In a dramatic move this week, the government replaced the board of Health New Zealand (Te Whatu Ora) with a commissioner.
Dramatic but not much of a surprise. Last November, health expert Ian Powell wrote, “The health system is in a state of chaotic crisis (carnage is what it often feels like to those at the clinical frontline).”
He thought that if the new Minister of Health did not decisively change the board’s direction “nothing would change”.
Take a bow then on this first step, Minister Reti.
Even so, taking this measure can be only a prelude to addressing the ‘chaotic crisis’.
Powell sees the critical needs as building delivery capability and changing the culture. The current central government command and control culture based on “elitist incompetence” needs to be replaced by a culture of greater subsidiarity (the empowerment of local responses to the needs of local communities).
There is also a compelling fiscal need for decisive action. Health New Zealand is overspending at an alarming rate of $130 million per month, implying an annual of $1.56 billion if uncorrected.
This is a real threat to the new administration's fiscal credibility. Its May 2024 Budget allocated $181 billion (about $90,000 a household) for core Crown spending in 2024-25, with $180 billion already allocated. The health overspending alone threatens to wipe out that slim $1 billion margin, and almost everywhere the Minister of Finance looks, she must see other serious threats to her fiscal targets.
Nor is it just this year’s problem. Treasury warnings about the tightness of spending plans beyond 2025 imply that the Budget targets are implausible under current policies.
In other words, significant future cuts to existing spending programmes will be needed to keep within the spending targets. That embodied task made the fiscal challenge beyond 2024-25 look grim.
The new Commissioner’s twin tasks of finding $1.4 billion in savings while improving services and meeting health targets reflect those fiscal and health imperatives. To put that saving in perspective, Treasury forecasts core Crown spending on Health in the current fiscal year to be $31 billion, compared to a pre-Covid amount of $18 billion. (In real per capita terms, the rise is 14% against the consumer price index.)
The new Commissioner thinks his task is achievable, and a good Minister would not set him up to lose. Moreover, they both know the health system as insiders. There are grounds for hoping for improved outcomes from less spending in the short-term.
But there are deeper issues. Changing the board does not change the centralised ‘command and control’ monopoly structure that disempowers users.
Nor does it address the problem that the changes made in 2001 to the funding of General Practitioners have broken the GP market. The government has dictated GP remuneration, making it uneconomic for GPs to take on needy patients.
We can get a haircut from any local barber, but media reports tell us that about 250,000 New Zealanders cannot access a GP because they cannot find one who will sign them up.[1] Talk about priorities!
The GP problem is a ‘Soviet-style’ one. Government “Wellington knows best” control has dictated GP remuneration through capitation payments and a cap on out-of-pocket charges per GP visit. Setting the cap too low reinforces the incentive built into capitation payments ─ to reduce visits without reducing capitation revenues.
The deep feature of these “command and control” structures is that they disempower and frustrate professional providers and the general public alike. The public is taxed one way or other to pay for more than the service cost. (Tax collectors and spending bureaucracies must be paid.)
This system means the public is no longer the one that pays the piper and calls the tune. Government politics dictates the tune instead. Witness Pharmac funding.
The under-pricing of medical services forces access to be rationed by non-price means. This does not necessarily favour people experiencing poverty. The well-off have more options.
The public’s role is to queue for whatever the government provides at too low a charge, be it a shortage of GP’s, hours of waiting in A&E, months of waiting to see a specialist, or years to see if a medicine will be subsidised.
The deep irony is that when your pet gets ill, it is easy to get the needed veterinary appointment. Pets can get timely treatment, humans cannot. Does this seem wrong, anyone?
Powell’s call for greater subsidiarity in the provision of medical services has merit. However, it needs to be done in a way that gives more power to the users of the services.
In short, a deep rethinking of healthcare economics, incentives, and governance is needed. Government needs to excel in addressing public health issues, such as vaccines. Its role in non-communicable health issues is more problematic.