Health funding: the nature of distortions and implications for the health service mix.

With restricted public sector budgets, there is increasing pressure to obtain value for money in the allocation of health sector resources. Distortions and inefficiencies created by features of Australia's health funding arrangements prevent health resources moving from lower valued to higher valued activities. These distortions tend to restrict resources being allocated to disease prevention and health promotional approaches, favouring medical treatment. These propositions are illustrated, largely with reference to diabetes.