Contractual Pitfalls in Capitated Primary Health Care: Sharing Random Demand Risk in New Zealand's Strategy
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.
|Date of creation:||2007|
|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/
More information through EDIRC
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.:
- 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
- Martin Gaynor & William B. Vogt, "undated". "Antitrust and Competition in Health Care Markets," GSIA Working Papers 1999-E29, Carnegie Mellon University, Tepper School of Business.
- Martin Gaynor & William B. Vogt, 1999. "Antitrust and Competition in Health Care Markets," NBER Working Papers 7112, National Bureau of Economic Research, Inc.
- 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.
- 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.
- Joseph P. Newhouse, 1973. "The Economics of Group Practice," Journal of Human Resources, University of Wisconsin Press, vol. 8(1), pages 37-56.
- 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.
- 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.
- Ching-to Albert Ma & Michael Riordan, 1997. "Health Insurance, Moral Hazard, and Managed Care," Papers 0080, Boston University - Industry Studies Programme.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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)
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 references are entirely missing, you can add them using this form.