Editorial: Minister must move fast on health reform

A group set up by Health Minister Tony Ryall to review the state of the health system has made a suggestion he is now reluctant to endorse. In a quest for efficiencies, it suggests that many of the tasks of the Ministry of Health, particularly those to do with allocating funds and approving capital investments, should be entrusted to a more independent Crown agency created for the purpose.

It sounds like the Health Funding Authority of the 1990s, the hub of a competitive contracting health system set up by the last National Government. Labour replaced it with centrally dominated district health boards and primary health organisations (PHOs) for general practice. Each reorganisation was an upheaval that health practitioners have no wish to repeat. And health can generate so much political heat that this Government has promised there will be no repeat.

Mr Ryall's ministerial review group would duly keep district health boards but require them to co-operate regionally for more purposes. It would also encourage PHOs to amalgamate. It finds they have not fulfilled the hopes held for them, particularly in developing new systems of integrated medical and nursing care. It recommends they be abolished if they cannot do better in the next three years.

These are not radical suggestions, not as radical as they might need to be to tackle the blowout in health costs facing nations such as ours. The minister's group, headed by former Treasury Secretary Murray Horn, points out that the cost of the public health service is rising at a far greater rate than the country's economic output. Health spending is outpacing income growth much faster in New Zealand than in other developed countries with ageing populations.

The cost is projected to double in the next 20 years. Unless we can greatly improve our economic growth, or spend health money more efficiently, the health needs of an ageing population will absorb an ever greater proportion of public funds and starve other state services.

The task remains to eliminate more waste in hospitals, get rid of unnecessary bureaucracy, improve the co-ordination of staff and facilities to perform more surgery when it is needed, encourage healthier living habits, have more patients treated before their condition requires hospital care, and resist pressure from health professionals for gold-plated services at public expense.

Customer charges and competitive pressures fix these sorts of problems in public services provided by the private sector but part-charges and competition have proved politically too difficult for acute hospital services. Waste reduction and rationing still depends on public service management and reporting procedures.

The latest review believes these could be improved by again splitting policy-making from service-buying, the first role to remain with a smaller Ministry of Health and a National Health Board to be set up to allocate funds to districts, purchase some national programmes and approve capital expansions.

The national board would necessarily have to grapple with the kind of rationing of services that eluded a public consultation exercise in the 1990s. The review group believes a Crown agency could be shielded from the public sentiment that makes rationing of services so difficult. Mr Ryall probably knows differently.

Previous health ministers have discovered the public holds them accountable for decisions made by purchasing agencies. But if the minister does not like these solutions he will need to find better. The rising cost of health is, in the word of his review group, unsustainable.