected to be greater than the disadvantages.

12. The benefits of DHBs evolving over time to the maximum state of autonomy envisaged are that it:
    • helps manage the substantial health outcome risks of under-performance by inexperienced Boards
    • avoids the potential that some DHBs have expectations placed on them which they will fail to meet (which would be demotivating)
    • allows for the inevitable variation among DHBs in developing their capability to carry out the full range of roles.

13. The disadvantage is that it:
    • introduces a risk that responsibility may not be devolved at all (which would lead to disillusion in DHBs and reduced community involvement).

14. On balance the advantages from an evolutionary approach outweigh the disadvantages.

Consultation

15. The following agencies were consulted in preparation of the Cabinet paper: the Health Funding Authority, Crown Company Monitoring Advisory Unit, Department of the Prime Minister and Cabinet, The Treasury, Te Puni Kokiri, and the State Services Commission.