COVER STORY : Taking the pulse – what is the prognosis for the health system?

If you want to keep yourself awake at night, or perhaps you need something scary to take the place of the old Sunday night horrors they used to have on television, turn your mind to health.
Not just your own, but the prospects for adequate healthcare for you, your loved ones, and the country overall, as the population ages and demand on the health system gets ever larger.
We are getting older, and as the population ages the amount spent on healthcare grows. The cost of healthcare is also being driven up by technological innovation, which aids outcomes but pushes up the required dollar input exponentially.
Then there is the rising tide of obesity, which looks set to push lot of people into healthcare at much younger age than they would normally need to be looked after.
A couple of years ago insurer Asteron began doling out BMI (body mass index – calculation of healthy weight ranges) index calculators to its clients. Asteron’s actuary, Kim Harrison, told Life Brokers Association conference that obesity is the number-one health issue facing the industry. It brings hugely added risks of diabetes, renal failure and extra pressure on hip and knee joints. Plus there is emerging evidence of clear correlation between depression and other mood disorders and being overweight.
When you have actuaries – who are, within the industry, notoriously unemotional types who are difficult to stampede in any particular direction – getting concerned, it is time to take notice. Although the headlines about ‘obesity epidemic’ might tempt the thought that this is all bit of media hype, the cold hard figures tell us otherwise.
While you’re getting yourself worked up, you might like to consider that the public health system, at least, has had spending rise at faster rate than other government spending, and at faster rate than the country’s economy, every year since 1995. Back then health was 14 percent of government spending: in 2005 it passed the 20 percent mark and has kept growing since.
The significance of this is that it has come at time when, demographically, health costs should have been falling. The aging population issue has not yet begun to put pressure on the health system and will not do so for roughly another 10 years.
Unexpected cost pressures within health are not new. One of the dynamics of this, going back long time, is that healthcare is labour intensive. With technologists always finding new ways to cure things, more people are employed to carry out those services. And they tend to be highly paid and highly mobile workforce.
That rise in health spending over the past 12 years also highlights another issue: costs have risen in New Zealand regardless of which political party has been in power.
Although politics is never far away from debates about health spending, this article will focus primarily on the management issues facing long-term healthcare. Politics, and over-committed ideological standpoints, have tended to obscure rather than illuminate the issues within health, and there will be enough political debate around health, no doubt, over the next year.
Rather, the focus will be on management issues around the health sector.
The divide is not just party political. For years there has been tension between the public and private health systems in New Zealand.
One example of how silly this got: until about decade ago, all accident compensation cases had to be treated by the public health system. That meant lot of relatively simple operations had to wait very long time before they got fixed, and over that time, many of them worsened.
In the four years following that change, the number of people with long-term ACC claims – ie, more than year – more than halved. Although other factors were involved, the then chief executive Garry Wilson cited the ability to draw on the resources of the private sector as being the most important.
Now, 10 years after use of the private sector began, “most ACC funded elective surgery” is carried out by the private sector, Ministry of Health’s deputy director general of sector policy, Kathy Spencer, told health conference earlier this year.
That conference represented shift in approach in New Zealand. Organised by the Health Funds Association, the idea behind the get-together was to set the ideological arguments to one side and discuss what the public and private health sectors have in common: the overall goal of healing sick and injured people, and the rising costs of doing so.
In global context, New Zealand is not alone in facing these costs, or in looking at finding new ways to deal with them.
The keynote speaker to that gathering, United Kingdom health economist Nick Bosenquet, told the conference there are three models around the OECD countries for delivering health services – and those models are converging on each other.
The three models are taxpayer-funded public provision, of which New Zealand is one practitioner; and social insurance model, also known as the Bismarck model after it was started by Otto Bismarck in Germany late in the 19th century. Third is the market model, of which the United States is the only practitioner.
Bosenquet emphasised he was not going to preach to New Zealanders which system they should adopt, “but this is the way the world is going”.
“The US, for example, is less market oriented than it was and more concerned with access and cost control.”
He also noted the East European countries, with former communist regimes, have tended to move towards more market-based model than many OECD countries.
There seems to be more public appetite for mixed model in New Zealand, even if the politicians seem reluctant to talk about it.
A survey conducted by ShapeNZ on how people see future health policy shows New Zealanders are very concerned with the issues and are prepared to consider some radical options.
Firstly, an overwhelming majority do want public hospitals to remain free – 90 percent. That suggests any government wanting to try charging, as was briefly tried in the early 1990s, is not going to get very far.
However nearly two thirds – 64 percent – say District Health Boards should be able to buy health services from private and other health providers.
And just over half – 51 percent – said both public hospitals and private health providers should be able to compete for additional taxpayer funds to provide extra hospital services.
Asked what should be the preferred option for providing more money to public hospitals, 45 percent said making greater use of private hospitals, 29 percent said they would rather have more money going to public hospitals, and 21 percent said the demand should be dealt with by encouraging people to take out more private health insurance.
That last point is significant one, because encouragement, at least in the form of tax break, has been no-no for some time.
The Health Funds Association has pushed for it, but Treasury analysis, carried out in 2002, indicated it would not make great deal of difference: the trade offs in revenue lost would be greater than any lessening of pressure on the public system.
There might, though, be case for some sort of government incentive to stay in health insurance when you get older, says Health Funds Association executive director Roger Styles.
More generally, though, Styles says the move to mixed model simply recognises the different sectors are good at different things.
“Demographics are driving lot of this. Orthopaedics is perhaps the best example. With people aging, but living longer, they are now starting to need second or even third replacements of the same joint.” At between $14,000 to $20,000 joint, those costs add up, he says.
“There’s lot of repeat business, and we’re going to see joint replacements rise exponentially over the next 30 to 50 years.
“There’s no way the Government is going to be able to fund and provide all that on its own account. And I think we’re reaching the end of the experiment