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- Introduction
- Public and Private Roles and Responsibilities
- Reforms to the New Zealand Health Care System
- Reflecting on the Reform Agenda
- Defining Public and Private Roles
Introduction
Debate about the most appropriate roles for the public and private sectors in the health care system is alive and well in most OECD countries. Many of these countries, not unlike New Zealand, have or are making modifications to the roles and responsibilities of the public and private sectors in their health care system. In the New Zealand context, the appropriate interface between the private and public sectors remains unclear and is a priority issue.
In considering current and ideal roles for the public and private sectors, it is important to recognise that the current ‘mixed’ system - containing elements of public and private involvement - is likely to continue into the future. The debate about sectoral roles should not degenerate into claims and counterclaims as to whether ‘public’ or ‘private’ sector health care is best. Rather, the debate should explore the best assignment of roles, responsibilities and interfaces across the two sectors.
In assessing the appropriateness of different institutional arrangements, it is important to evaluate alternative systems with regard to their capacity to achieve particular policy goals and criteria - such as efficiency, effectiveness, equity, choice, quality and accountability. Growing concerns by governments to contain their levels of health spending have enhanced interest in setting institutional arrangements which provide greater opportunities for the government to undertake risk management and risk-sharing strategies in association with other key actors and institutions in the sector.
Public and Private Roles and Responsibilities
Many governments have a substantial involvement in the funding, purchasing and delivery of health care. Consequently, those discussing strategies for the sector commonly do so with a strong emphasis on the public sector’s role. Trends observed across a number of OECD countries reflect expanded opportunities for both the not-for-profit and for-profit private sector to participate in funding, purchasing, provider and ownership roles, and new opportunities to operate under contract to the public sector.
Because of the various aspects and levels of public and private involvement in the health care system, it is not always easy to quickly describe the exact nature of the public-private mix. Attempts to develop a taxonomy for health care systems often result in the need for the researcher to classify systems according to a multi-dimensional approach. This multi-dimensional classification can incorporate descriptions of the various roles played by public and private institutions as well as an interpretation of particular goals and objectives.
One recent example from the literature allows for a system to be classified in terms of the levels of public and private participation in funding and purchasing arrangements but also with regard to the degree to which individuals utilising the service can exercise choice. The measure of choice assesses the degree to which the individual, medical provider or a third party chooses the particular service and incorporates some measure of the range of alternative providers and services from which the choice can be made.
Reforms to the New Zealand Health Care System
While much debate occurs concerning the optimal or most appropriate level of expenditure on health care, it is widely recognised that the level is one that must be selected within the context of a particular country. Real spending levels per capita have been relatively constant in recent years in New Zealand and the country sits at about the OECD average in terms of the share of GDP which is devoted to health care spending.
The 1993 health reforms introduced substantial institutional changes and signalled some expanded opportunities for the private sector in the areas of funding, purchasing, regulation, ownership and provision. While private participation has grown in a number of areas, the overall level is less than was expected at the time of the reforms.
A trend since the 1980s has been the steady reduction in the percentage of total health expenditure funded by the public sector, which has fallen from a high of 88.2% in 1980 to 76.4% in 1995 (Ministry of Health, 1997). Within this shift, the share of private expenditure funded through private insurance has risen from 1.1% to 7.1%, while the share of expenditure which is out-of-pocket has grown from 10.4% to 16.7%. Over the same period, CPI-deflated expenditure trends have resulted in an overall 2.2% increase in total expenditure, and a 1.3% increase in expenditure per capita. The rate of growth in private sector total expenditure and expenditure per capita has grown faster than in the public sector.
The growth of the private sector participation in the formation of health care plans has not proceeded at this stage for a variety of reasons. Trends in service delivery suggest that between 1992 / 1993 and 1995 / 1996 total case-mix adjusted inpatient discharges increased 5.0% per annum and total case-mix adjusted day-patient discharges increased by 6.1% per annum (Health Expenditure Trends in New Zealand 1980 – 1996, Ministry of Health, 1997, p50). However, the important feature of our funding and hospital delivery systems is that the public and private insurance and provision arrangements are complements rather than alternatives to one another.
Expectations of active competition between public and private hospitals in the area of surgery have not come to fruition. In part, such developments have been hindered by the much lower unit costs for professional services relative to those offered in the private system. The government is paying increasing attention to the contribution which specialists are making to health care costs, and the Minister of Health, Bill English (NBR, 24 April, 1998, p13), has announced his concern about the rising costs of specialists in a market dominated by a single insurance company - Southern Cross Healthcare. Relatively few specialists operate exclusively in the private system, and their monopoly position gives them leverage over the supply of services in both the public and private sectors. Private insurance systems have not developed at the rate which was anticipated at the time of the reforms and levels of participation in private health insurance have been falling.
Reflecting on the Reform Agenda
Looking back at the 1993 proposals, one is struck by the way in which modifications have been made. Areas which come to mind concern public health, the definition of ‘core’ services, introduction of the purchaser-provider split and associated hospital and primary care reform, health care plans and greater competition and contestability in service delivery.
Several changes have been made to the nature and function of institutions established under the reforms. The separate Public Health Commission has subsequently been abolished and the function transferred to the Ministry of Health. Health care plans have not proceeded. The work of the four Regional Health Authorities has now become the responsibility of a single national purchaser, the Health Funding Authority (HFA). The work of defining core services has proceeded slowly and the organisation given this task, The National Committee on Core Health and Disability Support Services, has been renamed the National Health Committee. It has played a much larger role than was envisaged earlier in working with provider groups to establish good practice and recently has been given a role in monitoring the Health Funding Authority. In the latest budget, Crown Health Enterprises (CHEs) are to be called hospitals again.
Perhaps the single most important change brought about by the reforms was the ability to combine the funding and purchasing of health care within a single agency. This has allowed for greater integration of funding and purchasing of primary, hospital and disability support services. Earlier plans to establish contestability of public and private purchasers seem to have been put aside for the moment. The original proposal allowed for individuals to take an entitlement from the Department of Health; however, implementation required that a concept of core services be defined and reliable estimates be made of the risk profile and income characteristics of individuals and groups.
While the purchaser-provider split produced an opportunity for greater clarity of the purchasing and ownership interests of hospitals, the anticipated competition among private and public providers has not occurred. The HFA is now conducting experiments with integrated care plans which will link services together. Subcontracting of purchasing for packages of services may result from these experiments. If successful, these approaches are likely to reduce the transaction costs between purchasers and provide and offer prospects of a more seamless set of health care services.
Interest in getting greater competition in service provision is continuing and some progress is being made in the primary care area. Some form of fund-holding is being adopted by IPAs as are other alternatives to traditional support for primary medical services provided by general practitioner services.
The government is pursuing new agendas concerned with reviewing the regulatory environment for health care professionals with a view to considering whether greater flexibility would assist in increasing the supply and improving the contestability of health care delivery in a number of areas.
Defining Public and Private Roles
The challenge of developing a private sector which supports public policy goals is a major one. Government advisers will need to focus on policies which are directed at both using the private sector more effectively to meet public health goals and at bringing about improvements in the quality, distribution and cost-effectiveness of private production and delivery systems.
An ongoing area of debate concerns clarification of the relationship between private and public hospitals. The specialisation of private hospitals in elective surgery and public hospitals in acute hospital treatment is potentially problematic. Unless privately funded patients are given access to public hospitals, the only way in which a parallel private hospital system will evolve is by developing an expensive parallel system of acute care in the private sector. CHE balance sheets and deficits have been much worse than anticipated, and in an environment of public sector fiscal constraints, the private sector may be required to provide the resources for further development of the public hospital system.
The move toward greater involvement with the private sector requires a sound understanding of which kinds of public / private mix will add value. While some speak of the health care market, this market often does not reflect the models of perfect competition in which there is an homogeneous product, many buyers and sellers and perfect information. Areas like public health and infectious and communicable disease management appear to be particularly public sector activities and are likely to remain so. Unless private insurers are to be given access to services in public hospitals, they will not be able to offer cover for all risks, other than by duplicating expensive acute services in private hospitals.
In practical terms, the development and evaluation of health policy alternatives can commonly result in some balancing of different policy goals - particularly those of efficiency, equity and choice. Often it is claimed that the private sector is more efficient than the public - but these issues require careful examination because of differences in case mix and the underlying health status of the populations which are served. Because of the dominance of public providers and funders, the challenge will be to capture some of the efficiency advantages of the private market - while keeping an eye on problems of equity and quality concerns - so as to meet public performance criteria. In situations where private providers are dominant - such as in general practice - the challenge will be to introduce further regulatory changes and measures which stimulate competition among providers.
Governments have a number of instruments which can be used to affect private markets. These involve the creation and dissemination of information, the regulation of private activity, the mandating of certain actions by individuals or firms, the funding of health services or the delivery of those services through public sector institutions. The most appropriate roles for the private and public sectors must be developed over time and partly as a response to experiments conducted. Public sector choices must be made with consideration and evaluation of the implications for various policy settings of adopting different positions regarding the roles and interfaces of the public and private sectors in health care.
In this environment it will be important to try to assist any strategy which allows for clarity of public entitlement to care and focus further attention on ways in which private sector policies can be defined in relation to these responsibilities. The institution of hospital booking systems provides an example of some improvement in terms of getting greater clarity in public sector service entitlement. The original reform agenda still requires much work with regard to the hoped-for goal of shifting attention away from care provided in a hospital setting to that provided in a primary care setting. Only by getting greater transparency of the government’s core entitlements will it be possible to develop appropriate supplementary insurance products and get the much needed clarity between the roles of the public and private sectors.
