Former NZ Health Minister on Private vs. Public Healthcare

Worth A Look, Healthcare & Welfare, Frontier Centre

The World Health Organisation’s comparative review of the performance of national health care systems has occasioned much navel-gazing the world around. Here in Britain – where I am writing this column – the daily broadsheets have all found reasons to editorialise yet again on the miseries of the National Health Service. Consuming a smaller share of national output than any other developed economy, the British believe their system is, at one and the same time, miserly and a unique national treasure that somehow defies the law of economics.

One paper has gone so far as to run a series of articles on other countries’ health systems in search of the Holy Grail. Last week it was New Zealand’s turn. Despite the fact that the system described in the article was virtually unrecognisable to me, its conclusion was both foregone and familiar: that New Zealand spends significantly more than Britain for no appreciably better outcome.

But what does it all mean? Favourable conclusions are frequently drawn about the Canadian system (which spends far more than we do) and the system in Oman that spends far less. What on earth is going on?

In truth, all these comparative statistics try to square off triangles into round holes. They look at access, excellence, equity and outcomes across a bewildering range of cultural and institutional variables. About the only conclusion you can draw is that no-one is satisfied with their health system (although almost everyone loves to demonise the system – America’s – which just happens to produce some of the most radical, leading edge medical technologies on the face of the planet).

It all boils down to what you want from a health system. The evidence is that the richer a country is, the more its population will spend on health services. Health care is both a necessity and an infinitely expandable item of consumer spending. Basically, people in developed countries are obsessed with their personal mortality and will devote almost unlimited resources to deferring it. The richer we become as a society, the less we are prepared to put up with discomfort.

Some people are not even prepared to put up with perfectly healthy ageing, going for all sorts of nips and tucks to stay lithe and youthful for longer.

If health care was funded on a wholly private basis, we would expect health spending to rise in line with disposable incomes. Rational people would make an assessment of their risks and insure against those very costly medical disasters they couldn’t easily predict or provide for. The balance they would find on an "as needed" basis. Such an approach would lead to a reasonably good match between demand for services and what consumers are prepared to pay for (surprise, surprise).

But no-one has ever done it this way – not even the diabolical, market-driven "privatized" health system (as local demonologists refer to it). Even in America 44 percent of health expenditure is socialised. Why? Simply because in societies like ours there is a very deep moral distaste for radical inequality when it comes to access to health care. That distaste goes far deeper than any other element of social spending.

Whereas many people believe welfare payments should be no more than a minimum safety net, very few people will take such a tough line on health care. Somehow, when health and survival is at stake, we tend to assume there are needs that should be met without any questions asked. That shouldn’t surprise us: our tolerance of inequality differs markedly. No-one seriously insists incomes or the standard of housing should be equalized. Education invokes more egalitarian scruples, health the most of all.

I’ve always assumed this was one of the most deeply embedded elements of our Christian heritage – the Good Samaritan ethic. Either that or a large measure of "there but for the grace of God go I" (or whatever the secular equivalent is). The only trouble with this approach is defining the minimum level of access required to discharge that moral imperative.

Needless to say, it is a feast that is moving as fast as the technological breakthroughs that keep turning insoluble medical problems into soluble ones. But assuming that thresholds can be defined, the decision that then has to be made is how to fund it? And in many countries like New Zealand, the tradition has been to match the moral case for equality of access with a taxpayer funded scheme. Risks are pooled across the entire population and funded through a re-distributive tax-funded scheme. The only question is how much tax we’re prepared to levy in total.

Many on the left feel so strongly about the need for an egalitarian health system that they would be much happier if it was simply not possible to buy more than the state system provides. But banning private health care would amount to an horrendous infringement of people’s rights to spend whatever money’s left to them after taxes on arguably the most important thing to them in the world – their health.

So they’re forced to tolerate a private system through which people can secure all the things deemed for the time being unaffordable as part of the universal minimum. It acts as an escape hatch for the reasonably well off and a safety valve for an even wider catchment.

The juggling act that is constantly being performed is one that seeks to maximize universal access without spreading resources too thinly (with resulting queues) or too thickly (inviting either over-use or gold-plating by providers). The only conclusion I can draw is that we pay a heavy price for something falling well short of equality. There are lengthy waiting times in the hospital part of the system filled (at least in part) by people who could afford to pay but feel, on principle, that they’ve paid their taxes and they’re not going to pay twice. On the other hand, there are elements of primary (i.e. GP-based) health care that are completely free and almost invite over-use.

There are no obvious solutions in sight that will not run against the grain of long-held expectations about entitlements to health care. Notwithstanding Labour’s willingness to raise taxes on higher income earners, I should have thought there was limited room to meet those expectations from higher taxes. If New Zealanders want to preserve the basic structure of a taxpayer-funded system, they are going to have to accept there will be things that system cannot provide. In those circumstances, the terms on which private dollars may be added to public dollars become critical.

Making it difficult for people to top up their taxpayer-funded access has the bizarre result of making private care more expensive while placing more strain on the public system. It is time we had a straightforward debate about this. Hospital patients can jump the queue by paying the full cost of an operation in private hospitals – out of sight and out of mind of the public hospital on which their surgeons will be relying for backup in the case of a real emergency. But they’re not able to purchase the same services at less cost in a public hospital using under-utilised capacity, thereby benefiting both the public hospital and reducing waiting times for those relying purely on the public system.

Members of the current government wilfully misrepresented ideas like these as "privatization" while in Opposition. Now that they are presiding over the public health system and finding that queues and cost pressures are ineliminable, it is to be hoped that they might park their ideology and look at some practical solutions. Setting up a cumbersome system of partially elected hospital boards will do nothing for improved health services. Looking at the way in which public and private health dollars can be used synergistically could achieve a lot without sacrificing the egalitarian premises on which our present health system is allegedly based.