This paper examines the issues associated with introducing bundled health care payments for primary care in Australia, including the predisposing conditions required for their successful implementation. These are discussed in the context of the Commonwealth Government-initiated Reform of the Federation and Reform of Australia’s Tax System. Like all health care systems, the Australian health care system is facing challenges. There have been calls for an urgent reform of the funding system to better support a well-functioning primary health care system that delivers better clinical outcomes, particularly for those with chronic conditions and for vulnerable populations, and is sustainable. This requires incentivising care coordination and integration of care.
There are fundamentally three payment mechanisms, which are along a spectrum; fee-for-service, bundled payments and capitation. Each has advantages and disadvantages and each has its place depending on the goals of the health system. The payment methods can be blended with one another and with other strategies to either encourage desirable benefits or discourage undesirable consequences. These strategies include pay for performance, benefit and risk sharing, and management strategies.