The NSW health outcomes initiative and economic analysis.

The New South Wales Health Department's initiative on health outcomes promises some important advances in the planning and priority setting of health services. However, the potential to promote better health care will not be realised unless resources are redeployed to the programs where health outcomes (and other benefits) can be purchased most cheaply. The initiative reflects firmly the economic concept of efficiency but leaves less certainty about how concerns for equity are to be handled. This paper proposes that program budgeting and marginal analysis be used to create a framework for redeploying resources to follow the good buys--in terms of health and other outcomes. Additionally, the paper argues for creating the right incentives to promote efficiency, and expressly argues against the use of diagnostic related groups or casemix funding, as such funding is concerned, by definition, with cases and not with health per se. The goal of the initiative of trying to maximise health outcomes implies that there are no other valued gains to be had from health care. This is challenged. In reaching decisions about how best to deploy resources, more account should be taken, in a structured way, of community values.