Protecting primary healthcare funding in Aotearoa New Zealand: a cross-sectional analysis of funding data 2009–2023
Maite Irurzun-Lopez
1 * , Mona Jeffreys 1 , Jacqueline Cumming 1
1
Abstract
In 2001, Aotearoa New Zealand (NZ) launched a Primary Health Care (PHC) Strategy to improve access, reduce inequities, and shift care toward the community level. Those goals have remained in place since. Despite initial successes, multiple challenges indicate PHC remains underfunded.
This study aims to assess the extent to which PHC has been financially prioritised within public spending between 2009 and 2023.
We use Ministry of Health transfers to Primary Health Organisations (PHOs) as a proxy for PHC funding, including general practice capitation and PHC capacity investments. We analyse PHC funding trends relative to total government health funding, adjusted for inflation, in total and per capita terms, and examine changes in key funding streams.
On average, NZ spent NZ$238 per person per year on PHC in 2023 prices, reflecting a slight 7% increase since 2009. Although PHO funding has diversified over time, it remains dominated by First Contact Funding, which accounted for 70% of total PHC funding. On average, NZ allocated 5.4% of its national health budget to PHC, a share that did not change throughout the study period.
The findings highlight the need for greater financial prioritisation of PHC in NZ to fulfil the PHC Strategy. Despite nominal increases, the static share of PHC funding suggests that successive governments have not sufficiently prioritised PHC funding to align with their strategic PHC goals. We recommend routine monitoring of PHC funding relative to the total government health budget and setting a minimum allocation to help protect spending on PHC.
Keywords: Health System Strengthening, Healthcare Equity, New Zealand Health Policy, Primary Health Care, Public Financial Management, Public Health Funding, Public Health Financing, Public Policy Priorities.
| WHAT GAP THIS FILLS |
| What is already known: New Zealand’s 2001 Primary Health Care (PHC) Strategy aimed to enhance access, reduce inequities, and shift care to community-based services. Successive governments have had similar goals ever since. Despite initial successes in reducing user fees and enhancing access, persistent challenges like workforce shortages and inequities in access still exist, suggesting PHC remains underfunded. |
| What this study adds: This study offers the first analysis of PHC funding as a share of health funding by the New Zealand Government, 2009 to 2023, revealing no significant increases in that share nor in real per capita funding, despite nominal per capita increases, raising concerns about whether PHC is truly being prioritised. The research calls for stronger financial prioritisation of PHC, recommending routine monitoring, a minimum funding benchmark and advocating for a higher PHC funding share, to ensure resilience and equity of the health system. |
Introduction
“What we decide to measure now, is what we will prioritize in the future” (Waring 2018).1
This quote by Marilyn Waring captures our own belief as public policy economists and researchers: monitoring funding is a pre-condition to prioritising programmes. We apply this principle to the case of Aotearoa New Zealand (NZ), where the government set to revitalise Primary Health Care (PHC) in 2001. Since then, and despite major successes, the strategy’s potential remains largely unfulfilled. We posit that improving the understanding and oversight of PHC funding could help in taking efforts a step further.
The most recent turn of the century witnessed a renewed worldwide push for PHC. International bodies signalled again the importance of national policymakers emphasising PHC over more specialised and expensive services.2–7 Numerous declarations and reports called for the need to position PHC in ‘the driver’s seat’ of the health system.8 This is justifiable considering that PHC is usually the first level of contact with healthcare services, and it is universally recognised as essential for improving health outcomes and advancing health equity.2–5,7,9–11 However, despite moving in the right direction, progress has fallen short of expectations.2
In NZ, the government launched the PHC Strategy in 2001.12 It set out to introduce capitation funding, reduce user fees, and cover new and extended services (Refer to13 for a review of PHC financing arrangements before and after 2001). Primary Health Organisations (PHOs) were established to oversee the allocation of funding and delivery of services. PHOs received the lion’s share of the government’s funding to PHC, which they channelled to their network of PHC providers. The PHC Strategy also considered building up the PHC workforce, including exploring suitable job conditions for PHC nurses, and creating a support package for rural areas. The implementation of the PHC Strategy transformed the PHC system in laudable ways, improving access and equity to patients and the broader population. For example, it successfully led to reductions in direct patient payments and inequities in access to services, at least in the short term.13–15
However, despite these wins, we observed signs that PHC remains overshadowed by specialised care. In NZ’s healthcare landscape, hospital nurses typically earn more than their PHC counterparts, specialised hospital doctors receive more recognition that specialist general practitioners (SGPs), and workforce shortages and an uneven distribution of staff in the primary sector is widely evidenced.16,17 These challenges suggest that PHC still lacks the necessary resources to achieve a substantial breakthrough in the health system. In fact, PHC had been earlier described as being in a position of ‘second among equals’ within the health system.18 This perceived secondary status hinders the ability of PHC to better support the health system and health outcomes. There would appear to be a vicious cycle where insufficient resources limit the effectiveness of PHC services. When patients face long waits, have to pay for visits, or are not happy with the care received, they turn to using 24-h hospital services (free in NZ) for their basic needs. This leads to more funding going to specialised care as it becomes more overwhelmed with demand, which further erodes PHC resources.2
In approaching this research, our first premise was that driving policy changes requires resources. The more governments allocate to PHC out of the total health budget, the more they prioritise it, from an economic standpoint. When governments raise the funding share to PHC, they strengthen its services as well as signal they are elevating its role within the system. A second premise was that a more balanced budget, where PHC was not overshadowed by specialised care, would not only strengthen PHC but also enhance overall health system allocative efficiency and the health system overall, through better detection, referral and coordination of care.6,19,20
Considering recent NZ and global initiatives aimed at enhancing PHC, one would expect that its share of funding would have increased over time. However, recent international efforts to estimate this PHC share reveal modest allocations.2,21–24 For example, 22 Organisation for Economic Co-operation and Development (OECD) countries (NZ not included) allocated on average about 14% of their health spending including both public and out-of-pocket spending to PHC in 2016, or about US$500 per capita annually.21 Moreover, the Lancet Commission on financing PHC points at fluctuating trends, with some countries increasing their PHC contributions in health budgets at times, whereas others reduced it, such as after the 2007–2008 global financial crisis.2
These insights reinforced our interest in whether NZ’s stated policy aims of strengthening PHC have been accordingly and consistently funded. Despite NZ putting PHC in the spotlight since 2001, we lack evidence on whether governments have backed this up with funding. Furthermore, the ongoing PHC policy changes – such as the 2016 health strategy refresh,25 PHO consolidation, co-payment adjustments,26 and regional shifts to alliance models27 – may affect funding in unknown ways, highlighting the need for continuous monitoring. Consequently, this study applied a ‘follow the money’ approach and investigated how much the government has been allocating to PHC from the health budget, how it has changed over time, and the implications arising from these flows of money.
Methods
As a proxy for PHC funding in NZ, we tracked financial transfers from the Ministry of Health (MoH) to PHOs via District Health Boards (DHBs, now HealthNZ | Te Whatu Ora). We examined PHC funding both in absolute terms and relative to overall government health funding, but our focus is on the latter. As PHC funding as a share of health funding is not regularly reported as such by the MoH, we derived it based on PHC funding data obtained from the MoH through Official Information Act requests, and Health funding data from Vote Health.28
The dataset classifies PHO funding into two main groups, each made up of four funding streams (Fig. 1). Under the ‘General practice capitation funding’ group, ‘First contact’ funding is through a principal capitation rate, based on an average number of visits by age and gender. ‘Very Low Cost Access (VLCA)’ funding is an enhanced capitation payment paid at a practice level, so that high-need populations are charged a lower (capped) co-payment, aiming to diminish income inequities. ‘Community Services Card (CSC)’ funding is another enhanced capitation payment, paid for eligible individuals on lower incomes, also allowing lower (capped) patient co-payments. ‘Zero fees for under 6s/13s/14s’ funding assists with the cost of implementing the no-fee policy for these age groups, which has been extended to older-age groups over time. Under the ‘Flexible funding pool’ group, ‘care plus funding’ facilitates improving outcomes for people with chronic conditions, such as supporting longer consultations and lower cost access. ‘Management fees’ funding is for PHO’s administrative responsibilities. ‘Health promotion’ funding supports PHOs providing health promotion activities. ‘Services to improve access’ funding aims to reduce ethnic- and deprivation-specific health inequities. Refer to29 for further description of these funding streams.
We analysed data from the fiscal year 2008–2009 to 2022–2023. We refer to the budgetary year 2022–2023 as calendar year 2023 for simplification. We adjusted nominal figures to real terms in 2023 NZ dollars (NZ$) to eliminate the effect of inflation, using the gross domestic product (GDP) deflator from the World Bank.30 We estimated per capita funding using June population estimates from Statistics NZ.31
Results
How much is New Zealand’s government spending on PHC?
NZ funding for PHC in nominal terms nearly doubled over the period, from NZ$667 million in 2009 to NZ$1277 million in 2023, resulting in an average allocation of NZ$912 million per year. In real terms, PHC funding increased by 30%, from NZ$983 to NZ$1277 million in 2009–2023 (Fig. 2).
Taking into account population growth, PHC funding per capita in real terms remained fairly stable, showing a 7% growth over the period (Fig. 3). On average, NZ spent NZ$191 in nominal terms on PHC per person per year, reaching a total of NZ$244 per person in 2023.
The changing composition of NZ PHC funding
Fig. 4 shows the relative contribution of the main funding streams for PHC in 2009 and 2023. The ‘First contact’ funding is the biggest stream, accounting for 70% of total PHC funding over the period. All other streams are much smaller, starting with VLCA and ‘Care plus’ funding, each contributing 7% to PHC funding (average data not shown). These contributions have changed over time, with ‘First contact’ funding decreasing its weight from 77% in 2009 to 63% in 2023. In parallel, VLCA contribution increased from 5 to 9% in 2023, and CSC funding (which started only in 2019), amounted to 8% by 2023. Overall, PHO funding has diversified over time, yet remains dominated by 'First contact' funding.
PHC as a share of health funding in NZ
NZ spends on average about 5.4% of the national health funding (‘Vote Health’) on PHC. This share remained stable at around 5% throughout the period studied. The highest value was in 2021 (5.8%) and the lowest value in 2022 (5.1%) (Fig. 5).
Discussion
Modest and stagnant PHC funding share limits transformation
Our findings reveal that despite nominal increases in PHC funding in NZ, the share of the health budget allocated to PHC has remained relatively stagnant, averaging around 5.4%. We draw three main insights. First, specialised services consume the majority of government health budgets. This may be due to hospital and specialised services being more costly, requiring more complex interventions, expensive medical products and medicines, and inpatient ‘hotel’ costs. Besides, politically, investing in PHC may be thought to be less of a vote winner than the hospital sector,2 making it harder to secure policy attention and negotiate funding. In addition, in NZ, general practices are partly funded by patient fees, meaning patients bear out out-of-pocket costs to compensate for the government funding shortfall. However, these user fees pose barriers to access and equity.2,32 The Lancet Commission recommended prioritising the elimination of these payments to achieve universal health coverage, advocating for removing financial barriers before expanding the range of services covered.2
The second insight raises doubts about whether PHC has truly been prioritised, as the share of health funding allocated to it has remained fairly constant over the 15 years studied. It is likely that the largest injection of funding fuelling the PHC Strategy occurred prior to this period, immediately following the Strategy’s launch.33 In releasing the PHC Strategy, the government had indicated that it would increase PHC funding by an additional $2.2 billion over 7 years;34 however, data limitations mean that it is difficult, if not impossible, to identify whether such spending increases ever occurred. Even if they did, it remains unclear whether an early funding boost followed by static relative PHC funding was intentional, or if PHC simply lost momentum. In any case, the funding seems inadequate for PHC to fulfil the central role envisioned in the Strategy or international declarations, given the PHC constraints as presented in the introduction to this paper. Indeed, the constraints appear to have worsened, with general practices reportedly in crisis, related to a combination of factors, including difficulties in recruiting and retaining SGPs,35,36 practices unable to enrol new patients due to limited capacity (also known as ‘closed books’,37–41), rising fees due to restricted funding,41–45 a revised capitation formula still pending,46–48 all of which directly or indirectly make it harder for individuals to access PHC services, and which will lead to stretched emergency departments. The 2022–2023 NZ Health Survey reveals that one in five adults were unable to access their general practice, with the proportion citing appointment wait times as a barrier to care nearly doubling in 1 year, from 11.6% in 2021–2022 to 21.2% in 2022–2023.49
Finally, the changing composition of PHO funding, with increases in VLCA and CSC funding proportions over the period, hints at a shift towards targeting based on affordability (via VLCA) and income (CSC funding) rather than age and gender (first contact funding).
To summarise, the persistent stagnation of the PHC proportion at below 6% of the health budget hinders the shift in the model of care envisioned by the PHC Strategy. The modest increases in PHC funding appear insufficient to drive the intended transformation of healthcare delivery. Achieving meaningful progress, such as strengthening the workforce and further reducing user fees will likely require higher public investments.
Study limitations
Our analysis is limited by the exclusion of certain PHC funding streams beyond PHO allocations. Key funding for immunisations, pharmaceuticals, after hours, rural health, and mental health were not included, partly due to the evolving nature of budget structures. As this paper went to publication, however, Te Whatu Ora produced a document summarising a wider set of services than we have included here, covering the period from 2013 to 2024. This adds an additional NZ$120.69 million for 2023,50 or a further 9% on top of our data for that year, and taking PHC funding to 5.8% of overall spending (instead of our estimated 5.3%).
Additional funding directly from DHBs (now Te Whatu Ora | Health NZ) was also unable to be included. There are also PHC and health services funded by other ministries or sectors, which we did not account for, in particular emergency funding to respond to the COVID-19 pandemic, which was channelled through different mechanisms. Expanding a more comprehensive analysis of basic healthcare services funding could build on the existing disaggregated analysis51 from both public and private sources, encompassing areas such as oral care, social rehabilitation, telehealth, aged care, and other essential services.
A further limitation is that we did not include the funding for Hauora Māori services, delivered by Māori health providers that are not PHOs. These providers offer health and social care services for some, but not all, Māori, and are an important source of public health and health promotion services. They are generally paid through contracts for specific services, and account for a significant portion of Vote Health (NZ$523.5 million or 2.5% in 2023)52 when viewed against the 5.4% directed to PHC.
Similarly, funding for Pacific health providers that are not PHOs are also not included here.
There may be also a mismatch as the Health Vote source refers to the budget for that year and it is not revised subsequently, whereas we do not know if PHO allocations have been revised or not in subsequent years. Our empirical analysis explores PHC funding prioritisation, but the evidence regarding its sufficiency is drawn from existing literature rather than empirical evaluation.
Recommendations for health policy
Based on our analysis, we recommend:
Report PHC funding as a share of the total health budget routinely, as part of the minimum monitoring requirements for the next phase of promoting PHC. A regularly reported analysis of PHC and health funding is a crucial step missing from NZ’s efforts to prioritise PHC. Particularly with the ongoing health system reforms, a focus on PHC spending is critical. A regular health expenditure trends report is urgently needed, as used to be available in NZ.53 This would enhance accountability, support the evaluation of progress, and keep track of trends in patient fees over time, addressing the previously raised need to improve data intelligence for PHC.54
Track PHC funding more comprehensively, to include other PHC budget lines, such as immunisation, COVID-19 response, mental health and funding for Māori health providers that are not PHOs. This would provide a more accurate picture of how resources are allocated and allow disaggregated analysis of not only the quantity but also the quality of spending.
Consider establishing a minimum benchmark for PHC funding within the health budget to protect it from political and economic pressures favouring specialised services. This need is supported by the claims that NZ has struggled to sustain the early financial push of the PHC Strategy, relating to the difficulty of maintaining reform’s momentum to achieve long-term impact.55 A benchmark would ensure steady funding for PHC, aiding long-term planning and system resilience. Although no ideal PHC proportion exists, to our knowledge, a potential benchmark could be set at the minimum or average level of OECD countries’ PHC funding, though different estimation methods prevent direct comparisons. Another possibility is to set the benchmark at the highest share since the PHC Strategy in 2001. Although the 5.1–5.8% range (2009–2023) suggests a de facto minimum, formalising such a benchmark could help safeguard funding against policy shifts. A more ambitious benchmark could be set by using the highest PHC funding share recorded since 2001, given early funding increases.
Leverage the small share of PHC funding to advocate for increases. For example, reallocating $500 million to PHC in 2023 would result in a 39% increase in PHC funding while only a 2% reduction in the non-PHC portion of the health budget (as estimated in this study). Larger budgets provide more room to accommodate funding shifts, hence an opportunity to argue for a stronger emphasis on PHC despite concerns about reallocation.
Data availability
Data used to generate the results are available at the indicated sources in the text.
Declaration of funding
This research was funded by the Health Research Council of New Zealand (grant no. 18/667) for the ‘Enhancing primary health care services to improve health in Aotearoa New Zealand’.
Declaration of use of AI
In the writing of this article, the authors declare the use of ChatGPT occasionally to suggest different ways to express ideas and explore word choices. This text was then further refined by the authors. (OpenAI. ChatGPT 4, 2024. Available at https://chat.openai.com/).
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