Rural adjuster factor in funding differences

A south Canterbury person attracts about $40 more health funding a year than someone living in Southern District Health Board's area, to compensate for providing services in a rural setting.

Information released to the Otago Daily Times under the Official Information Act shows that last financial year, the population-based funding formula allocated $71.82 per person for what is called the "rural adjuster" in South Canterbury, compared with $30.21 in Southern.

This information is contained in a letter from National Health Board director Chai Chuah in April last year in response to queries raised by Southern's chief executive Brian Rousseau.

For at least the past two years, Mr Rousseau had been critical of population-based funding (PBF) as it affected Southern in the areas of elective surgery, allowance for rurality and mental health funding.

In a March 2010 email to Mr Chuah, he questioned the differences between the then Otago board and South Canterbury, asking what could "possibly justify a 13.5% difference in funding".

Similarly, he asked why there was a 11.8% difference between Southland and Taranaki.

"Maybe it is time to lift the lid on the PBF formula! I am not sure what is so secretive about it anyway ... you can actually reverse engineer it if you tried!"

Mr Chuah provided information showing what was taken into account when setting the formula, but it did not spell out how the figures relating to each part of the formula were calculated.

The rural adjuster was made up of seven parts - the costs of inter-hospital transfers, delivering community services, providing small hospitals, governance, providing services to offshore islands, rural GP payments, and travel and accommodation for patients.

The figures provided by Mr Chuah show that the rural adjuster for people in the old Southland board area last year would also have been lower than South Canterbury's at $54.72.

Otago's rate would have been $56.12, also lower than South Canterbury's.

Mr Chuah said the most important part of any board's funding share was the number of people. After that, the share depended on how much the population varied from the average in terms of age and gender, socio-economic status, the proportion of Maori and Pacific people and overseas patients, and the rural adjuster.

Earlier this year, the Ministry of Health advised that because South Canterbury was a smaller district health board, it received a higher amount as a rural adjuster.

Figures from the 2009-10 year provided by Mr Chuah show that the most rural adjuster funding went to Nelson Marlborough ($10.5 million), followed by West Coast on $10.3 million.

That year, the Otago board got $6.2 million, Southland $7.9 million, South Canterbury $5.1 million and Taranaki $5.2 million.

Mr Chuah pointed out the old Otago and Southland boards, South Canterbury and Taranaki all had populations older than average, but South Canterbury had the "most elderly population in country".

Accordingly, South Canterbury received $433.84 a head for age and gender adjustment, compared with the old Otago's $138.17 and Southland's $54.29.

With both boards combined, the Southern allocation for this was $106.97.

In Taranaki, the difference in funding was due to the poorer socio-economic status there.

The population-based funding formula has been criticised by University of Otago health policy specialist Associate Prof Robin Gauld, who has described it as a mystery. He has been supervising a postgraduate student studying how the Ministry of Health allocates money according to the formula.

The next review for rural funding is 2013-14, something Mr Rousseau had been keen to see brought forward.

• This year, Southern will receive $2255 a head in population-based funding, compared with the national average of $2300. South Canterbury will receive $2684 and Taranaki $2541.