Trying to get public health spending up down under

New Zealand's story has become a cautionary tale of healthcare reform

New Zealand's story has become a cautionary tale of healthcare reform. Like the Republic, New Zealand has two-tier access to hospital care and charges most patients to visit their GPs. It spends less than the Republic on healthcare. Radical reform has met radical reversal.

Life expectancy is longer than in the Republic, however: a year and a half longer for both men and women.

Although the British monarch is still the head of state, New Zealand became fully independent from the United Kingdom in the late 1940s, just before the foundation of the NHS. New Zealand has not sought to establish a comprehensive, equitable healthcare system, free at the point of use.

Hospital inpatient treatment has been free since 1938. By 1947, a predominantly tax-funded healthcare system was in place, which, while subsidising the GP care of lower-income patients, permitted GPs to set their fees. Primary care is dominated by private for-profit general medical practice.

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In a study last year of primary care, Dr Beverly Sibthorpe of the Australian National University commented that "charges are seen as a significant barrier to accessing primary medical care".

GPs' fees range from 30 New Zealand dollars (£11) for consultations in poorer areas to 50 New Zealand dollars (£18.30) in affluent areas. GPs do not accept the 15-dollar (£5.50) state subsidy as a full fee and may impose an extra charge on subsidised patients. There are no official figures on GPs' earnings.

Doctors in public hospitals are salaried employees who earn between 95,000 New Zealand dollars (£34,800) and $148,000 (£54,200) and frequently also engage in private practice at private hospitals.

Waiting lists for elective surgery have increased the demand for private health insurance, to fund private treatment. Approximately 30 per cent of the population now has private insurance, according to the New Zealand Medical Association.

Waiting times have improved. At the last count, 16,400 people had been waiting for more than six months for prescribed surgery and 4,400 for more than two years.

New Zealand today is a poorer state than the Republic. Irish income measured as GNP per capita overtook New Zealand's in the late 1990s. New Zealand's total and public spending on health were above the EU average in 1998, when measured as a proportion of GDP. This reflects the fact that New Zealand's GDP is relatively low by European standards, however. New Zealand's per-capita public health spending remains below the EU average and has been exceeded by the Republic's since 1997.

In 1991, the National Party government initiated radical healthcare reform in a political climate that promoted market solutions to social problems. Public hospitals were expected to perform as businesses. A report by the Arthur Andersen management consultancy suggested that up to 32 per cent of expenditure on hospitals could be saved by shorter stays and better management. Managers were recruited from outside the public service. Hospitals and other "providers" of healthcare competed to sell their services to regional health authorities.

It was not a happy experiment. A report into the deaths of seven patients at Christchurch Hospital in the winter of 1996 revealed a treasury group that had been monitoring hospitals' performance had been aware that "efficiency gains . . . were aggressive". Competing for their funding, providers of care had also ceased to co-operate and share information.

The Labour-Alliance coalition government elected in 1999, under Prime Minister Helen Clark, ended the purchaser-provider split in the hospital sector, although it still exists in primary care. Clark chairs an interdepartmental "closing the gaps" committee that seeks to reduce social inequality.

The new health strategy enacted last year stated her government's belief that "the commercial focus of healthcare in recent years", with competition "for the largest share of the health dollar", was undermining public trust in the health system. New Zealand is grappling with how to fund healthcare adequately and shift its balance from hospitals to primary care. The jury is out on whether Clark will succeed where others have failed.