Sounds Familiar

By Jim McVeagh 03/12/2009 4

This is the section on health from the 2025 Task Force summary:

10. Health:

a. A funder-provider model should be reintroduced in the hospital sector, allowing much greater private sector involvement in the provision of taxpayer-funded services.

b. Universal (unrelated to income or health status) subsidies for doctors’ visits should be abolished.

c. Subsidies for prescription pharmaceuticals should be substantially reduced, with those in generally good health and not on low incomes paying the full price up to a cap.

I’ve read the full section as well. These are the only three real ideas in it. This is all the much-vaunted task force could come up with for health. It is quite sad.

For a starter, Dr Brash would like to go back to the funder/provider split that worked so well in the 1990s </sarc>. All this shows is that he and his compatriots have no understanding of health care at all and are merely advocating ideology again.

The problem with the health reforms of the 1990s were that they were too timid. The then National government attempted to graft a mock free market onto socialised medicine with predictably disastrous consequences. Attempting to run a state-owned hospital as a business is lunacy. A private medical concern is extremely efficient: these are two words that do not describe state hospitals. Consequently, the attempt by the lumbering administration of state hospitals to become efficient, saw them cutting corners in all the wrong places while increasing their bureaucratic requirements exponentially. This process of cost cutting slowed under the DHB system, but all that achieved was rapidly rising costs.

What was really required was for the National government to grasp the nettle of health care and completely privatise the system, ensuring that the poor had access to health care by providing them with fully or partially subsidized insurance. The bizarre limbo we find ourselves in at the moment, where people are denied healthcare or delayed to death by the system is due solely to the attempt by the State to provide universal socialised health care alongside a fully functioning private system. You only need to pop along to South Africa to see the end result of this dual system: a decaying public service unable to cope with the sheer volume and a private health service costing a large fortune, simply because it is underutilised (driving up costs).

I do not expect the current government nor any future one to actually privatise health. Most people react with horror at the suggestion because they associate privatised health with the US system. In fact the problems with the US system are almost entirely related to the combination of too much state intervention and the pernicious effect of tort law. But the left have taught us that the US problems are due to “privatisation” and we have learned this untruth too well.

It should be obvious from what I have said that I think the second and third suggestions miss the point as well. In addition, reduction of doctor’s visit subsidies brings a clear problem at the margins where people earn $10 dollars a week more than their neighbour, yet pay the full price for doctor’s visits. A similar problem can be found with subsidies for pharmaceuticals, but here the problem is worse. With a dual (subsidised, non-subsidised) system, drug companies are incentivised to drop their prices dramatically for Pharmac, but increase their prices at pharmacies, effectively taking all their profit from the non-subsidised sales. This effectively locks out competition (because they take the volume), ultimately reducing choice and raising prices.

Because New Zealand is a small country and most places have no choice of medical facility, it should be possible to move to a privatised system in stages. Initially, withdraw funding from hospitals and place it into a universal insurance scheme. The scheme should NOT be government run but merely offer a universal subsidy to insurance companies, allowing people to buy more expensive coverage with their own money if they desire. Patients then immediately get a choice in the larger centers. Small hospitals can then be offered privately, initially to locals, then New Zealanders and finally overseas investors. Only the tertiary hospitals would remain and should be taken over by the universities (though the New Zealand universities do not appear particularly business orientated and would be better off having separate companies running the hospitals while retaining a major shareholding in the companies).

All this is doable, but requires enormous political will. It would fix the health system permanently, providing better access and proper cost containment. You could get your cancer therapy in 6 days time, instead of 6 weeks. You could get your hip replacement next week. It would actually matter if ED throughput and hospital bed turnover was managed properly.  Doctor’s pay scales would be contingent on the number and complexity of patients seen, rather than whether they fill a place on a roster.

Ah, well. I can’t dream, can’t I?..


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4 Responses to “Sounds Familiar”

  • I’m curious about your comment that the health reforms of the 1990s saw hospitals “increasing their bureaucratic requirements exponentially”. Exponentially in proportion to what?

  • I only arrived in NZ in mid 1995 so my information is based on what others have told me. Certainly I noticed a large increase in the amount of statistical information being gathered. A substantial portion of this was the same information collected at multiple different points. This information did not improve our clinical outputs, nor did it improve our financial position. I therefore conclude that it was unnecessary and, thus, bureaucracy.

  • I don’t think you understood my question fully. The word exponential has a precise meaning and I was assuming that you had figures that showed the “amount” of bureaucratic requirements (quantified in some precise way) was increasing exponentially with respect to some other measurable quantity. I guess you just meant that your friends told you that there had been a large increase.

    On another note, wouldn’t a large increase in the amount of statistical information collected be a good thing? It seems like a good way to improve any system be to collect statistical information about it, analysis it and use the results to make improvements. Or do you think the problem is that there is a lack of analysis being done with the data that is collected?

  • Ah, Sorry, I didn’t realise you were being a pedant… 🙂

    There is nothing wrong with statistical analysis. But most data in the public health system is collected by nurses – reducing the amount of clinical time they have. Worse still, these same nurses tend to pay little attention to the accuracy of this data. Thus the data is very dirty and the analysis consequently poor. Most DHBs realise this, of course, so their solution is to collect the same data from multiple points to try and get a more coherent data set.

    A real business, of course, would have invested in better IT solutions and would have attempted to streamline their data collection, to improve the quality.