The Horn Report

As the great New Zealand public prepared to go to thepolling booths just under a year ago, one concern lingered in the minds ofmany. While National had worked hard to exorcise many of the demons of its 90s eraof Government, the ghost of its healthcare experiment was still wandering thecorridors of power, rattling its chains. National tried to bury this ghost onceand for all by promising no change to the District Health Board structure. The onlytrouble is that a few of the 90’s reforms were useful and could benefit ourhealthcare system. Now National faces the challenge of resurrecting some ofthose ideas without them looking like the mummified corpse of discredited pastpolicies.

In the 1990s the National Government of the time tookNew Zealand on the most ambitious reform of healthcare delivery in the WesternWorld. The central thrust was setting up hospitals as businesses and gettingthem to compete for the right to cut you up. This would surely improve efficiency,as all hospitals would up their game to become as slick as the best. But thepublic balked at the idea of closing poor performing hospitals, so thecompetitive approach fell at the first hurdle. More recently we have seen the difficultiesof operating arms-length competitive approaches in healthcare with thediagnostics contract in Auckland.

The problem is that a purist competitive modeldoesn’t sit easily with the massive specialised investments in healthcare,particularly in a small dispersed country. Such big investments require longterm contracts and good relationships to work. Specialised investments are onereason why some private sector businesses find it useful to form closerelationships with preferred suppliers, rather than getting suppliers toconstantly compete. In these industries there is still pressure to improve, butit is underpinned by a symbiotic long-term partnership.

However, there were some elements of the 1990sreforms which did work. National created Pharmac, which prioritises and bulkpurchases our drugs and is recognised around the world as best practice. We areone of the few countries in the world that is keeping a lid on ourpharmaceutical spending. Pharmac is so successful the US Government (on behalfof drug companies) repeatedly asks the New Zealand Government to disband it aspart of any prospective free trade deal.

Pharmac prioritises drugs by the increase in aperson’s illness-free lifespan for each dollar spent. Decisions areunderstandably controversial because they are dealing with life and death,however there is no more objective method available. Naturally, these decisionsneed to be tempered at the edges by common sense and clinical opinion, butgenerally the approach seems to work. Pharmac didn’t fund Herceptin quitesimply because it is not value for money. With the same amount of money asspent to keep one person alive for a year on Herceptin, around five otherpeople could be kept alive for a year with other drugs. This didn’t stop theincoming National Government overturning Pharmac’s Herceptin decision, which underminedthe most successful healthcare reform of its previous period in Government.

For many years there have been calls to apply the Pharmacapproach to medical treatments more generally. We would only fund those new treatmentsthat generate the greatest amount of additional illness-free years of life.National’s latest review of the health sector, the Horn Report, sets out plans tostrengthen the National Health Committee to take forward this role. If set upright, with a focus on evidence but room for the input of common sense andclinical views, this group should do some useful work.

The hitch is that, unlike Pharmac, this Committee willreport directly to the Minister of Health and will not have any direct powers.Politicians have an atrocious record of meddling in healthcare priorities. Aswe saw with Herceptin, they tend to bow to well-orchestrated campaigns fromminority groups. Once the placards start waving and the media latch onto theissue, the Minister of Health will inevitably get the quiet word from the PrimeMinister to cave in and get healthcare off the front pages. This focuses healthspending on oiling squeaky wheels, rather than on the long term good of NewZealanders health.

It takes a bold politician to keep their sticky pawsoff decisions that might be unpopular with vocal minorities. Yet without this changewe will continue to be at the mercy of pressure groups and throw money where itdoesn’t have the greatest benefit. The lesson learned from the 90s reforms shouldbe that competition is of limited value in healthcare, but that apolitical,evidence based prioritisation works. The reforms of the 90s are certainly dead,but perhaps National buried the wrong body.

Geoff Simmons is releasing a new book with Gareth Morgan on the New Zealand public healthcare system in November.

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