Addressing inequities in health both within and between countries has attracted considerable global attention in recent years. In theory, equity remains one of the key policy objectives of health systems and underpins the allocation of health sector resources in many countries. In practice, however, current evidence demonstrates that only limited progress has been made in terms of bridging the health inequity gap and improving the health of the least advantaged. The persistence of inequities in health and health outcomes raises concerns about how governments and health authorities distribute limited health resources to improve the health of the poor and most vulnerable and thereby promote equity. This thesis is about equity and allocation of financial resources in the health system of New South Wales, one of the eight states of Australia. It investigated the extent to which there has been a movement towards equity in resource allocation to Area Health Services under the NSW Health Resource Distribution Formula and whether this has been reflected in equitable resource allocation within Area Health Services. It considered only resources allocated through the NSW Department of Health. The study employed a combination of qualitative and quantitative methods to gather and analyse data. The qualitative component analysed data gathered through semi–structured interviews with policy makers, health executives, managers, and other stakeholders to establish the resource allocation processes and the factors upon which the allocation decisions were based. The quantitative component analysed health expenditure and health needs data to assess the extent to which allocation of resources from the State to Area Health Service levels has been equitable in terms of reflecting the level of health needs. Two indices were constructed and used as proxies for health needs. Principal component analysis was used in the construction of one of the indices, using demographic, socio–economic and health-related data. The other index was developed using a combination of premature mortality and morbidity data. The quantitative study spans the two decades 1989/90 to 2006/07, with a more detailed analysis of material for the years 2003/04 to 2006/07. The findings of the study show a considerable degree of inequity in resource allocation with several Area Health Services (AHSs) receiving less than a fair share of funding for the years analysed, although some movements towards equity were evident. This contradicts the general impression that the introduction of the resource distribution formula in NSW has significantly improved equity in resource allocation. In general, funding allocation at the State level correlated significantly with population size but not with health needs of the eight AHSs in NSW. Similarly, within the AHSs, allocation of funds was based on programs and services and not on health needs. Key issues that emerged from the qualitative data as affecting the equity with which health funds are allocated in the NSW health system include limited use of the resource distribution formula at the state level, lack of an effective resource allocation tool to guide the distribution of funds within AHSs, and insufficient emphasis on equity at the AHS level. It is crucial that these and several other issues identifies in the study are addressed if current inequities in funding and in health outcomes generally are to be effectively reduced.

Addressing inequities in health both within and between countries has attracted considerable global attention in recent years. In theory, equity remains one of the key policy objectives of health systems and underpins the allocation of health sector resources in many countries. In practice, however, current evidence demonstrates that only limited progress has been made in terms of bridging the health inequity gap and improving the health of the least advantaged. The persistence of inequities in health and health outcomes raises concerns about how governments and health authorities distribute limited health resources to improve the health of the poor and most vulnerable and thereby promote equity. This thesis is about equity and allocation of financial resources in the health system of New South Wales, one of the eight states of Australia. It investigated the extent to which there has been a movement towards equity in resource allocation to Area Health Services under the NSW Health Resource Distribution Formula and whether this has been reflected in equitable resource allocation within Area Health Services. It considered only resources allocated through the NSW Department of Health. The study employed a combination of qualitative and quantitative methods to gather and analyse data. The qualitative component analysed data gathered through semi–structured interviews with policy makers, health executives, managers, and other stakeholders to establish the resource allocation processes and the factors upon which the allocation decisions were based. The quantitative component analysed health expenditure and health needs data to assess the extent to which allocation of resources from the State to Area Health Service levels has been equitable in terms of reflecting the level of health needs. Two indices were constructed and used as proxies for health needs. Principal component analysis was used in the construction of one of the indices, using demographic, socio–economic and health-related data. The other index was developed using a combination of premature mortality and morbidity data. The quantitative study spans the two decades 1989/90 to 2006/07, with a more detailed analysis of material for the years 2003/04 to 2006/07. The findings of the study show a considerable degree of inequity in resource allocation with several Area Health Services (AHSs) receiving less than a fair share of funding for the years analysed, although some movements towards equity were evident. This contradicts the general impression that the introduction of the resource distribution formula in NSW has significantly improved equity in resource allocation. In general, funding allocation at the State level correlated significantly with population size but not with health needs of the eight AHSs in NSW. Similarly, within the AHSs, allocation of funds was based on programs and services and not on health needs. Key issues that emerged from the qualitative data as affecting the equity with which health funds are allocated in the NSW health system include limited use of the resource distribution formula at the state level, lack of an effective resource allocation tool to guide the distribution of funds within AHSs, and insufficient emphasis on equity at the AHS level. It is crucial that these and several other issues identifies in the study are addressed if current inequities in funding and in health outcomes generally are to be effectively reduced.