Australia should move to blended funding for general practice. But how much funding should be flexible, and how much should remain fee-for-service?
Around the world, blended funding has become a common way to fund general practice. It combines a flexible budget for each patient with a fee for each service.
Grattan Institute has recommended blended funding for Australia. So have three recent independent, government-commissioned reviews. Blended funding would reward prevention and continuity of care, support multi-disciplinary care, and make funding fairer.
Today, the federal government funds general practice almost entirely through fee-for-service payments. The Medicare Benefits Schedule pays for each individual service delivered, and mostly only for care delivered by GPs. This rewards short, one-off consultations and limits team-based care.
The opposite funding model is called capitation: the GP clinic gets a fixed budget for each patient, adjusted up or down depending on the patient’s predicted healthcare needs. That budget doesn’t change if they get a lot of care, a little, or none at all. This means that under capitation, practices have a financial incentive to provide too little care, since each additional service is a cost and not a source of revenue.
Each way of funding care has benefits and drawbacks. Blended models are designed to balance them to get the best result.
Many other countries use blended funding, and they have chosen a wide range of designs. For example, among systems implementing new models in recent years, one in Belgium has roughly 50:50 capitated and fee-for-service funding, while a model in Alberta, Canada, has 85 per cent capitation.
Making it work requires the right design, and one choice matters more than any other: how much funding is flexible, and how much remains fee-for-service. But there is little research on how to strike the right balance. This new Grattan policy briefhelps fill that gap.