Prepared by John J. O’Brien, July 2005
with funding from the sponsors of the Ian Axford (New Zealand) Fellowships in Public Policy
John O’Brien is the Director of Health Care and Insurance at the Office of Personnel Management in Washington, DC. In this position he oversees the insurance programs for federal employees including the Federal Employees Health Benefit (FEHB) program, which provides health insurance to over 8 million federal employees, retirees, and their dependents. In addition, he leads the team implementing OPM’s responsibilities under the Affordable Care Act (ACA) including the development of multi-state plans for state exchanges.
During John’s Ian Axford Fellowship exchange to New Zealand he was based at the Ministry of Health in Wellington, where he researched New Zealand’s methods for assessing healthcare system performance, and contrasted them with similar efforts by state Medicaid programs in the US.
Health care presents significant challenges to the measurement of public programme success. The inputs are many (health habits, sanitation, drugs, doctors, technology, etc.) and the outcomes (longer life, reduced illness) not usually traceable to a single effort. Still, the need to measure performance in health care is as great, or greater, than almost any public sector activity. Health care, or the lack of it, affects nearly every citizen and the public investment in health care is enormous.
In the last decade both the Maryland Medicaid programme and the New Zealand Ministry of Health embarked on ambitious restructurings of their respective health service delivery systems. In Maryland Medicaid developed in 1997 the Maryland HealthChoice programme that relied on Managed Care Organizations (MCOs). In New Zealand the Primary Health Care Strategy, which relies on the similarly named Primary Health Organizations (PHOs), began enrolling individuals in 2002.
Comparing New Zealand with the Medicaid programme also highlights the tremendous differences in the structure of health care service delivery in each country. The Medicaid programme accounts for only 17 percent of total health care funding in the United States, and targets that funding at low income and disabled populations. The New Zealand government’s role in the health care is almost the opposite. In New Zealand public dollars account for 78 percent of all health care funding, and those funds are intended to serve the entire population. The differing funding structures lead to vastly different positions of market power. Maryland Medicaid is an important but small purchaser of services and must set prices and programme rules with the knowledge that providers, such as doctors and hospitals, can and do survive without Medicaid funding. In New Zealand the Ministry of Health is a monopsony, a single dominant purchaser negotiating with many small sellers.
From these very different starting conditions Maryland and New Zealand have implemented very different models of health service organization. They do however share two key features: prospective payment to providers on a per capita basis, and the creation of an enrolled population for whom the organization is responsible. Beyond these similarities however PHOs and MCOs are starkly different. This begins with the process of approval for operation: extensive and costly for MCOs while limited and economical for PHOs, and extends to the level of financial risk each bears to the methods used to calculate payment rates. It is notable therefore that both New Zealand and Maryland have invested considerable effort and resources in performance measurement systems.
New Zealand and Maryland are not alone in their interest in performance measurement. Other countries are developing ways to address the same issue. Performance measures in Maryland and New Zealand along with performance indicator efforts in Australia and the United Kingdom have been examined and commonalities identified. The four countries have different structures for health care financing and are using performance measurement on very different entities, yet the following significant commonalities emerged:
While the ways that performance is measured across different systems is surprisingly consistent, there are a range of responses to the question, what is it for? The diversity of responses is inherent in the nature of performance measurement. Performance measurement is not a single tool designed to address a specific need; rather it is an evolving set of metrics that can be applied for a variety of purposes. These include:
These are not mutually exclusive and policy-makers and programme managers may use performance measurement to address all of the issues. In comparing performance measurement in the United States and New Zealand the primary differences are not of type but of emphasis. For example, New Zealand stresses the quality improvement aspect far more than the Maryland Medicaid programme.
Comparing Maryland and New Zealand offers a window into the biases and habits of thought of policy-makers in each system. By looking at them side by side several lessons emerge.
From New Zealand, Maryland can learn:
From Maryland, New Zealand can learn:
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