Where is long term healthcare funding?

May 18, 2016

New Zealand already spends a bigger chunk of its tax revenue on healthcare than any OECD country – about $15 billion annually. On top of this, we’ve had repeated warnings from Treasury over the past decade that our health policies are unsustainable, with spending projected to blow out by 4 percent of GDP – around $10 billion per year in today’s dollars – over coming decades.

 

We know from the headlines that the government cannot keep up with present needs – whether it is drug funding, elective surgery, cancer screening programmes – you name it. So what chance is there of meeting the future healthcare demands under present policy settings?

 

The recently released health strategy acknowledges some of the pressure, and contains some ambitious goals to transform the health system and make use of new technology. This is all well and good, but one would be unwise to bet the house on new technology being a panacea. Especially given recent experience that new technology, treatments, procedures and medicines have actually increased healthcare demands and resulting costs.

 

The glaring omission from the health strategy is any plan to grow alternative funding streams and thus lessen New Zealand’s heavy dependence on taxation funding for healthcare. (New Zealand is one of a handful of OECD countries heavily dependent on public funding – around $4 in every $5 is funded via taxation). Without such a plan, we run a high risk that future health outcomes will be severely constrained by the lack of tax dollars to meet demands.

 

So we must look instead to the government budget for any sign of a plan to broaden healthcare funding.

 

We know there is a good deal of capacity in the private and not-for-profit sectors when it comes to both funding and delivery of healthcare. Around half of elective surgery is privately funded, and almost 30 percent of New Zealanders have health insurance, which collectively funds over $1 billion annually in healthcare.

 

The challenge for the future is to best harness both public and private funding to ensure we maximise health outcomes.

 

We have seen from how the country has taken to kiwisaver that such transformational change is possible in as short a time as a decade.

 

There is huge potential to employ similar strategies to lift the numbers covered by health insurance in New Zealand and the resulting contribution to future healthcare costs. A recent NZIER study found New Zealand could be funding an additional $1-2 billion annually in healthcare via insurance if it could match the best performing countries with similar tax and health systems.

 

 

Whatever the competing pressures on the public purse strings, surely the results would be better if we had an extra $1-2 billion being funded privately.

 

HFANZ is keen to assist and engage with Government to explore options. These needn’t have any fiscal cost – and have the potential to deliver benefits worth hundreds of millions, or billions over time. Not to mention the non-monetary benefits – the better health outcomes and access, lowering of unmet need, and reduction in unnecessary pain and suffering for hundreds of thousands of people.

 

Time is of the essence. Every year delayed is a missed opportunity as the population ages.

Over the next 15 years we know the ranks of the over 65s will grow by around 425,000. If recent experience is any guide, then the number of insured aged 65+ will likely grow by around 50,000. The other 375,000 will be joining the queues at public hospitals – swelling the ranks of the un-insured over 65s by 70 percent.

 

A closer look at the cohort aged 50-64 is also needed, (as this group will make up the extra 65+ group in 2030). In 2015, just 37 percent of the 836,000 aged 50-64 had health insurance – significantly below the 45 percent recorded in 2008, and way below the 50 percent in 2001.

 

We have a one-off opportunity to boost coverage rates while this group is still in the workforce, and thereby also lift the ensuing coverage rates post-retirement for this age cohort. It is no good to wait until 2030, look back and wonder why no one did anything. Surely this demands a closer look right now. 

 

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