OECD Health

“Healthcare NZ’s ‘biggest threat’ – OECD” blares the headline, which nearly sent it straight to my spam journalism series, but the underlying article is interesting. It is the OECD report on New Zealand’s economy.

““With the risk of a baseline level of debt much higher than expected before the [global economic] crisis, controlling future health (and pension) costs is even more important,” the OECD report says.

“It says the economy is likely to remain in recession for the whole of this year before recovering “only hesitantly” next year. “It is crucial that the new Government’s first Budget this May delivers a credible consolidation plan,” it says.”

It is true that the two government expenditures that have been rising most steeply are the health budget and pensions (note that by “pensions” we mean future provision for pensions, not the amount of the current pension). The OECD has thus confirmed that the reduction of Kiwisaver and the cessation of payment to the Cullen fund are both wise moves. It will be interesting to see their reaction to Bill English’s first budget. I am not altogether sanguine that there will be much in the way of “consolidation”.

“The report talks a lot about imbalances within the New Zealand economy and says the country needs to close the “substantial” income gap with other OECD nations.”

Too right. We have plenty of opportunities. Someone pointed out to me the other day that ultrafast broadband would make us a natural storage point for the world’s most important data (isolated, safe, stable country with plenty of computing knowhow). Yet the commonest remark I hear about the broadband initiative is “why would we want ultrafast porn?” Sad.

“It makes a number of suggestions on structural policies. These include lower taxes, the Government selling off “non-core” assets, user-pays road charges, improved incentives for private investment in electricity generation and transmission, and reduction in local government ownership of port assets to bring more “market discipline” to the sector and raise the return on assets.”

Not holding my breath on any of these, at the moment. Perhaps in 2011, if Key is still riding high in the polls. But by then it may be a little late.

“It says recent trends in New Zealand’s healthcare system are “disquieting”, with public healthcare spending having grown at more than double the pace of GDP since 2001. However, much of that increased spending had gone on wage payments. “But there is scant evidence as yet of much higher output or quality achieved. Indeed, waiting lists and shortages have grown and measured hospital efficiency has declined.””

Actually, it is only much of the increase in hospital expenditure that has gone on wage payments, but wage payments per se have not doubled the health budget. Much of the budget has disappeared in subsidies in primary health care, bureaucracy and Labour’s pet projects. Efficiency has, of course, declined substantially, but this is partially to do with increasing bureaucracy and partly to do with improved working conditions for staff.

A simple observation: If you are going to crucify doctors every time they make mistakes, you can’t expect them to continue to work 70 hour weeks.

“Amongst a number of recommendations made, the OECD suggests drawing sharper lines of responsibility between the Ministry of Health, the District Health Boards and the Primary Health Organisations.

“It also suggested enhanced competition among healthcare providers and purchasers, “recovering some positive elements of past reforms”.”

Responsibility and competition. How very refreshing. The blurred lines of responsibility are deliberate, of course. How else are the bureaucrats going to pass the buck round and round for ever, never taking ownership of a problem? I’m not sure about the competition angle. The last attempt by National to introduce competition produced predatory pricing and perverse incentives without producing efficiency or service excellence. This was because it was a theoretical model, instead of a real-world market. Throwing open surgical waiting lists for tender amongst hospitals, both private and public, might be a useful start. Just to test the water.

Another simple observation: Doctors tend to view competition with distrust and become very myopic when it is thrust on them. Witness the DML/Labtests fiasco.

““Central control over devolved purchasing agents should be eased, giving them autonomy and responsibility for efficient allocations.”

Translation: Pharmac should but out. The MoH too.

“General practitioners should be given stronger incentives for both prevention and efficient care.”

This is quite easy to do. You can either nationalise GPs and capitate their practices, or you can stop all subsidies and provide a universal health insurance with limited GP visit cover and incentives for preventative health. I know which one I prefer. Note that the former is the UK national health system. Just say no.

“A greater role for private insurance and provision could be envisaged so as to spur competition and burden sharing.”

Exactly. A universal basic health cover would provide the basic health needs of everyone. Private cover would then provide things like reduced approval requirements, less co-payments and the like. All hospitals could then access the funding via the normal means of health insurance, rather than direct government funding. People could choose where and when to access healthcare and even what health care is important to them. Imagine the incentive for a person to stop smoking when they find that their co-payment is twice that of a non-smoker. 

So the message of the OECD is privatise, privatise, privatise.

Surprise, surprise.

Now what was Roger Douglas saying yesterday?

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