Addicted to healthcare - could alarming cost bankrupt us?
By GRAHAME ARMSTRONG - Sunday Star Times
Last updated 08:00 23/08/2009

The cost of healthcare in New Zealand is increasing so rapidly it could bankrupt the government, according to a new report.

It says New Zealand is "addicted to healthcare" and warns that the government's $12 billion a year health budget, at the current rate of growth, will blow out to $45b by 2026.

The report, "Health: New Zealand's Untreated Addiction", prepared by Temple: Capital Investments Specialists, claims the cost of health is "taking over".

The gloomy outlook follows a Ministerial Review Group report released last week that put forward 170 recommendations to reduce bureaucracy and improve frontline health services. Cabinet will consider the recommendations over the next few months and is not obliged to adopt any of them.

Health spending has grown at the alarming rate of 6-10 percent a year for the past 10 years, double the rate of growth of the entire economy's gross domestic product (GDP). The Temple report says unless the economy can expand faster, the only way to feed the growing demand in healthcare is to increase taxes, slash spending or borrow more.

It also says Treasury and the Health Ministry have underestimated the problem. The government was focused on inflation and the recession rather than the underlying structural reforms that were needed.

While all 30 countries in the OECD had experienced health spending growing faster than GDP, New Zealand was in the top eight. Healthcare spending in New Zealand now represented 20 percent of total government spending. If it continues to grow at the same rate it will be 40 percent by 2026.

The report concludes that New Zealand as a society was addicted to healthcare consumption, sharing many characteristics with drug addiction. "We require more and more over time, lack of availability or withdrawal causes social unrest, the country has difficulty controlling its use, addressing the underlying issues is neglected and lastly there is a repeated desire to cut back while doing very little to do so," the report's author Paul Winton says.

Winton also says the necessary changes are unlikely to happen because talk of reducing spending on healthcare was "political suicide" for incumbent governments.

But Health Minister Tony Ryall told the Sunday Star-Times the rate of spending growth could be reined in with "smarter" use of resources, without reducing essential services and without increasing taxes. The health budget had doubled in the past 10 years but services had not doubled, which showed there were better ways of doing things.

Ryall believes the trend towards more specialist services being available in communities, rather than big city hospitals, and improved medical technology and more effective drugs, will mitigate some of the growth in costs.

The government would use private hospitals and services if it made financial sense and if it eased the pressure on public hospitals but New Zealand had a proud history and commitment to public health services and the government would always operate within that "cultural legacy".

"It's all very well to have these reports criticising the future of the health service but, in the end, the government is committed to protecting and improving the public health service and that means we will continue to make strong investments in health," Ryall said.

"There is no doubt that finances are getting tighter. You can't be in the worst recession since the 1930s and carry on as though money grows on trees. We have to do it without raising taxes because the last thing anyone needs now is a tax increase."

New Zealand Institute of Economic Research chief Jean-Pierre de Raad says the fast-growing health budget is a concern, but he agrees with the Ryall that the answer is not a hike in taxes.

The bigger worry, de Raad says, is that all the extra money that has been poured into healthcare over the past 10 years has not resulted in improved productivity in public hospitals. He believed a lot of waste could be cut. Universal screening, for example, could be better targeted. De Raad also questioned the need for taxpayers to subsidise doctor's visits for the wealthy.

Associate professor Toni Ashton of Auckland University's School of Population Health said the level of spending in health was in line with other OECD countries.

Ashton said it would be fairer if everyone paid more tax to maintain a high quality public healthcare system. "But this doesn't mean that there isn't also a need to improve the efficiency and productivity of the current system and to continue to find ways to control expenditure."

From here.