IDEAS home Printed from https://ideas.repec.org/a/acb/agenda/v15y2008i1p29-48.html
   My bibliography  Save this article

Capitation and Financial Risk Allocation in New Zealand’s Primary Health Care Sector: The Perverse Consequences of Neglecting Financial Risk Allocation

Author

Listed:
  • Bronwyn Howell

Abstract

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.

Suggested Citation

  • Bronwyn Howell, 2008. "Capitation and Financial Risk Allocation in New Zealand’s Primary Health Care Sector: The Perverse Consequences of Neglecting Financial Risk Allocation," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 15(1), pages 29-48.
    • Handle: RePEc:acb:agenda:v:15:y:2008:i:1:p:29-48
    as

    Download full text from publisher

    File URL: http://press-files.anu.edu.au/downloads/press/p87341/pdf/15-1-AN-2.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zeckhauser, Richard, 1970. "Medical insurance: A case study of the tradeoff between risk spreading and appropriate incentives," Journal of Economic Theory, Elsevier, vol. 2(1), pages 10-26, March.
    2. Ching‐To Albert Ma & Michael H. Riordan, 2002. "Health Insurance, Moral Hazard, and Managed Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(1), pages 81-107, March.
    3. Hefford, Martin & Crampton, Peter & Foley, Jon, 2005. "Reducing health disparities through primary care reform: the New Zealand experiment," Health Policy, Elsevier, vol. 72(1), pages 9-23, April.
    4. Ellis, Randall P. & McGuire, Thomas G., 1986. "Provider behavior under prospective reimbursement : Cost sharing and supply," Journal of Health Economics, Elsevier, vol. 5(2), pages 129-151, June.
    5. Howell, Bronwyn, 2007. "Financial Risk in Primary Health Care Contracting: Implications for Sector Structure, Ownership and Outcomes," Working Paper Series 3964, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    6. Dranove, David & Satterthwaite, Mark A., 2000. "The industrial organization of health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 20, pages 1093-1139, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:vuw:vuwscr:19064 is not listed on IDEAS
    2. Howell, Bronwyn, 2007. "Contractual Pitfalls in Capitated Primary Health Care: Sharing Random Demand Risk in New Zealand's Strategy," Working Paper Series 19064, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. Howell, Bronwyn, 2007. "Contractual Pitfalls in Capitated Primary Health Care: Sharing Random Demand Risk in New Zealand's Strategy," Working Paper Series 3965, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    4. repec:vuw:vuwscr:19063 is not listed on IDEAS
    5. Howell, Bronwyn, 2007. "Financial Risk in Primary Health Care Contracting: Implications for Sector Structure, Ownership and Outcomes," Working Paper Series 19063, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    6. Howell, Bronwyn, 2007. "Financial Risk in Primary Health Care Contracting: Implications for Sector Structure, Ownership and Outcomes," Working Paper Series 3964, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. Rehn, Eric, 2007. "Public Hospitals - Incentives and Organization," Working Papers 2007:13, Lund University, Department of Economics, revised 01 Apr 2008.
    8. Howell, Bronwyn, 2006. "Paying for the Hospital Waiting List Cull at the GP's Surgery: The Changing Locus of Financial Risk-Bearing in New Zealand's Primary Healthcare Sector," Working Paper Series 3842, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    9. Liu, Ting & Ma, Ching-to Albert, 2013. "Health insurance, treatment plan, and delegation to altruistic physician," Journal of Economic Behavior & Organization, Elsevier, vol. 85(C), pages 79-96.
    10. Brandon Pope & Abhijit Deshmukh & Andrew Johnson & James Rohack, 2014. "Multilateral Contracting And Prevention," Health Economics, John Wiley & Sons, Ltd., vol. 23(4), pages 397-409, April.
    11. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    12. Patricia M. Danzon & Jonathan D. Ketcham, 2004. "Reference Pricing of Pharmaceuticals for Medicare: Evidence from Germany, the Netherlands, and New Zealand," NBER Chapters, in: Frontiers in Health Policy Research, Volume 7, pages 1-54, National Bureau of Economic Research, Inc.
    13. Kowalski, Amanda E., 2015. "Estimating the tradeoff between risk protection and moral hazard with a nonlinear budget set model of health insurance," International Journal of Industrial Organization, Elsevier, vol. 43(C), pages 122-135.
    14. Angelo Antoci & Alessandro Fiori Maccioni & Paolo Russu, 2016. "The Ecology of Defensive Medicine and Malpractice Litigation," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-15, March.
    15. Godager, Geir & Wiesen, Daniel, 2013. "Profit or patients’ health benefit? Exploring the heterogeneity in physician altruism," Journal of Health Economics, Elsevier, vol. 32(6), pages 1105-1116.
    16. Jihong Ding & Minglai Zhu, 2009. "A theoretical investigation of the reformed public health insurance in urban China," Frontiers of Economics in China, Springer;Higher Education Press, vol. 4(1), pages 1-29, March.
    17. Stenbacka Rune & Tombak Mihkel, 2018. "Optimal Reimbursement Policy in Health Care: Competition, Ownership Structure and Quality Provision," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(1), pages 1-19, January.
    18. Pierre Martinon & Pierre Picard & Anasuya Raj, 2018. "On the design of optimal health insurance contracts under ex post moral hazard," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 43(2), pages 137-185, September.
    19. Hennig-Schmidt, Heike & Selten, Reinhard & Wiesen, Daniel, 2011. "How payment systems affect physicians' provision behaviour--An experimental investigation," Journal of Health Economics, Elsevier, vol. 30(4), pages 637-646, July.
    20. Fengrong Liu & Jiayu Chen & Chaozhu Li & Fenghui Xu, 2023. "Cost Sharing and Cost Shifting Mechanisms under a per Diem Payment System in a County of China," IJERPH, MDPI, vol. 20(3), pages 1-12, January.
    21. James M. Malcomson, 2004. "Health Service Gatekeepers," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 401-421, Summer.
    22. repec:vuw:vuwscr:18937 is not listed on IDEAS
    23. Martin Gaynor & Deborah Haas-Wilson & William B. Vogt, 2000. "Are Invisible Hands Good Hands? Moral Hazard, Competition, and the Second-Best in Health Care Markets," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 992-1005, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:acb:agenda:v:15:y:2008:i:1:p:29-48. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/feanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.