IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Contractual Pitfalls in Capitated Primary Health Care: Sharing Random Demand Risk in New Zealand's Strategy

Listed author(s):
  • Howell, Bronwyn
Registered author(s):

    This paper uses the literature on the likely outcomes of the use of capitation contracts in primary health care to critique the arrangements in the New Zealand Primary Health Care Strategy (NZPHCS) introduced in 2002. The New Zealand arrangements provide significant challenges to achieving the desired goals of increased equity in the allocation of available resources according to health need behavioural changes towards more collaborative models of care delivery and an increased focus upon prevention and patient wellness instead of instances of illness. The single capitation instrument chosen to deliver the objectives is unusual in that the capitation funder does not meet the full costs of the commissioned care the independent private sector practitioners receiving capitation payments are able to charge the patient for any costs not met by the funder and the capitation incentive becomes increasingly sharp over time as the funder selectively prioritises different population groups to receive greater proportions of its subsidies. The discussion concludes that the NZPHCS use of capitation is unlikely to be helpful in achieving the desired objectives but is far more likely to lead to substantial increases in the cost of care relative to the previous system and distortions in sector interactions that will result in distributional outcomes diametrically opposed to the articulated objectives. If the desired behavioural changes amongst practitioners do occur this is far more likely to be as a consequence of non-price mechanisms in the NZPHCS than financial incentives.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://researcharchive.vuw.ac.nz/handle/10063/3965
    Download Restriction: no

    Paper provided by Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation in its series Working Paper Series with number 3965.

    as
    in new window

    Length:
    Date of creation: 2007
    Handle: RePEc:vuw:vuwcsr:3965
    Contact details of provider: Postal:
    ISCR, PO Box 600, Victoria University Wellington 6140, New Zealand

    Phone: +64 (4) 463 5562
    Web page: http://www.iscr.co.nz/
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as
    in new window


    1. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
    2. 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.
    3. 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.
    4. Joseph P. Newhouse, 1973. "The Economics of Group Practice," Journal of Human Resources, University of Wisconsin Press, vol. 8(1), pages 37-56.
    5. Crampton, Peter & Davis, Peter & Lay-Yee, Roy, 2005. "Primary care teams: New Zealand's experience with community-governed non-profit primary care," Health Policy, Elsevier, vol. 72(2), pages 233-243, May.
    6. 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, 03.
    7. Cutler, David M. & Zeckhauser, Richard J., 2000. "The anatomy of health insurance," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 11, pages 563-643 Elsevier.
    8. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    9. Danzon, Patricia M, 1997. "Tort Liability: A Minefield for Managed Care?," The Journal of Legal Studies, University of Chicago Press, vol. 26(2), pages 491-519, June.
    10. 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.
    11. 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.
    12. Howell, Bronwyn, 2005. "Restructuring Primary Health Care Markets in New Zealand: Financial Risk, Competition, Innovation and Governance Implications," Working Paper Series 3855, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    13. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:vuw:vuwcsr:3965. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Library Technology Services)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.