Standardized mortality ratios and Canadian health-care funding

Needs-based capitation models have been suggested as an alternative to health-care funding methods based on historical utilization patterns. The standardized mortality ratio (SMR) applied in conjunction with an age/gender adjustment is the most widely adopted measure of relative need. This paper addresses a number of important index construction issues using Canadian data and discusses their health policy implications. These include the influence exerted by the age structure (excluding people over 64 versus 74), the optimal period over which to average the SMR in order to smooth meaningless fluctuations, and the correspondence between SMRs, standard socio-economic indicators (i.e., unemployment, education, and income), healthcare "need," and expenditures.