Funding for health unclear

Elspeth McLean.
Elspeth McLean.
Is it time we knew if the billions of dollars spent on health are dished out fairly, asks health writer Elspeth McLean.

New district health board members will soon know all about the relentless pressure to balance the board books, but it is likely they know little about the detail of health funding or its fairness.

They are not alone.

While the country's 20 district health boards receive the lion's share of public health funding, with more than $11 billion going to them this financial year under the Population Based Funding Formula (PBFF), recent University of Otago research showed there was little understanding of the formula.

The health policy researchers Erin Penno, Associate Prof Rick Audas and Prof Robin Gauld said there had never been a comprehensive description of the process used to determine the allocation through the decade-old PBFF.

And, when they attempted a detailed study of the formula, they were thwarted by a lack of information.

This lack meant it was ''impossible to tell whether the DHB allocations are correct or fair, raising questions that every DHB finance department and the Government should be concerned about'', they said.

No board could be sure it was receiving the right level of funding, they said.

(Despite the ongoing pressure on boards to break even, last year 10 recorded deficits.) When the researchers revealed all this in their report published more than a year ago and again in an article in the NZ Medical Journal this year, who was paying attention?

In these straitened times, it might have been expected there would be intense interest both within the health sector and in political circles about exactly how this funding , making up about 75% of Vote Health, is calculated and whether it is fair.

But if people are making concerned noises they are not doing so publicly.

There has been scant coverage of the issue in the mainstream media.

Even the revelation that the money allocated per person varies by almost 25% between the 20 district Health Boards did not prompt a public outcry.

Ironically, the deficit-plagued Southern District Health Board which in the past has probably been the most outspoken about the need for the funding system to be reconsidered, is the only board which gets funding corresponding exactly to its district's share of the population.

When they embarked on their study, the researchers from the Centre for Health Systems at Otago had wanted to know whether allocations made under the formula reflected current health needs across the country or whether there were systematic errors in how funds were allocated.

They also wanted to know whether the methods used to determine the cost weights and adjusters in the formula could be further improved.

Broadly speaking, the funding formula, established in 2003, was supposed to allocate money to the recently formed DHBs according to the needs of their populations.

The boards receive funding for each member of their population based on an expected average yearly cost per person.

These are called cost weights and take account of age, gender, ethnicity (in priority order, Maori, Pacific, other) and deprivation.

To assist with fairness, three adjusters were also introduced to compensate the boards for differences in costs associated with serving rural areas, overseas patients, and meeting unmet needs in Maori, Pacific and deprived populations.

There is murkiness about exactly how these adjusters are calculated and whether boards who get high levels of funding may be receiving that money based on over-prediction of actual needs and service use.

There is also concern about the quality of ethnicity data (something which is not new, although it is surely hard for anyone to test the accuracy of ethnicity data when it is self-identified and can change over time).

Next year there will be a review of the formula but, at this stage, the ministry is keeping mum on its scope, because it says the terms of reference have not been finalised.

Will it involve technical tinkering or a wide review, including whether the formula is fair and if it is addressing the greatest need?

A cynic might suspect we will either get something once-over-lightly or its outcome will be delayed until 2015 at least, given that 2014 is an election year and this might prove contentious.

Questioned on the review, the ministry could not say exactly who would be involved on technical working groups, although it did say there would be district health board representation.

Boards would also be consulted on any changes to the formula.

Further questions about wider public involvement and how those involved in the review would be brought up to speed with the detail of the formula went unanswered.

It does not bode well for the greater transparency and public involvement the researchers called for.

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