Healthcare NZ's 'biggest threat' - OECD

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TAKE CARE: The OECD says recent trends in New Zealand’s healthcare system are 'disquieting'.

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Rising healthcare costs pose the biggest threat to the long term sustainability of the New Zealand economy, the OECD says.

In its 2009 report on New Zealand the 30-member Organisation for Economic Co-operation and Development paints a fairly downbeat picture of this country's immediate future.

About a third of the report is devoted to healthcare.

"With the risk of a baseline level of debt much higher than expected before the [global economic] crisis, controlling future health (and pension) costs is even more important," the OECD report says.

It says the economy is likely to remain in recession for the whole of this year before recovering "only hesitantly" next year. "It is crucial that the new Government's first Budget this May delivers a credible consolidation plan," it says.

The OECD says the Government has little scope for further spending in reaction to the global slowdown and says a spending cap should be considered.

It suggests that the main thrust of stimulus for the economy should come through monetary policy as implemented by the Reserve Bank. The RBNZ has already loosened monetary conditions substantially by dropping interest rates from 8.25 percent last July to 3 percent.

The OECD says there is still plenty of scope for further easing. However, it warns about the potential impact of policies on our currency.

"In assessing the scope for any further policy stimulus, either fiscal or monetary, the authorities will need to be conscious of the risks of triggering a disorderly or severe exchange-rate adjustment," it says.

The report talks a lot about imbalances within the New Zealand economy and says the country needs to close the "substantial" income gap with other OECD nations.

It makes a number of suggestions on structural policies. These include lower taxes, the Government selling off "non-core" assets, user-pays road charges, improved incentives for private investment in electricity generation and transmission, and reduction in local government ownership of port assets to bring more "market discipline" to the sector and raise the return on assets.

The OECD also makes a number of recommendations on healthcare policies.

It says our healthcare system is comparatively efficient because of strong "top-down" budget control. "Yet, policy makers are right not to be complacent."

As elsewhere in the OECD a "toxic" mix of rising chronic conditions, rampant technological progress and rising public expectations poses serious issues of long-term affordability.

It says recent trends in New Zealand’s healthcare system are "disquieting", with public healthcare spending having grown at more than double the pace of GDP since 2001. However, much of that increased spending had gone on wage payments. "But there is scant evidence as yet of much higher output or quality achieved. Indeed, waiting lists and shortages have grown and measured hospital efficiency has declined."

Amongst a number of recommendations made, the OECD suggests drawing sharper lines of responsibility between the Ministry of Health, the District Health Boards and the Primary Health Organisations.

It also suggested enhanced competition among healthcare providers and purchasers, "recovering some positive elements of past reforms".

"Reforms should strive to improve incentives," the OECD says.

"Central control over devolved purchasing agents should be eased, giving them autonomy and responsibility for efficient allocations.

"The health sector should build on existing momentum toward greater District Health Board collaboration in regional planning and seek to achieve greater contestability among public hospitals and with private providers so as to stimulate hospital efficiency.

"General practitioners should be given stronger incentives for both prevention and efficient care.

"A greater role for private insurance and provision could be envisaged so as to spur competition and burden sharing."

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