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Press Release

Budget 2014: Sticking plaster approach won’t cure issues in health sector

In the lead up to this year’s budget, the looming question remains, just how affordable will our public health system be in the future? Will a sticking plaster approach quell the unease or is a bigger change required?

We’ve shown the capacity for innovation within the health sector in the past. New Zealand politicians from both sides of the fence recently lauded the success of our Accident Compensation Corporation (ACC) scheme. ACC was first proposed by Sir Owen Woodhouse in the late 1960’s and was adopted by government in1974. 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 our capacity for such visionary policy development, our 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 ‘grey tsunami’ that’s looming in our midst. In the health sector, some of those in senior management are quietly suggesting all is well, while others are less comfortable with the direction of health funding, forecasting serious workforce challenges and an expectation that funding for leading edge technology will need to be increased.

Currently, we are the only country that actually taxes contributions to private health insurance schemes. Currently, contributors either fund this out of their after tax income or, if they are lucky enough to enjoy employer contributions to private health insurance, the employer gets hit in the pocket with fringe benefit tax. This regulation isn’t embracing the same community spirit that helped us found our successful ACC scheme four decades ago.

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 amongst consumers. There are also barriers to entry, in that health care professionals must be licenced by law, and there are constraints on access to care, either through physical location of consumers or the decisions of providers. 

We only need to look across 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. Our close neighbour, Australia also established a national health insurance scheme during the 1970s, although the succession of governments in Australia hampered the full implementation of all intended aspects of the original proposals.

Moving to a national health insurance scheme is not an overnight decision, but one that should be seriously considered in this year’s budget. Complex planning will be needed to implement it and along with that, agreements on health policy goals and maintenance of our existing health infrastructure. However 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, stepping forth into new territory. We have done it successfully before on other social policy matters. Surely we are no less brave and capable to successfully do it again.

Further enquiries, please contact:

Pam Newlove
Partner, Privately Held Business and Chair of the Grant Thornton New Zealand Board
T +64 (0)9 308 2579

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