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BUDGET 2014: Bandage won’t cure health issues

How affordable will the public health system be in the future? Will a sticking plaster approach quell the unease or is a bigger change required?

We’ve shown capacity for innovation within the health sector in the past. Politicians from both sides of the fence recently lauded the success of the accident compensation scheme (ACC). It was first proposed by Sir Owen Woodhouse in the late 1960s and was adopted by the government in 1974. 

We continue to be recognised as a world leader on this and many mature nations have not been able to replicate such a scheme to achieve no-fault accident cover, leaving their courts clogged with a myriad of petty personal injury claims where only the lawyers gain.

You would think that given this capacity for visionary policy development, politicians could successfully achieve a similar outcome with a national health insurance scheme that effectively covers treatment costs for sickness. 

We are constantly hearing about the looming “grey tsunami.” In the health sector, some in senior management quietly suggest all is well, while others are less comfortable with the direction of health funding, forecasting serious workforce challenges and an expectation funding for technology will need to be increased. 

New Zealand is the only country that taxes contributions to private health insurance schemes. Contributors either fund this out of their after-tax income or, if they are lucky enough to enjoy employer contributions, the employer gets hit in the pocket with fringe benefit tax. This doesn’t embrace the same community spirit that helped found the ACC scheme.

To further complicate matters, market-based solutions that work successfully in other sectors won’t necessarily be effective in the health sector. 

The major sources of market failure in the health sector are the monopoly power of providers and uncertainty among consumers. There are also barriers to entry: healthcare professionals must be licensed and there are constraints on access to care, either through physical location of consumers or the decisions of providers.  

We only need to look to Spain and Holland to see examples of countries challenged by a burgeoning health spend that was only tempered by the introduction of national health insurance.

Germany, on the other hand, established a public health insurance scheme over 100 years ago. Australia also established a national health insurance scheme during the 1970s, although successive governments have hampered the full implementation of the original proposals.

Moving to a national health insurance scheme is not an overnight decision but it should be seriously considered in this year’s budget. Complex planning will be needed to implement it along with agreements on health policy goals and maintenance of the existing health infrastructure. 

Some of this hard work may already have been done with the existing ACC infrastructure. And once a scheme is set up, it needs to be politically robust enough to withstand changes in government. It could easily be an excellent platform for cross-party policy development.

Any political move to support a significant ground shift in the funding of social policy is the domain of the bold and the brave. We have done it successfully before on other social policy matters. Surely we are no less brave and capable to do it again.

Pam Newlove is a partner, privately held business, at Grant Thornton New Zealand and chairs its board

Comments and questions

What a contrast we had this week. Collection for the St John Ambulance . Funding from taxation or taxpayers after tax income.

Compared to a near billion dollar business called Ngai Tahu disguised as a charity paying no tax at all. What a contribution the maori economy is making. Yeah right. They are in a position of extreme privilege.

Even the Salvation army is spewing at this massive anomally.

An interesting article.
What makes the author think our pollies have any vision that extends past the next election?