Solving the looming health crisis

Paying part of your hospital bill, banning tobacco, and robots for nurses may just be the answer to a looming financial health crisis. OLIVIA CARVILLE reports on how the health system is threatening to bankrupt the country.

When you get sick, you are admitted to hospital.

You receive treatment and, all going to plan, your healthier self is discharged a few days later.

No-one leaves a bill on your hospital bed because the public has already paid for it.

In a perfect world, our healthcare system would continue to be the safety net under the trampoline, there whenever you may need it.

But we don't live in a perfect world.

In reality, New Zealand is on the brink of a healthcare funding crisis that is threatening to bankrupt the Government.

The ageing population, growing chronic disease epidemics, rising costs of care and public expectations have seen health expenditure grow faster than the economy for the past two decades.

Every year, the Government stumps up $2500 per Kiwi on healthcare.

These costs are ballooning at unsustainable rates, and if nothing is done to ease the pressure, our health sector will implode by 2040.

We are not alone in this - the healthcare funding crisis is gripping OECD countries around the world.

It's just that no-one has come up with a solution yet.


Health is one of the largest and fastest growing areas of Government spending.

In 2001, New Zealand spent $7.5 billion on healthcare - next year it will spend a record $15.6b.

And the costs will continue to mount as the baby-boomer generation moves into retirement age.

The number of Kiwis aged 65 years and over has doubled since 1980.

This age group is expected to exceed one million by the late 2020s.

Their health expenditure is predicted to climb to almost 65 per cent of the total Government health spending by 2050.

The future cost of healthcare is "one of the biggest challenges facing New Zealand's economy", Treasury's 2013 fiscal statement highlighted.

The ageing population, increasing costs of new technological health innovations and rising demand for services has created a "fiscal challenge which a growing economy will not fix", the report said.

The New Zealand Institute of Economic Research (NZIER) estimates the country only has about eight years to change its historic spending patterns before health costs start to have a serious impact on the Government's ability to keep the country within budget.

Between 1999 and 2008, the Government doubled its expenditure on healthcare.

The cost was unsustainable, and when the global financial crisis hit in 2008, the National-led Government "tried to keep a lid on the spending", NZIER chief executive Jean-Pierre de Read says.

Health costs currently soak up 21 per cent of all Government spending, and de Read predicts this will swell to 32 per cent by 2050.

On Thursday, National unveiled its sixth Budget, returning the books to black.

The Budget promised $1.4b of new money would go into health over the next four years to meet cost pressures and population growth.

This figure has been criticised by unionists as little more than "a sympathetic hug from the Government".

Over the past few years, the increase in health expenditure has tapered off down to about 3 per cent a year, which is keeping it level with inflation.

Yet, at the same time, Government expectations on district health boards (DHBs) has intensified.

Health boards are continuously being told to do more with less each year.

The Auditor-General 2011/12 health sector audit found "continued pressure for increased efficiency and reduced costs" was creating a challenging health environment.

DHBs are expected to continue to provide high-quality care, lift health outcomes, meet targets, reduce deficits and break even, the report said.

Last week, The Press highlighted how these vice-like financial constraints and never- before-seen Government pressures were creating a "culture of fear" within the health sector.

Clinicians, unions and private- sector leaders have started to call for the de-politicisation of the sector.

They want it removed from what they describe as an unhealthy three-year political cycle that hamstrings effective long-term planning.

"In an election year, it can be easy for the big issues, such as health, to become just political footballs. Voters will hear a lot about more services, more funding, less waiting. But perhaps more than any other issue, health is too important to just be used to win votes," Southern Cross Healthcare Group chief executive Ian McPherson says.

Finding a long-term realistic solution to the looming funding crisis will be a big task that will need strong leadership and a willingness by all to "put aside the politics", he says.

"It may mean making some tough, even unpopular decisions in the public health system."

At a think tank hub in Auckland last Friday (arranged by Southern Cross and Massey University), delegates and experts met to discuss healthcare affordability.

Thirty-two health experts from the think tank were surveyed on strategies to help tackle financial issues and 50 per cent believed the political environment was a barrier to solving long-term health problems.

The respondents felt politicians often ignored, misunderstood and were unwilling to promote unpopular solutions.

Some of the more controversial potential solutions discussed at the hub included introducing more user charges, handing hospital patients a "statement" of their treatment costs, higher taxes on unhealthy foods and addressing "overtreatment" for those near death.

However, New Zealand Medical Association chairman Dr Mark Peterson does not believe a resolution of the funding crisis is in sight.

Continual technological improvements in medicine mean we will always be chasing our tail because demands will grow and there is no bottomless pit of funding, he says.

"I think that's always going to be a problem, and always has been. Realistically we just can't afford it."

The magnitude of the looming financial crisis is not public knowledge, Peterson says.

"We, as a country, will have to decide what proportion of our GDP we want to spend on health and if we want to spend more, then we will have to decide where we are going to take that money from, or how much more we are going to tax people to get it."

These are difficult, awkward and emotive conversations to hold, but in an ideal world they should be discussed in the public arena, Peterson says.

Health Minister Tony Ryall has "no doubt there are huge pressures on health sectors around the world".

"Times are tighter, and there is a need for people to stick to budget here in New Zealand, but I'd have to say we are doing a lot better in New Zealand than what is happening overseas," he says.

The National-led Government has invested an additional $3.3b into health in the past five years.

"While many developed countries around the world are freezing or even reducing health funding, this Government is committed to protecting and growing our public health services," he says.

Ryall concedes the increases are smaller than what was seen in the early 2000s, but, he says, times have changed and "money was raining out of the sky up until the global financial crisis".

"I think there is almost a universal theme in countries all over the world suggesting that healthcare is in crisis and that it's driven by a tsunami of ageing and chronic disease. However, I think it's quite clear there are a number of ways to bend the cost curve."

Ryall believes costs can be reduced by moving health services into the community, closer to patients' homes, and adopting more commercial approaches to purchasing services.

The minister is not the only one bouncing around possible solutions.

Some clinicians believe we should start a public debate on what the taxpayer actually wants to pay for - rare cancer treatments, expensive transplant operations or more joint replacement surgeries to get arthritic 60-year-olds back into the workforce?

Christchurch Hospital intensive care senior specialist Dr Geoff Shaw says one potential answer could be to target the multimillion-dollar ticket items - such as tobacco and alcohol.

"If there was no alcohol and cigarettes in this community, I would not have a job. And we would potentially have to close half the hospitals down," he says.

"The solution to our problem is ballsy Government policy to legislate tobacco out of existence and reduce the harm from alcohol and cigarettes," he says.

"This is a simple formula that requires brave policy decisions by Government. But at the moment, nobody seems to be willing to discuss the problem, because people don't want to see it yet."

University of Otago Professor Robin Gauld, an expert in health systems and policy, believes there are two sides to the story.

"Yes, health expenditure keeps on going up, but we are not alone in this. No-one really has a specific solution to it at the moment, but it depends on whether you see this as an area of investment or whether you see it as a problem," he says.

One side of the coin is that rising health costs are a burden on the public purse that must be reduced by gelling services while we wait for someone else to come up with a solution.

The other side of the coin is that New Zealand could grasp this as an opportunity and lead other countries in coming up with those solutions.

The Government could set up a local innovation hub around health-system improvements to "stimulate change, study it and sell it abroad", Gauld says.

New Zealand could invest in robot research and find new ways of keeping those suffering chronic illnesses out of costly hospital-level care.

With patients' consent, their homes could be wired and sensors installed so they could be monitored from afar 24/7, get daily reminders to take medication and have in-house robots for support.

"This is an industry we could take a lead on and be at the cutting edge, but it all comes down to how much money the Government is prepared to put into it," he says.

Treasury's 2013 Affording our Future report says the country faces choices over how it wants to tackle the cost pressures.

"There is no one perfect answer and anything we might do will have pros and cons. No matter what policy changes we decide on, it is important that we decide on them early. Fiscal pressures are already starting to build."

The Press