The New Zealand Health Sector: Past and Present – Summary of Presentation

Dr Bruce Bowen, Executive Consultant, Kaiser Permanente is a risk management expert with experience in both the US and New Zealand markets. In his presentation, he addressed the issues of whether or not there is an evolutionary pathway forward for New Zealand, explaining the implications of fragmented funding streams in New Zealand.

Bowen began with a summary of the structure and features of Kaiser Permanente. A key in the functioning of this Health Maintenance Organisation (HMO) is the co-ordination of multiple funding streams (individuals, employers and Government) to meet health needs.

In a summary of his observations on the current situation in New Zealand health care, Bowen’s focus was on fragmented funding and delivery and its implications. He also highlighted inefficient delivery, with too much reliance on hospitals as a source of care, and the shifting line between public and private health care.

The implications of fragmentation of funding include consumer and provider confusion, and difficulties related to data collection and management. Consumers have difficulty establishing who pays for which aspects of their care and how they are expected to access care. Providers must deal with multiple funders and the different and potentially conflicting incentives from these funders. Funders all collect information in relation to the treatment that they provide for but there is no co-ordination of data collection across health care as a whole. In addition, ring-fencing compounds the problems and encourages cost-shifting.

Disease management becomes very difficult to achieve in a fragmented funding environment. Fragmented funding limits the incentive for a provider to invest in an effective disease management programme as the benefits of such a programme are not directly related to that investment; all providers potentially benefit from the one provider’s investment. Disease management is also limited by the purchasing environment’s focus on buying "widgets", eg hip replacements, versus disease prevention and overall management. Effective disease management demands that funders come together in relation to the management of a specific population.

Bowen highlighted the lack of system efficiency in New Zealand, noting high rates of hospital days in New Zealand, relative to benchmark rates and rates in Kaiser Permanente, and duplication and lack of co-ordination of services.

Private insurers are struggling under the current system. Their role is essential in the system but the system is not conducive to their success. Private insurers provide an increasing percentage of elective surgery, and this increases costs for private insurance. Increasing costs cause price sensitive healthier enrollees to drop coverage and the decreasing enrolment of healthier members also contributes to price increases. These increasing costs and declining enrolment results in a so-called "death spiral" – numbers of people with private insurance are decreasing yet private insurers are responsible for an increasing percentage of total health care expenditure.

Private insurance provides a "safety valve" for the current system; its disappearance would create a question around the funding of a large proportion of elective surgeries.

Against this background, Bowen went on to consider how the New Zealand health sector could evolve. He views managed risk and incentives, integrated data and maximising return on dollars spent as essential to this evolution.

In Bowen’s view, the planned District Health Boards (DHBs) need to organise and fund, versus provide, care at a local level but within national guidelines. He sees a role for “health care organising” companies in management of certain functions for the DHBs, eg, data collection, facilitation of contracting, etc. The need for true risk-adjusted payments for DHB populations is also seen as critical.

Bowen concluded his presentation by raising a number of outstanding queries related to the DHBs: what roles will they actually play, will they get the incentives correct, will they effectively manage risk and who will be responsible for quality of care and its monitoring?

[Click here for slides from The New Zealand Health Sector: Past and Present presentation. You may request a copy of the full Powerpoint presentation (120kb) by clicking here]