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Beyond Needs-Based Funding: Resource Allocation And Beyond Needs-Based Health Funding: Resource Allocation and Equity at the State and Area Health Service levels in New South Wales – Australia Doris Gatwiri Kirigia A thesis submitted in fulfilment of the requirements for the degree of Doctor of Philosophy School of Public Health & Community Medicine, Faculty of Medicine, University of New South Wales, Australia September 2009 ii _________________________________________________________________________ Author’s Declaration ‘I hereby declare that this submission is my own work and to the best of my knowledge it contains no material previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgement is made in this thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project’s design and conception or in style, presentation and linguistic expressing is acknowledged.’ Doris Gatwiri Kirigia Signed …………………………………………………… iii _________________________________________________________________________ Table of Contents Table of Contents .................................................................................................................. iii List of Tables.......................................................................................................................... x List of Figures ..................................................................................................................... xiii Acronyms .......................................................................................................................... xviii Abstract ................................................................................................................................ xx Acknowledgements ............................................................................................................. xxi Chapter 1 : INTRODUCTION – RESOURCE ALLOCATION AND EQUITY .................. 1 1.1 Introduction .................................................................................................................. 1 1.2 Equity and Financial Resource Allocation ................................................................... 3 1.3 Equity of Resource Allocation in New South Wales: The Research Issue .................. 5 1.4 Aims and Research Questions ...................................................................................... 7 1.5 Overview of Methods ................................................................................................... 8 1.6 Outline of Thesis .......................................................................................................... 8 Chapter 2 : THE NEW SOUTH WALES HEALTH CARE SYSTEM............................... 10 2.1 Introduction ................................................................................................................ 10 2.2 Financing and Delivery of Health Care in Australia .................................................. 11 2.2.1 Financing of Health Care: Commonwealth Government .................................... 13 2.2.2 Financing of Health Care: State, Territory and Local Governments ................... 17 2.2.3 Financing of Health Care: Non-Government Sources ......................................... 19 2.2.4 Delivery of Health Care in Australia ................................................................... 21 2.3 The New South Wales Health System ....................................................................... 23 2.3.1 Geography and Population................................................................................... 23 2.3.2 Health Status and Inequalities.............................................................................. 25 2.3.3 The NSW Department of Health ......................................................................... 29 2.3.3.1 Organisational Structure................................................................................ 30 2.3.4 Financing of the NSW Health System ................................................................. 33 2.3.5 Delivery of Health Services in NSW ................................................................... 38 2.3.6 Area Health Services and Health Care Delivery ................................................. 41 2.3.7 Financing of Area Health Services: A Brief Overview ....................................... 43 Chapter 3 : RESOURCE ALLOCATION, EQUITY AND HEALTH NEEDS .................. 45 iv _______________________________________________________________________________ 3.1 Definition and Levels of Resource Allocation ........................................................... 45 3.1.1 Resource Allocation and Theories of Justice ....................................................... 47 3.1.2 Distributive versus Procedural Justice ................................................................. 49 3.1.3 The Justice of Resource Allocation in NSW ....................................................... 53 3.2 Resource Allocation and Efficiency ........................................................................... 57 3.2.1 Technical Efficiency ............................................................................................ 57 3.2.2 Allocative Efficiency ........................................................................................... 58 3.3 Equity: Concepts and Definitions ............................................................................... 59 3.3.1 Horizontal and Vertical Equity ............................................................................ 64 3.3.2 Equal Treatment for Equal Need ......................................................................... 66 3.3.3 Equality of Access to Health Care ....................................................................... 67 3.3.4 Equality of Health ................................................................................................ 69 3.3.5 Capacity to Benefit .............................................................................................. 71 3.3.6 Measurement of Equity ........................................................................................ 74 3.4 Health Needs: Definition and Measurement .............................................................. 75 3.4.1 Approaches for Measuring Health Needs ............................................................ 77 3.5 Beyond Needs–Based Resource Allocation Formulas ............................................... 80 Chapter 4 : RESOURCE ALLOCATION MECHANISMS ................................................ 83 4.1 Introduction: Health System Financing and Resource Allocation ............................. 83 4.1.1 Historically-Based Funding ................................................................................. 84 4.1.1.1 United Kingdom – RAWP ............................................................................ 86 4.1.2 Population and Needs–Based Resource Allocation Mechanism ......................... 89 4.1.3 Market Driven Resource Allocation Mechanisms ............................................... 95 4.2 Resource Allocation in New South Wales ................................................................. 98 4.2.1 Introduction .......................................................................................................... 98 4.2.2 Cost/Expenditure Base Funding .......................................................................... 99 4.2.2.1 Casemix/Output–Based Funding .................................................................. 99 4.2.2.2 Budget Share Formula ................................................................................ 101 4.2.2.3 Purchasing Formula .................................................................................... 101 4.2.3 Episode–Based (Casemix) Resource Allocation in NSW ................................. 102 4.3 The NSW Resource Allocation Formula .................................................................. 107 4.4 Resource Distribution Formula (RDF) ..................................................................... 112 v _______________________________________________________________________________ 4.4.1.1 Effects of the Resource Distribution Formula (RDF) ................................. 121 4.5 Beyond Needs–Based Funding in NSW: Introducing the Research Questions ....... 122 Chapter 5 : RESEARCH METHODS ................................................................................ 128 5.1 Study Aim and Research Questions ......................................................................... 128 5.2 Research Design ....................................................................................................... 129 5.2.1 Research Model: Sequential Exploratory Model ............................................... 130 5.3 Qualitative Method ................................................................................................... 136 5.3.1 Sample Selection................................................................................................ 137 5.3.2 Rationale for Selecting NSCCAHS and GWAHS ............................................. 142 5.3.3 Data Sources and Recruitment
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