GUEST BLOG: Ian Powell – If patient co-payments were removed from general practices


It is only a matter of time before a government, whether Labour or National-led, accepts that patient co-payments for general practice visits are a major barrier for access to primary care.

Steps in this direction began in the late 1990s under a barely remembered associate health minister, Neil Kirton, with free care for those under the age of six. Kirton was a New Zealand First MP which had formed a coalition with the larger National Party.

Although this coalition was short-lived, Kirton’s success proved to be politically ground-breaking and sustainable. In July 2015 the then National-led government increased eligibility for those under 14 years. Labour’s policy has been to further increase eligibility but has yet to advance this since the 2017 election.

Co-payments are a long-standing and contentious issue. The ‘Growing Up in New Zealand’ longitudinal study, by the University of Auckland, of children born in Auckland, Counties Manukau and Waikato regions between 2009 and 2010, has highlighted barriers to access to primary care, one of which is cost.

How general practice is funded

General practices are funded by two main means – government capitation-based payments and patient co-payments. The former are based on the numbers of the enrolled Primary Health Organisations (PHO) population (there is generally one PHO in each district health board).

This means PHOs and their general practices are paid according to the number of people enrolled, not the number of times a patient receives care from a practice. Capitation is a good funding mechanism in principle.

Patient co-payments, the second main avenue for general practice income, are partially offset by government for holders of the Community Services Card for those on low incomes, living in public housing, or receiving the accommodation supplement.

If co-payments were removed, then capitation levels would need to be increased consequentially. This would require a different process to set the new levels and then annually adjust them. But there is a complication.

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Whereas publicly owned hospitals provide hospital care, primary care is predominately provided by privately owned general practices. The large majority of these practices are owned by GPs but a slowly growing small minority are corporate owned. The number of GP owners is slowly declining but often other GP partners buy up the equity.

Short of an arbitrary nationalisation of these practices, privately owned general practices are sufficiently embedded to be a dominant feature of primary care for the foreseeable future. This has to be factored in when considering the full removal of co-payments.

The current process

Currently a forum called the PHO Services Agreement Amendment Protocol (PSAAP) has the mandate to agree changes to the PHO Services Agreement. PSAAP has representatives from the Ministry of Health, DHBs, PHOs and the General Practice Leaders Forum.  The Forum’s membership includes the New Zealand Medical Association, Royal New Zealand College of General Practitioners, and General Practice New Zealand (which comprises general practice networks).

Privately owned general practice businesses set their own patient fees, but within a certain threshold agreed to by DHBs and PHOs (in reality, the Ministry on behalf of the Government of the day).

There are strong criticisms of the PSAAP process, primarily because it isn’t a level playing field, with government, through the Ministry, calling the shots. This process would not be fit for purpose if co-payments were removed and, arguably, isn’t fit for purpose now.

Alternative scenarios

In contrast, collective bargaining provides employees – through their unions – with more of a level playing field because of the existence of the right to strike and, to a lesser extent, the availability of a form of non-binding arbitration.

The United Kingdom doesn’t have patient co-payments. Recognising this, it has a statutory system through the determinative National Health Service Pay Review Body. This is sufficiently broad to include privately owned general practices as well as employees. So far, so good. Even better, supposedly the review body is independent.

But there is a problem. This body’s independence is the kind of independence you have when you aren’t having independence. In other words, the government is in charge, including determining the criteria required for each round. The principle of a determinative process is all that we can usefully take out of the Pay Review Body process.

Recognising that general practices are predominantly private businesses, employment law can provide some useful insights. The Employment Relations Act 2000 provides for an adjudicative process, known as facilitation, in collective bargaining between employers and unions.

Facilitation is a process that either employer(s) or union can request from the Employment Relations Authority following an impasse in collective bargaining. It is non-binding arbitration. But it has the extra influence of the Authority being able to publicly release its decision in order to put pressure on the parties to accept.

Another possibility is adapting the resolution process proposed by the Government in its pending fair pay agreements legislation, intended to provide minimum industry or sector employment conditions, including remuneration. In the event of unresolved negotiations between employer and union parties, the Employment Relations Authority could determine these conditions for the affected industry or sector.

The Police Act 2008 provides “final offer” arbitration for the resolution of collective bargaining between the police commissioner and the Police Association when a negotiated settlement can’t be reached. This system is unique to the police because it is unlawful for them to strike. It’s downside is that it is ‘winner takes all’ which is not well suited for satisfactorily resolving complexity.

Through a health lens but fairly

Removing patient co-payments can be justified when considered through the lens of a universal public health system. The structure of privately owned general practices as the means of delivering most primary care should not be used as an argument in opposition. General practice has to fit in with the health system, rather than the other way around.

General practices will continue to be the dominant provider of primary care for the foreseeable future. Consequently, there needs to be a system of negotiation (not just consultation) on capitation levels and related matters that is a genuine playing field and includes, when necessary, a form of mutually agreed, independent, binding adjudication.

[This is a slightly amended version of my column published in New Zealand Doctoron 26 August]

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion.


  1. Why must general practice has to fit in with the health system, rather than the other way around?

    I’ve yet to see a unionised forced negotiation (by default its not really a negotiation either) lead to innovation and entrepreneurial ideas and I can’t see that this would help drive improvements in primary healthcare. I can see it driving GPs out of the sector as the profit motive will be removed and the result being equally miserable patients getting reduced service and care as PHOs look to recover the lost profits resulting from this suggestion.

    I’d rather see funding allocated in a different way, maybe to patients on a needs tested basis so that care is not compromised

  2. My updated Ideas to fix long term illness and health welfare funding.

    1 Create a Medicare agency including accidents and long term illness ( long term being anything outside of your sick leave entitlement).

    2 Place a Medicare Agency social worker in every Doctors surgery ( Why because of the increased workload because of idea 5 6 7 and 9 ).

    3 Fund ALL MEDICINES through the Medicare Agency ( Pharmac funded or otherwise).

    4 Fund all long term illness welfare funding through the Medicare agency ( i.e. 80% of Minimum wage benefit).

    5 Remove all Long term Welfare illness funding from Winz.

    6 Remove all the relationship rules and limits for all long term welfare illness benefits.

    7 Remove the requirement for 2nd opinion doctors reports as the ACC social worker can discuss it directly with your doctor at the clinic.

    8 Create the agency within the New remodelled Agency of compassionate care to cut double agency costs.

    9 The Agency organises specialist appointments and where an operation in a public hospital can’t be done in a timely manner arranges it in the private sector at Governments cost.
    This should be arranged before leaving the Doctors surgery/clinic.

    10 All medicines on a Prescription ( Funded or Unfunded) should count towards the 20 count, including any repeats, to get Free meds after 20 Prescriptions.

    11 Remove restrictions on diagnostic and maintenance testing that patients require for effective medication dosing purposes.

    12 All ACC SOCIAL WORKERS at a doctors surgery issue a patient with a medicines swipe card to swipe at a pharmacy.
    If a medicine is unfunded ACC pays all but the $5 pharmac fee, if it is Funded the Patient pays the $5 fee.
    Why the card ?
    This is to keep track of the total number of medicines prescribed in any given year and the total cost involved .
    This means all costs will be available from one agency and not as now spread over multiple Dhb’s who have no idea whatsoever of the total dollar cost of unfunded medicines prescribed each year .

    13 Dr visit fees and unfunded Medicines then be funded by a medicare levy, which replaces the current acc levies, we all pay to the Medicare agency including beneficiaries.

    This is point 14 added to my list of things to add to the new medicare agency.

    The medicare agency buys up retiring doctors clinics whose staff are not interested in buying the current clinic they are employed in . The Medicare agency overtime builds a nationwide health Hub GP clinic network that runs on the low cost funding model.

    Then point 15 :
    The new medicare agency charges Pharmac with the responsibility of building OUR OWN MEDICINES PRODUCTION FACILITY.

    I have been told in NZ in 2019/20 $115 billion was spent on Medical research, approximately 1/3rd of our total GDP so why are we buying generic’s and importing them ?
    When we could be producing our own at a much lower cost.

    Point 16:
    Labours ; Social insurance policy
    Why cant this Social insurance which currently apparently is only going to cover short term Unemployment.
    Why cant it cover also any unfunded medical care or Unfunded medicines you need and also any GP costs ?

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