King announces low-cost primary health care for older New Zealanders enrolled in PHOs
Health Minister Annette King says the Government is accelerating a $47 million nationwide initiative to make primary
health care more affordable for older New Zealanders enrolled in Primary Health Organisations (PHOs). Ms King said the
Government originally intended to make low-cost primary health care more accessible for New Zealanders aged 65 years and
over from 2005/06, but decided after consultation with professional bodies to bring the initiative forward a year.
“It became abundantly clear to me that professional bodies, particularly the New Zealand College of GPs, believed
bringing forward funding for over 65s would be beneficial. Not only would this help a large group of New Zealanders
access more affordable primary health care, but it would also sustain the momentum of PHO development.”
Ms King said the funding for over-65s was welcomed by Labour’s Government partner, the Progressive Coalition, whose
leader Jim Anderton had been a strong advocate for the move.
“The Ministry has also received correspondence from pharmacists and other health professionals about reducing the
maximum prescription fee to $3 for people eligible for low-cost health care through PHOs.
“The Government originally announced this would come into effect from October 1, but the Pharmacy Guild, representing
pharmacy owners, believes more time is needed for the sector to plan for the change, given that October 1 is also the
date that stat dispensing is being introduced.
“The reduced fees will now come into effect from April 1 next year. Deferring the roll-out for six months recognises
that asking pharmacists to deal with two such significant changes at the same time would cause difficulties. I
acknowledge the need to work closely with those actually implementing such changes.''
Ms King said from July 1 next year all New Zealanders aged 65 years and older who are enrolled in PHOs would therefore
be eligible for both low patient fees and $3 prescription charges.
“This is a significant step towards our goal to improve the overall health of all New Zealanders. About 1.7 million
people are already enrolled in PHOs and this is expected to reach two million from October 1, which is a great
achievement. More than 800,000 are paying no more than $20 to visit their regular health provider.’’ Ms King said the
Government had already announced that from 1 October 2003, children and young people aged between six and 17 years
enrolled in Interim-funded PHOs will also be eligible for low patient fees.
“By extending this to older New Zealanders covered by PHOs, we are making primary health care more affordable for those
people who may have health needs requiring frequent visits to primary health care practitioners.
“This will help improve early access to health care and contribute to a Government priority to reduce health
inequalities. We must do this to make a real difference to the quality of life of all New Zealanders.
“This Government believes in strong and fair public services. From July 1 next year we will be delivering affordable
health care through PHOs to those most in need – the young, the elderly, the chronically ill and lower socio-economic
Ms King said the Government had made a significant investment to improve access to primary health care, with $410m over
three years from 2002-03, and on top of that the funding for the over-65s was being provided through carry forwards in
Vote Health and money from the three-year health-funding package.
“Primary health care practitioners generally recognise the potential of PHOs to improve health and manage chronic
disease for their enrolled populations. The bottom line is good health for all. It’s not just about reducing costs for
individuals, although of course it’s important to get rid of barriers that might stop people from seeking early advice
“It’s also about PHOs actively trying to keep people well or treat them early in their illness by offering a range of
primary health care services such as those that tackle heart disease, diabetes and smoking-related illnesses head-on.
“The potential benefits for people who enrol with and stay with their regular primary health care provider are huge.
This is where continuity of care is so important. The PHO team will get to know their regulars and better understand and
cater for their health needs, and people enrolled with PHOs can tell them about the services they want from their team
working to keep them well.’’
Questions and Answers
What is primary health care? Primary health care covers a broad range of out-of-hospital services, although not all of
them are Government funded. It aims to improve the health of the people in communities by working with them through
health improvement and preventative services, such as health education and counselling, disease prevention and
Primary health care includes first level services such as general practice services, mobile nursing services and
community health services targeted especially for certain conditions, for example maternity, family planning and sexual
health services, mental health services and dentistry, or those using particular therapies such as physiotherapy,
chiropractic and osteopathy services.
Chronic diseases, such as diabetes are best managed by primary health care services so that complications can be
prevented or mitigated.
What is the Primary Health Care Strategy? Launched in February 2001 by Health Minister Annette King, the strategy builds
on the population health focus and the objectives of the New Zealand Health Strategy and the New Zealand Disability
Strategy. It outlines how a different approach to primary health care will improve the health of all New Zealanders
through: a greater emphasis on population health, health promotion and preventative care; community involvement;
involving a range of professionals and encouraging multidisciplinary approaches to decision-making; improving
accessibility, affordability and appropriateness of services; improving co-ordination and continuity of care; providing
and funding services according to the population’s needs as opposed to fee for services when people are unwell.
What is a Primary Health Organisation (PHO)? PHOs are the local provider organisations through which District Health
Boards (DHBs) will implement the Primary Health Care Strategy. The essential features of PHOs are set out in the Minimum
Requirements released by the Health Minister in November 2001: PHOs will aim to improve and maintain the health of their
populations and restore people's health when they are unwell. They will provide at least a minimum set of essential
population-based and personal first-line general practice services PHOs will be required to work with those groups in
their populations (for example, Maori, Pacific and lower income groups) that have poor health or are missing out on
services to address their needs PHOs must demonstrate that they are working with other providers within their regions to
ensure that services are co-ordinated around the needs of their enrolled populations PHOs will receive most of their
funding through a population needs-based formula (capitation) PHOs will enrol people through primary providers using
consistent standards and rules PHOs must demonstrate that their communities, iwi and consumers are involved in their
governing processes and that the PHO is responsive to its community PHOs must demonstrate how all their providers and
practitioners can influence the organisation's decision-making PHOs are to be not-for-profit bodies with full and open
accountability for the use of public funds and the quality and effectiveness of services.
What is the Government's high-level direction for the Primary Health Care Strategy? The agreed high-level direction is
as follows: Subject to the availability of funding, the public share of primary health care funding will be
substantially increased over the next 8-10 years Over time, as PHOs are formed, they will be funded according to the
needs of their enrolled populations to provide more effective and affordable care with a population health focus As this
happens, reliance on the Community Services Card (CSC) will be progressively reduced As the CSC will still be needed for
a number of years, measures will be implemented to improve its take-up in the meantime.
What are the Government’s six priority areas for implementing the Strategy and how are these progressing?
Priority area Progress to date
1. Extra funding for PHOs serving high needs populations to provide extra services and reduce co-payments An
‘Access’ formula is being made available to PHOs in high need parts of the country and as of 1 July 2003 approximately
860,000 people were funded at this level through PHOs. The Access formula allows all enrollees to be charged low
co-payments, or access free care, and there is no need to use CSCs for GP visits (however CSCs are still needed to
obtain low cost pharmaceuticals). All PHOs are eligible for additional funding for a range of new functions such as
health promotion and extra services (eg outreach or extended hours of service) to improve access for high need groups.
All PHOs also receive increased funding for enrolees with High User Health Cards (HUHCs).In April 2003 Cabinet agreed to
pilot and then roll-out ‘Care Plus’ from 1 January 2004. This initiative targets the 5% of the population who need
intensive management in primary health care (ie at least 2 hours of clinical contact time in the coming 6 months) and
will ultimately replace the HUHC.
2. Adjust the subsidy for children under six years Implemented 1 July 2002 for all GPs whether in PHOs or not
3. Progressively lower the cost of access, with school-age children being the first priority, followed by older people
and others with high health needs
Until there is enough funding for all PHOs to be on the Access formula, an Interim formula, with a lower level
of funding, is being applied to other PHOs. As of 1 July 2003, approximately 835,000 people were being funded at the
Interim formula level through PHOs.
From 1 October 2003 the Interim formula will be increased and all children and young people aged under 18 will become
eligible for low patient fees if enrolled in a PHO. When funding is increased for an age group, the CSC will no longer
be used to determine funding or set patient fees for that group. (However, the CSC will still be needed to access
low-cost pharmaceuticals until the pharmaceutical changes are implemented.)
4. Sustainable primary health care services in rural New Zealand Measures have been introduced to help implement
the Strategy in rural areas and to retain and recruit the rural health care workforce. Funding was rolled-out from July
2002 and is close to its full level by 2003/04.
5. Establish PHOs across the country
· Small amounts of funding are being provided to assist with PHO establishment.
· Other activities to facilitate the establishment and development of PHOs include:
11 innovative models of primary health care nursing have been allocated a total of $7.1m over three years.
In addition, 183 nurses have been awarded scholarships for post-graduate study related to primary health care nursing.
A second scholarship application round will occur in November 2003. Information management (IM)/information technology
(IT) developments are being funded which enable PHO registers to be processed for funding purposes and to improve the
quality of information.
Of those enrolled with PHOs from 1 July 2003, 80 percent had ethnicity recorded and 90 percent had their national health
index number recorded. These developments are significantly enhancing the quality of primary health care information.
The Ministry is working with the Health Research Council to formally evaluate the Strategy.
6. Improvements to CSCs and High User Health Cards (HUHCs). Most of the progress to date against this priority has
been the increase in up-take of the HUHC, encouraged by the high levels of funding in the two formulae for enrolees with
How are PHOs different from Independent Practitioner Associations? PHOs must meet a set of minimum requirements that do
not apply to IPAs. Many IPAs would already meet some of these requirements but few would meet all of them at this stage.
Several IPAs have made the changes necessary to become a PHO while others are supporting the establishment of PHOs
locally. PHOs are also expected to develop as multi-disciplinary teams (eg doctors, nurses, Plunket, pharmacists, etc).
When did the first PHOs begin operating? TaPasefika Health Trust and Te Kupenga O Hoturoa, in the Counties Manukau
District Health Board (DHB) region, were established in July 2002.
Is it important that people enrol with a single practice in a PHO? Yes. Enrolment with one practice offers huge
potential benefits to people who use their services, but it also requires a two-way commitment. It means the team of
health professionals will work to maintain and improve the health of those people enrolled with them. The PHO will work
with other health services in the area to make sure patients get the most benefit from good quality health care.
What benefits will people get if they keep visiting the same PHO practitioners they’re enrolled with? They’ll help them
to better understand the health needs of the enrolled population, leading to improved health and wellbeing.
Regular visitors will be able to tell those caring for them about the services they want.
People enrolled will be able to visit whenever they want information on keeping well – they don’t need to be sick to
visit for wellness checks.
Those people with chronic illnesses such as heart disease or diabetes will have better managed care.
We’ll be able to measure how well PHOs are doing looking after those groups of New Zealanders who have high health
What are the formulae that have been developed to fund PHOs? There are two: Access and Interim.
How does the Access formula work? It allows all those enrolled with an Access PHO to be charged low patient fees, or
access free care, and there will be no need to use CSCs. In the first instance, the Access formula will be available
only for PHOs (or practices/clinics within PHOs) serving populations with high concentrations of NZ Deprivation Decile
9/10 and populations with high health needs.
What about the Interim formula? Until there is enough funding for all PHOs to be on the Access formula, an Interim
formula will apply to other PHOs/practices. The Interim formula will continue to use CSC status both for determining
funding and setting patient fees. It includes additional funding for a range of new functions such as health promotion
and extra services to improve access for high-need groups.
Over time, as funding allows, the per capita amounts in the Interim formula will be increased towards the levels in the
Access formula. This will start on 1 October 2003 with increases for children and young people. All New Zealanders
enrolled in PHOs aged 65 years and over will be eligible for low-cost primary health care from 1 July 2004.
What alternative funding approaches have been proposed and why? Following concerns expressed by some GP groups, several
PHOs are trialling an add-on -- Care Plus -- that will give extra funding for another group with high health needs.
To be deemed a Care Plus patient, an individual must fulfill one of the first five criteria and criterion number six:
Any one of the following:
Has had 6 primary care visits in the past six months; Has had two acute non-surgical admissions in the past twelve
months; Has a terminal illness; Has two or more chronic conditions; Is on active review for elective services;
6. Is assessed by the General Practice team as being expected to need ‘intensive clinical management’ (at least two
hours of clinical management) over the following 6 months.
About five percent of the population will come into this category. All 'Care Plus’ patients will have a care plan
developed for them, including quarterly reviews to check on health status, treatment, medications and so on. The care
will be able to be delivered flexibly, using GPs and other members of the PHO team. Capitated funding will facilitate
How much will it cost New Zealanders to visit PHOs? All people enrolled with ‘Access’ PHOs will have low patient fees.
Although charges will vary, Access PHOs should be able to offer free care for children under six. School-age children
will generally be charged less than $10 while most adults will pay an average of $15 and no more than $20. Each Access
PHO will agree maximum patient fees with its DHB.