Health Minister Jonathan Coleman says private investors in the mental health sector will not be able to cherry-pick clients or "fudge results" in order to get a return on their investment.
The Government has confirmed plans for New Zealand's first social bond, which will focus on job support within the mental health sector.
Dr Coleman defended the scheme against claims that it was gambling with New Zealand's most vulnerable people.
Until now there had been no sanctions or incentives in the mental health sector, he said. Because individuals, private companies or charities would be paid a return only if targets were met, there would be an incentive to provide high-quality services. "This will sharpen everyone's minds," Dr Coleman said.
Responding to concerns by the Labour Party, he said providers would not be able to avoid difficult, more expensive clients or play the system. "We get to set the contract and say, 'This is the group you're paid to work with'," he said.