How general practice is funded in New Zealand depends upon an answer to the question “This week or next?”! General practice, and primary healthcare generally, is currently undergoing a revolution greater than anything since the early 1940s, when government funding of general practitioners was introduced. GPs then successfully argued for the “sacred” right to charge a fee commensurate with their services, making them unique compared with similar countries, including Australia. Substantial patient copayments resulted, rising at times to more than 80% of practice income.

In the early 1990s, the government introduced a “community services card” (CSC) for people on below-average incomes. Currently, the threshold for this is NZ$21 913 for a single person and NZ$31 225 for a married couple, and rises with number of children. The CSC entitles holders to higher subsidies, including for prescriptions, but the quid pro quo was the removal of all government subsidies for adults on above-average incomes, including the elderly. However, the government proportion of GP funding remained low, averaging about 30% of practice income.1

With this underfunding, many GPs became Robin Hoods, charging minimal or no fees to patients who could not afford to pay, with some compensation from their well-off patients. Many (understandably) located themselves in more affluent areas.1 Hence, central Aucklanders have 800–900 population per GP, whereas more disadvantaged populations have almost twice as many people per GP.2 Of course, the Robin Hood system did not work for practices serving predominantly poorer and disadvantaged (including rural, Mäori and Pacific Islander) populations.

Radical organisational reforms in 19933,4 encouraged GP leaders to voluntarily form independent practitioner associations. Similar to Australian Divisions of General Practice, these primary care organisations (PCOs) rapidly expanded to include 85% of GPs by the end of the 1990s.

PCOs took on the financial management of pharmaceutical and pathology services to improve quality use.1,3-5 Savings from this were used to promote other services, such as vaccination, smoking-cessation programs, chronic disease management and terminal-care services. They were also used to remunerate GPs and associated services (eg, free nursing and radiology services for community-based alternatives to hospital admission). This was never called fundholding, the term for a scheme implemented, then abandoned, in the United Kingdom.

The real revolution began in 2000, with the New Zealand Public Health and Disability Act. This established 21 decentralised and population-based district health boards (DHBs) providing public hospital services and managing government funding of all health and disability services, including primary healthcare.

In 2001, a new government primary healthcare strategy launched the evolution of PCOs into broader primary health organisations (PHOs).6 These are needs funded and serve defined populations enrolled in member GP practices. They provide population healthcare as well as treatment services, involve communities in their governance, and are multidisciplinary. GP membership is voluntary. This strategy is supported by the New Zealand Medical Association and the Royal New Zealand College of General Practitioners, but there is ongoing criticism over the implementation process.

Two forms of PHOs have been established, the first (Access PHOs) serving disadvantaged populations. The remainder are called Interim PHOs, in the expectation that Access funding will eventually apply to all PHOs. An alternative strategy, Care Plus, is being launched to fund the needs of individual high users. The different levels of funding are shown in Box 1.

The additional funding still covers less than half of the cost of running a general practice. More has been promised after 2005 by the Health Minister, “subject to the availability of funding”. A particular issue is the inequity between the two forms of PHOs, with funding being based upon the level of disadvantage of the enrolled population rather than individual need. Hence, poorer patients in Interim PHOs remain disadvantaged. The Care Plus strategy is an attempt to rectify this.

From late 2004, PHOs will be required to manage equitably funded budgets for pharmaceutical and pathology services, commonly called “referred services”,7 in a more formal process than PCOs used. There is clear evidence of serious inequities in current referred-services expenditure.2 This will mean significant shifts of expenditure from practices, PHOs and DHBs serving well-off populations to those below equity, but the funding distribution may be vital to improving the health of the disadvantaged.

Is this relevant to the future of Australian general practice? Almost certainly, given the recommendations of the 2003 Review of Divisions.8 A comparison of primary care in both countries (Box 2) suggests that New Zealand is some 10 years ahead,9 with a more integrated and influential primary healthcare service. Although the organisational upheavals and additional paperwork have been traumatic for many GPs, the prospects of improved care and better outcomes for patients and communities, while yet to be proven, appear to be good.