Rob Hennin: We need to talk about rising health costs

Introducing a medical version of KiwiSaver to help New Zealanders pay for their own healthcare is one way to help manage the cost of an ageing population. Photo / Getty Images

• Rob Hennin is chief executive of nib.

The convergence of powerful strains of winter flu putting a focus on the delivery of health services, immigration pressures and an election campaign have put rising healthcare costs firmly on the agenda.

Health costs will soon overtake superannuation as the Government's biggest social spending obligation. That has to be of concern to any political party likely to be involved in running a government in the future.

No one is keen to face the fact that the growth in health costs is outstripping our ability to pay. But it is a reality that needs addressing.

Likewise, none of us like to consider the prospect of rationing health care, but that is one option in a sector where an ageing population combined with technological advancements in medical treatment are resulting in ever-increasing costs to taxpayers.

There are other options that could lessen the health cost burden. Currently each DHB is responsible for recovering debt that is owed to them from non-eligible patients who may be visitors to New Zealand who do not qualify for free care. For some DHBs this unrecovered cost is in the millions of dollars every year - but the Ministry of Health doesn't make an effort to collect that data across all DHBs. Asking visitors to New Zealand to take out health insurance - in the same way as we do with international students and which is the norm in many international countries - would be one way of lessening that burden on DHBs.

Recently our business, nib, has been looking at the variation in healthcare costs across all health disciplines to ensure we are getting the best deal for our customers by keeping claims as low as possible and keeping health insurance affordable. The results were astounding - with claims data showing Kiwis are paying thousands of dollars more for surgery depending on where they live. Transparency around these charges would certainly help to keep costs down, and that would be good for individuals and for taxpayers.

Another option is to introduce medical savings accounts that allow individuals to save and pay for their own healthcare costs, in the same way that people currently save for retirement through KiwiSaver. Or we could look at a compulsory work-based private health insurance scheme.

Only around 30 per cent of Kiwis elect to take out their own health cover, a stark contrast to the 56 per cent participation rate our friends across the Tasman have been able to achieve under a very different policy framework.

Our ageing population exacerbates the rising costs - we need more young people to take out health insurance so the burden doesn't fall inequitably on more senior members of society. One idea is to share the costs across all age groups, so that older people don't carry the entire burden of the greater health risks that they incur as they hit the high-demand health spending curve in their 60s and 70s.

Private health insurance is currently covering about 5 per cent of New Zealand's total health bill - but with the right policy initiatives, it could grow to make a much bigger contribution to the 22 per cent of GDP that the Government currently spends to keep us healthy.

What I've learned from running New Zealand's second biggest health insurer is that making health insurance easy to understand and affordable builds a stronger value proposition for Kiwis to take out private health insurance. The more we look after ourselves, the fewer burdens there are on others.