Public health inflation out of control, says report

Inflation in the public health sector is out of control, argues a report released yesterday.

The report by the Health Funds Association, called "The Long Term Funding of New Zealand Healthcare", by former Treasury analyst Kim van Lanthen, says public health inflation is running at an average of 8 per cent a year.

In contrast, inflation in the private health sector averaged only 4 per cent a year.

Association executive director Andrea Pettett said district health boards (DHBs) needed to find partners to help them develop a focus on value for money and she suggested insurers and private providers were natural partners.

She called on New Zealanders and politicians to openly discuss the issues so that solutions could be found.

Ms Pettett said that if public health inflation continued unchecked, then public health spending was estimated to grow exponentially to more than 63 per cent of gross domestic product by 2050.

"This level of public health expenditure is clearly unaffordable for future New Zealand taxpayers," she said.

Public health funding continued to increase, yet the number of hospital discharges was declining and the number of people needing treatment was increasing, Ms Pettett said.

The association recommended that the Government start to measure public health inflation so it could begin to manage it.

"DHBs must learn to control their costs so that public health funding may again become sustainable," she said.

"However, DHBs are not currently structured to reverse the inflation trends they have started, and if they are to survive they need to find partners that can help them to develop a focus on value for money.

"Insurers and private providers are the natural partners, as they are structured to seek value for money, because they have direct financial relationships with the ultimate payers."

The association's research argues that employers and middle to high income earners should be able to buy all their healthcare needs from the public and private sector through insurance.

"These new stakeholders in the public health sector would provide a strong voice for value for money," Ms Pettett said.

"Eliminating the unfairness in fringe benefit tax treatments between health insurance and ACC would engage employers and increase health insurance policy uptake. Working-age people need to be encouraged to pay more for their healthcare needs."

Attitudes about funding and delivering healthcare had to change, she said.

"The private sector and insurers can help the public sector to better manage costs and to enable prompt access to health services.

"Without our help, the public health sector as it is currently operating is unsustainable."

- NZPA