Health System Fundamentals Cheat Sheet

This cheat sheet outlines the core principles, structures, challenges, and funding mechanisms of health systems, emphasizing the complexities of market failures, government intervention, and the pursuit of quality, access, equity, and efficiency.

Core Principles

• Health systems aim to improve quality, safety, and experience of care, while enhancing health and equity for all populations and ensuring best value for resources (NZ Triple Aim).
• Key aims for health systems include access, quality, efficiency (Robert's Aims), improving population health and experience, and reducing costs (Berwick's Aims).
• The WHO aims focus on health status, risk protection, and consumer satisfaction, with the Quadruple and Quintuple Aims adding workforce experience and health equity.
• Health systems are comprised of primary, secondary, and tertiary care, alongside public health services, all aiming to prevent disease, promote health, and prolong life.
• Market failures are prevalent in healthcare due to information asymmetry, externalities, and the nature of goods traded, necessitating government intervention.
• Effective health system funding models must balance efficiency, equity, and quality, considering various approaches like single-payer, multi-payer, taxation, and social insurance.

Key Terms

• NZ Triple Aim: Goals for health systems: improve quality, safety, and experience of care; improve health and equity for all populations; achieve best value for public health system resources.
• Primary Health Care (PHC): First contact with the health system, including general practice, health promotion, and community development.
• Supplier Induced Demand: When suppliers (e.g., doctors) influence patients to consume more healthcare than they would if they had full information.
• Moral Hazard: When individuals change their behavior (e.g., take more risks or use more services) because they are insured.
• Adverse Selection: When high-risk individuals are more likely to purchase insurance, and low-risk individuals are less likely, leading to an unbalanced risk pool.
• Capitation: A payment model where providers receive a fixed amount per patient, regardless of the services rendered.
• Activity Based Payment: A payment model where providers are paid for each specific service they deliver.
• QALYs (Quality-Adjusted Life Years): A measure of health outcome that quantifies the quality of life and life expectancy gained from a treatment.

Pro Tips

• Understand that 'health' is not a typical market good; it has unique characteristics that lead to market failures.
• Recognize that 'value for money' in health is complex, involving not just cost but also quality, equity, and patient experience.
• Differentiate between 'health outcomes' (population health) and 'health care outcomes' (system performance).
• Be aware that 'cream-skimming' is a risk in private insurance and some capitation models, where low-risk, low-cost patients are prioritized.
• Accurate data is crucial for effective policy and reform; without it, investment decisions and performance evaluation are compromised.

Pitfalls to Avoid

• Assuming free healthcare is efficient; it can lead to overuse and inefficient resource allocation.
• Overlooking the 'invisible' or 'compensatory' labor within fragmented health systems.
• Believing that simply increasing spending guarantees better health system performance; how money is spent is more critical.
• Ignoring the impact of workforce shortages and administrative burdens on system efficiency and quality.
• Relying solely on international comparisons without considering a country's specific context and goals.

Myth vs Reality

• Markets are always efficient in healthcare.: Healthcare markets are prone to failures like information asymmetry, externalities, and supplier-induced demand, making them inherently inefficient without regulation.
• More money spent always means a better health system.: The effectiveness of spending depends on how it's allocated and the type of services funded, not just the total amount.
• All professions in a health system have equal power.: Power dynamics and hierarchy exist within health workforces, shaped by history, regulation, and specialized knowledge.

Real World Examples

• A patient needs a complex surgery.: This would typically fall under secondary or tertiary care, involving specialized medical/surgical expertise and potentially high complexity and cost.
• A pharmaceutical company develops a new drug.: Pharmac (in NZ) uses economic evaluations (cost-effectiveness, budget impact, health need, equity, clinical effectiveness) to decide if it should be publicly funded, balancing innovation with budget constraints.
• A government implements a public health campaign about vaccination.: This is an example of public health intervention, aiming to prevent disease and promote health across the population, often with positive externalities.

Timeline

• July 1, 2026: New capitation formula implemented (includes age, sex, multimorbidity, rurality, SES, excludes ethnicity).
• 2024: NZ government proposes $5.9B cuts to health funding, focusing on back-room staff.
• 2024: Health system rankings show NZ strengths in quality, admin, efficiency, and low COVID excess deaths, but weaknesses in treatable deaths, equity gaps, and long waits.
• 2021-2024: NZ health system improved in health outcomes but saw declines in access, administrative efficiency, and equity.
• Sapere 2024: Study on PHOs in NZ highlights issues with budget reallocation and the impact of excluding ethnicity from funding formulas.

People

• Robert: Defined key aims for health systems: Access, Quality, Efficiency.
• Berwick: Proposed aims for health systems: Improving population health, improving experience of care, reducing cost per capita.
• Sharma et al: Conducted research (2024) evaluating what works in the NZ health system, emphasizing context and small-scale improvements.