1. Preamble

The AMA is opposed to fundholding that would enable the Government to:

• give the appearance of providing funds to the point of commissioning of services;
• devolve responsibility for purchasing of those services to GPs;
• place GPs in a position of conflict regarding services provided and income retained;
• gain a greater control over health expenditure through fixing the budget; and
• shift the risks to the budget holder.

Not only would the GP groups become more directly accountable - they would individually take responsibility for under-provision as a result of global under-funding, but would have no capacity to address this because their budget would be fixed. With capped budgets, GPs would face pressures to minimise expenditure on services. An 'ethical hazard' becomes apparent because the provider will be obliged to extend the 'duty of care' from the traditional role based on the needs of an individual to that of a population.

In an attempt to operate within pre-determined budgets, GPs could be forced to use a range of undesirable methods such as:

• introducing rationing or eligibility criteria for care (especially for long-term care of the chronically ill);
• discouraging service utilisation (eg. shorter hospital stays, fewer specialty services, less use of expensive technologies);
• selective enrolment (also known as cream skimming or cherry picking) on the basis of risk (preference for lower risk groups or patients with private health insurance) resulting in a built-in advantage for practices situated in more affluent areas. Selection could also operate by restricting the range of services available (eg. rehabilitation, disability);
• substituting 'cheaper' options for medical services (ie. removal of procedures from doctors in favour of other professionals such as psychologists and optometrists);
• reducing expenditure on capital costs; and
• reimbursement on the basis of patients' potential risk. This process of risk selection, known as medical under-writing, discriminates against the poor and unwell.

Inherent within fundholding systems is a range of unacceptable issues including:

• limitation on choices for patients as a consequence of capitation and/or enrolment and problems of patient access;
• difficulties in managing and/or sharing risk, particularly where there might be high cost 'outlier' patients who consume relatively large amounts from the fund pool;
• establishment and maintenance of a new bureaucracy and higher transaction costs; for example, those involved in management, contracting and administration. This would divert funds away from direct patient care leading to additional costs and duplication of local administrative structures;
• potential for 'ethical hazard' where regional governing/purchasing authorities may prefer to pursue their own sectional interests or where individual incentives are involved; and
• the threat of undermining the principle of universality under Medicare.

International experience demonstrates that fundholding is disadvantageous to both patients and doctors: it undermines patients' access to health care according to need and erodes the professional autonomy of individual doctors. Furthermore, there is no justifiable reason to introduce fundholding into Australian general practice. Medical management, currently initiated and undertaken by GPs, is clinically indicated and appropriate; therefore, there is little saving to be made by capping expenditure through fundholding, but there is potential for patients to be subjected to markedly rationed access to care.

The AMA is of the view that general practitioners must expose the dangers intrinsic in fundholding to the Australian public and lobby strongly to prevent its introduction.

2. AMA Fundholding Resolution

2.1 That Federal Council accept the following definition of fundholding (adapted from J. Beilby and B. Pekarsky) : "A framework within which specified resources, agreed prospectively, are made available for a defined period, and from which a range of services are provided to a specific group of patients."

2.2 That Federal Council reject fundholding as an integral feature of the healthcare system.

2.3 That Federal Council determine that fundholding models/projects will only be considered when no other funding model will achieve the desired health outcomes.

2.4 That Federal Council determine that when GP fundholding projects are considered all the following criteria must be met:

2.4.1 The proposed GP fundholding project/initiative must:

• be a local GP driven initiative designed to fulfil a demonstrated need;
• incorporate stakeholder consultation;
• rely on a local fundholder (NOT a national or international organisation/body and NOT an individual doctor or practice);
• have demonstrated local GP support for the choice of fundholder;
• incorporate clear quality improvement objectives;
• contain measures that ensure transparent management and accountability;
• NOT result in cost shifting;
• establish funding as additional to existing funds;
• incorporate an appropriate public evaluation strategy;
• recognise and remunerate GP input;
• define and separately fund administration costs;
• separate the funding pool from GP income.

2.4.2 The proposed GP fundholding project/initiative is unacceptable if it incorporates any of the following features:

• contains perverse incentives;
• contains 'cashing out' as a feature (for example cash out of MBS items);
• reduces access to patient care (rationing);
• reduces choice for patients;
• compromises clinical care;
• has a negative impact on existing GP services;
• increases red tape to GPs without appropriate remuneration;
• dilutes the independence of the doctor/patient relationship creates an increased burden for GPs;
  compromises fee for service;
• establishes the fundholder as an individual or practice;
• establishes the fundholder as any national or international organisation/body;
• reduces the competitive GP market place; and
• shifts Government risk to the fundholder.