They tell us that the healthcare system is in crisis,on the verge of failure” – expenses exceeding budget, longer waiting times, widespread staffing shortages.
The government responded by dismissing the Te Whatu Ora (Health NZ) board and appointing Lester Levy as a commissioner tasked with reducing “excessive spending.” Levy himself called a system “puffed up” and said a “reset” was needed.
But claims of overspending play down essentially the most significant external aspects contributing to our strained health care system while attempting to shift attention to internal issues. We fear that the overspending narrative could also be a precursor to doubts concerning the viability of a publicly funded system typically.
Many of the challenges facing our healthcare system are not unique to New Zealand. Global labor shortages have been increasing because the 2000s and are affecting most healthcare systems.
COVID-19 has exacerbated these trends. Many healthcare staff experienced burnout throughout the pandemic and left the healthcare system. Many of those that remain are stressed and overworked.
Pressure from the workforce is compounded by various other aspects: increased demand for healthcare services, an ageing population (patients and healthcare staff), an ever-increasing variety of treatment options and rising patient expectations, and the increasing prevalence of chronic conditions requiring ongoing, long-term care.
New Zealand spends too little on healthcare
The health systems of most high-income countries are under pressure. But by far the largest local contributor to New Zealand’s health system stress is its historical and current underfunding. Instead of overspending, it has long been extremely frugal.
In the 2010s, healthcare spending was just over 9% of the country’s GDP, while most comparable countries spent between 10% and 12%. According to OECD dataIn 2020, New Zealand spent the equivalent of $3,929 per person on healthcare – significantly less than Canada ($6,215) and Australia ($5,802).
This gap creates a disparity in healthcare staff’ pay in comparison with similar countries, exacerbating labour shortages as beneficial expert staff leave for higher pay elsewhere. While there may be scope for efficiency improvements in some parts of the system, any such gains could be small in comparison with the cumulative extent of underfunding up to now.
Equally vital is the two-tiered nature of New Zealand’s health care system. The Social Insurance Act 1938, which created a publicly funded system, was intended to make sure that health services were free and available to all residents. However, primary health care is currently unprofitable for about one in eight New Zealanders.
The problem goes back to the unique compromise between government and the medical career. GPs retained the precise to operate as private businesses, receiving government subsidies while charging patients for consultations. Doctors in public hospitals became salaried employees but were allowed to run private practices.
As a result, better-off people could more quickly access private-sector health services. No government since has been in a position to change these arrangements, despite the numerous inequalities in access they create.
Would other financing models work?
For more than 80 years, the fundamental structure of publicly funded healthcare has served us well, even with two-tiered design flaws. About 80% of healthcare is publicly funded through taxes, a model we share with Britain, Spain and the Scandinavian countries.
Given 37% of New Zealanders currently have private insurance, would a greater role for personal financing reduce the pressure on public financing? International experience tells us no.
The US private health care system, based on insurance, is by far the costliest on the planet, absorbing almost 18% of GDPPrices paid by private insurers for health services have risen much faster than the costs of the general public parts of the U.S. system.
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There can also be evidence from New Zealand that personal insurance can burden the general public sectorwith acute follow-up care sometimes required in public hospitals. Private insurers are coping with rising health care costs by increasing premiums and tightening eligibility restrictions.
Health systems that rely on private insurance for financing are less accessible, less efficient, less equitable, and customarily have worse health outcomes. Put simply, market-based health care does not provide the expected market advantages but generates the expected drawbacks.
An alternative to the tax-funded system is social insurance, where employers and employees contribute to a sickness fund, much like the New Zealand Accident Compensation Corporation.
In countries with social insurance, akin to Germany and the Netherlands, care is especially provided by non-governmental providers reasonably than government-run hospitals. But tests showed that social security systems face greater cost pressures because they’re costlier to manage than tax-based systems.
In tax-based systems, rationing based on financial shortages is more visible in the shape of waiting times and waiting lists. In private insurance-based systems, rationing relies on affordability and is far less visible.
Access and integrity protection
To meet the challenges facing New Zealand’s healthcare system, adequate funding and investment within the people behind the system are needed.
This includes each the healthcare staff who look after us and the executive and support staff who make our healthcare possible.
Short-term belt-tightening will most certainly deepen the crisis. In the long run, an actual publicly funded system is more efficient and effective than known alternatives.
This requires political commitment to actively address the multiple issues driving the crisis in a way that’s consistent with our values of universal access and justice.
In the meantime, we will need to have difficult conversations about address this underfunding and train and support the health workforce. Our publicly funded health system is as essential now because it was when it was created to make sure all New Zealanders have access to health care after they need it.
