Searching for the Holy Grail in antipodes: the market reform of the New Zealand health care system

Throughout the world there is a recognition that the delivery of health care is ineffective and that these unpleasant outcomes are a product of the perverse incentives inherent in all health care systems. In New Zealand the Government documented the defects of the health care system and is now introducing radical reforms in the belief that these will improve the system’s performance. The nature of these reforms, centred on the purchaser-provider divide, us similar to changes introduced in the Netherlands, the UK, Sweden, Israel and Russia. As elsewhere, the New Zealand Government is asserting that their reforms will improve performance and it is reluctant both to take time to design crucial misco economic elements in the new system and pilot the changes which are being imposed in a bold and untested fashion. This Discussion Paper describes the reforms which have been introduced in New Zealand and evaluates them in terms of the eight major problems its Government sought to eradicate by change. The authors argue that instead of mitigating these problems, the reforms may worsen them. There are risks that the system will become fragmented and less equitable. The move away from a single (tax) source of funds (i.e. the single pipe) may make cost control more difficult. The Government is seeking to address the issue of information generation to facilitate market trading but it is not clear how effectiveness and efficiency data will be produced, let alone how it will be used to change procedures policy. The authors agree that many of the problems identified by the New Zealand Government are significant and in need of resolution. However, whilst the political imperative may require immediate action, the economic case for these reforms is quite poor. Incremental change, with careful evaluation, would “confuse” policy reform with facts about the attributes of competing management mechanisms and reward systems. As it is we have the all too familiar combination of political assertions and an unwillingness to measure the impact of change, behaviours which create the causes for the advocacy of the next “redisorganisation” of the health care system within the next five years!