10 minute read
PRIVATE CONVERSATION
MATT SHAND, JOURNALIST
For an Associate Minister of Health, David Seymour has some unusual ideas about the future role of private provision in our country’s health care system.
ACT Party leader and Associate Minister of Health David Seymour wants New Zealand to have a conversation about wider privatisation of health care, but admits the country is not ready to have it. During his State of the Nation speech in January 2025, Seymour floated the idea of people being able to ‘opt out’ of the public health system and make their own arrangements.
While the concept was not fully fleshed out, the basic idea is for the state to provide a sum of money, about $6,000, for people to arrange private health care needs for themselves.
“I do feel the polarised debate that occurred after I mentioned the P word [privatisation] suggests maybe we are not ready for it,” he says. “On the other hand, I just look at the long-term future of health care and where the numbers go and I ask the other question – What is the consequence of not having these discussions?”
Outlining the problem
Seymour says the big problem with health care stems from the demographics of New Zealand.
“There are going to be more people over 80 with higher medical needs,” he says. “There are fewer children coming through, graduating and becoming doctors so there are two ways this can work. You can have more people migrate to look after older people and the other is to drastically increase the productivity or the effectiveness of medical care. That has been flat for a long time in terms of measured productivity, it’s no slight on the people that work in the industry.
“I often say we have a first-world people in a third-world system. My sense is that there is just enormous waste because no one has the incentive to make things more efficient.”
Seymour says he has been called by surgeons who have had to cancel lists because staff members had not turned up, and these calls occur too often.
“Surely you would be working very hard to make sure that everybody shows up at the right place in the right time otherwise you are throwing money down the drain,” he says.
“Another example I have had is I have doctors tell me it takes a month to get a suspected skin cancer pathologised or analysed. I tried to fix this. I visited the lab and found out they were not very keen on doing this [the tests] because nobody had changed the price of a pathology test since like, 1997, or something and the price was not enough to justify them doing it.
“I think I probably wrote a letter to the Minister at the time but I thought that, even if I could fix this, there are a million other problems like that and there needs to be incentives to fix them. That’s the problem. Aging population, aging demographic, massive cost increases, massive waste and massive inefficiency. No one’s actually got responsibility of fixing it.
“I would say that Shane Reti would have been the most competent health minister in the world, certainly in New Zealand, and he couldn’t fix it. Having said that, Simeon Brown has been put there because he is one of the most dynamic and effective ministers in Government.”
How would your privatisation idea work?
“The fact is that a huge portion of health care in New Zealand is private,” Seymour says. “Hospitals are largely state-owned but there are some private hospitals. GPs are all private businesses, pharmacies and much of the allied health stuff.
“We have a largely private system, the part that is public is the commissioning, the organising. That’s the part where we need to ask ourselves, is it better if you had a choice of saying, well there’s a $30 billion health spend and 5 million people so that’s roughly where the $6,000 figure comes from.
“I would say, if you like your health care you can keep your health care. But if you would like to take that $6,000 up the road to say a Southern Cross or a nib they can accept your, for lack of a better term, token from the Government.
“There would be some rules. They must accept every patient who applies, they can never dump a patient, they can’t screen them and they must be responsible for the totality of that patient’s health care. Whatever they need or whatever health care they receive must be compensated by that company.
“The flip side of that is they will start getting quite aggressive about how they manage their relationships with suppliers, and you know, if the pathology lab is too slow, they’re going to ask what they can do to solve that problem pretty quick. I think these guys will solve problems faster than we [the Government] do.”
Seymour gives the privatisation of mobile networks as an example where technical problems were solved through corporate pressure and profit-driven solutions.
He also says privatisation of health care could create incentives for public health measures from private providers like increasing the funding of GPs.
“I would argue that GPs are underfunded and the rest of the system is suffering as a result,” he says.
“We campaigned on but we could not get the Coalition to agree that we’re going to increase it. It’s a real shame. But that is a good point. At the moment you pretty much have to rely on someone going out, campaigning, winning an election to get the GP pricing right. In the system I am proposing if you are an insurance company now responsible for commissioning health for a patient you will have to think if we paid GPs a bit more then fewer patients might turn up to ED as a result and they wouldn’t have to pay [for ED treatment].”
Leaning on overseas models
Seymour points to other countries that have similar situations, such as a mixed, public–private system in Europe. “The UK is, you know, more social than anywhere but they have one of the most lamented systems,” he says.
“You go across to France, Germany, Switzerland and they have a very mixed system where you can choose your insurer. Your insurer, chances are, will send you to a private provider most of the time, and for the most part, they have very good health care.”
Seymour says much of the English-speaking world uses the Beveridge health care system where the government provides health care for its citizens through income tax payments. Other countries, such as Germany, use the Bismark system where all residents are mandated to enrol in one of several publicly or privately managed insurance funds to ensure universal health care coverage.
“That system works much more like the one I am describing,” Seymour says. “Most of Europe has some sort of Bismark system with a network for private insurers and providers with the government sort of quarterback funding those people who cannot afford their own.
“There are criticisms of both methods. The Beveridge model reliant is on income tax, which can be adversely affected in times of crisis and by a rapid influx of patients. The Bismark model can leave people in poverty behind or leave them with limited coverage. Further, isolated townships often have little hospital coverage under the model.”
What about acute care?
The big question with private health care stems from what it cannot do. At the moment, acute care is left to the public system and there are ethical questions about ‘for profit’ emergency departments.
What happens in the case of a cardiac arrest or car accident in a privatised system?
“Hospitals have to accept all patients,” he says. “If you are injured you go to the nearest hospital, and there would need to be some rules to prevent discrimination. You would charge the same price to whoever the patient’s insurer was.”
Seymour did have some concerns about this leading to monopoly pricing in specialist areas and said there may need to be some rules introduced to counteract this. These could include special birthing units, children’s hospitals or other specialised care centres where it would make little sense to build multiple facilities in the same region.
What about rural and remote regions?
New Zealand is seeing its capability to deliver health care in remote locations erode due to a lack of commercial viability for private practices. This is leading to closures of GP clinics and further blockages, as GPs who remain are too overloaded to accept more patients. Would these areas ever appeal to private providers where income streams are not as robust?
“In those instances there is a question of should the state intervene and provide a service that won’t be provided. I mean the free market may not produce another Starship Hospital for example, so the government could do that,” Seymour says.
“That is really a separate question, the question is who should be the commissioner [of services]. You could have a remote area of Otago where you are insured and sometimes they will send you to private and sometimes they will take you public. If you are in an area where private is not viable, then that is a problem for the current system and in the new system.”
Is the answer to provide more funding?
“Well… no,” Seymour says. “I think you know the fact we went from something like $18 billion in the late teens to upwards of $30 billion now. There has been inflation of course, but we’ve never spent more on health.
“I’ve come to the conclusion, if we went up another 50 per cent in five years getting up to $45 billion by 2030 people would still be as dissatisfied and we will still be short.
“One example during the peak of COVID was we needed more ICU beds. Somehow, despite having put amounts of money in that were just insane … there were fewer ICU beds then when we started. It’s a classic example of money still not getting the result.”
How has the privatisation debate gone?
Seymour says it is time New Zealand takes the debate of privatisation seriously. He uses the example of Hawke’s Bay where specialists set up their own health centre next to the hospital as an example of privatisation finding its own niche.
“I would say in a free society, people invent new institutions to achieve cooperatively what they cannot achieve individually. Really, this is about thinking how do we as society find new ways to cooperate to achieve things together.
“We should be more open minded about this.”
Seymour uses telecommunications services as an example of privatisation working, which, he says, has seen improvements in the last 30–40 years without government capital investment. “We’ve gone from zero to a situation where most populated parts in New Zealand can switch on a phone, download a video and do whatever you want. This service costs almost nothing for what you get.
“Imagine if Health New Zealand had been responsible for introducing mobile phones to New Zealand,” he says. “We would still be using smoke signals. Second of all, imagine if we introduced the same sort of competition and dynamism that has, you know, brought in constantly improving quality of service at falling costs.
“Imagine if we use the same sort of approach to doing better with medicine.”
ASMS is constitutionally committed to “support the right of all New Zealanders to equal access to comprehensive quality public health care services”. This year ASMS will be publishing a series of research papers on health funding.
