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| Journal of the New Zealand Medical Association,
14-May-2010, Vol 123 No 1314
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Building on myths: an economist’s response to
the Ministerial Review Group Report on the Health System
Rhema Vaithianathan
The (2009) Report of the Ministerial Review Group (MRG)
recommends a number of useful measures to enhance the New Zealand health system.
For example, there are far too many primary health organisations
(PHOs)—and indeed far too many district health boards (DHBs), an issue
that the report somewhat skirts around. Moreover, asking PHARMAC to extend its
role to evaluating medical devises seems sensible.
However, in my experience both detractors and friends of
publicly funded health systems indulge in myths and fallacies about the health
system to serve their ends. For example, those on the left argue strongly
against increasing the use of private providers ignoring the fact that the bulk
of health care is indeed provided privately (GP services, laboratory,
pharmaceuticals, most of aged care, medical devices, etc).
On the other hand, detractors of the public health system
argue that expenditure is unsustainable, and that unless something is done
immediately, expenditure will balloon until every tax dollar is being devoted to
health care. This is clearly nonsense. The same could be said about the trend in
other expenditures which have seen phenomenal rise in the last 10 years, such as
household services.
No-one is warning the country that unless something is done
immediately, in 50 years we shall be spending every last dollar on nannies. I
fear that the MRG does fall into the trap of overstating the economic
imperatives for reform.
The biggest loser from perpetrating these myths about a
national health system is the system itself. The evidence suggests that New
Zealand has a good health system. For example, the Commonwealth Fund
international comparison of six countries (US, UK, Australia, Germany, Canada,
and New Zealand)2 found that New Zealand spent
the least of all these countries but performed in the top half for quality,
efficiency and access. New Zealand performed worst on indicators of equity and
healthy lives—a measure of our poor performance in preventative health
rather than the overall health system.
The purpose of this article is to highlight some of the
fallacies that I believe the Ministerial Review Group (2009) has fallen into.
Healthcare spending is too high compared to other countriesTable 1 provides a ranked list of the latest healthcare
spending as a proportion of gross domestic product (GDP). New Zealand ranks
12th out of 25 countries for which data is
available.
Table 1. Healthcare expenditure (% GDP,
2007)
Source: OECD, 2009.
This comparison suggests that New Zealand does not spend an
exceptional amount of its GDP on health care. Certainly not enough to warrant
the panic and demands for urgent action that are suggested in the paper.
New Zealand health system has had exceptionally high growth in expenditureThe growth in health expenditure as a percentage of GDP is
also not excessive. While in the top half of the OECD, it is hardly the dramatic
growth seen in the US (see Table 2).
Moreover, the claim that we need to do something about this
growth now to avert a crisis in future, is in my opinion, incorrect. In
particular, the idea that we have a dramatic challenge that needs urgent action
is not borne out by the data—we are one of the lowest spending healthcare
systems in the OECD in per capita terms. Yet our increase in life expectancy
over the 2000–2004 period was reasonably good. For males it was 2.1
(compared with 1.8 for the OECD as a whole). For females it was 1.4, which is
equal to the OECD average.
The performance of New Zealand’s health system does
not stand out as being overly generous in terms of expenditure, nor
under-performing in terms of outcomes; the need for radical changes based on
financial constraints are simply not present.
Table 2. Percentage growth in healthcare
expenditure as a proportion of GDP
That healthcare spending increases are undesirableHealth expenditure in all countries follow an upward trend
(Table 2). New Zealand is no exception. This is not a bad thing. As the work of
Harvard Professor David Cutler has demonstrated, healthcare spending saves
lives. He estimated that almost half the increase in life expectancy from 1960
to 2000 in the US was due to medical care.1
Cutler’s findings suggest that the best value was to be had by increasing
life expectancy at younger ages, whereas the improvement in life expectancy
through spending on those over 65 years came at a very high cost.
That reporting and new agencies are a solutionThe paper falls into the trap—which is often a risk
when the problem is not clearly articulated—of arguing that “reports
should be written and agencies established”. Reports themselves are never
a solution. Change in behaviour requires change in incentives.
For example, requiring a formal Regional Service Plan is not
the solution to the fact that DHBs which could currently benefit from such a
plan are not doing it. The question that needs to be asked is why are
they not doing it?
If the answer is a lack of incentives—then surely the
solution is to re-consider the incentive structures under which the DHBs work.
Micro-process requirements such as these are the worst ways to elicit changes in
activity. The fact is that we want regional planning only when it is
cost effective. A requirement that such plans be done means that even when it is
not valuable they would need to be undertaken. Such requirements make the system
less flexible.
I do not think the logic for the creation of the new
agencies and the break-up of the functions of the Ministry of Health have been
clearly articulated. Restructuring is an extremely expensive exercise—with
huge downside risk especially in terms of reducing staff morale and possibly
increasing turnover. It should be done with a great deal of precision and with a
clear articulation of why it is restructuring that is the solution (as opposed
to say a change in the payment mechanism, change in responsibilities amongst
existing agencies, or monitoring regimes).
That clinical leadership is cost-effectiveWhile it is certainly desirable for clinicians to be engaged
in management roles, the call for greater engagement and leadership flies in the
face of claims made elsewhere in the paper that there is a shortage of
clinicians.
In this case, taking them out of leadership roles
and into clinical roles would enhance the available workforce. Given the
scarcity of clinical staff, it would seem that a sustainable solution needs to
be found for leadership which is effective in changing clinical behaviour but
not actually by clinicians.
That the only benefit of prevention is cost savingsThe report suggests that the main benefit of prevention is
in reducing costs of care. This is clearly not the case. Prevention also
generates significant improvement in health. As Cutler et
al1 found, the best benefits of healthcare
spending is on the young because of the increased life over which the benefits
are gained. Since the young rarely interact with the personal health system,
changes to health in this age group have to be mediated through public health
strategies.
ConclusionClearly New Zealand does need some changes. My personal
priority would be the following:
Overall I found the report needed a more
structured analysis of the current systems. The report presents a hotch-potch of
good ideas, rhetoric and micro-management issues best left to the Ministry of
Health.
Competing interests: None known.
Author information: Rhema Vaithianathan,
Health Economist and Associate Professor in Economics, University of Auckland
(previously Harkness Fellow at Harvard in 2007–2008; and a Health
Economist at the Health Funding Agency, the Transition Agency, and Waitemata
District Health Board).
Correspondence: Associate Professor Rhema
Vaithianathan, Department of Economics, University of Auckland, PBN 92019,
Auckland, New Zealand. Email: r.vaithianathan@auckland.ac.nz
References:
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