THE P-WORD

With the public health system under strain, the ‘P-word’ has started to make its way into the public discourse again. Is privatisation a means to increase supply of health services or is it just moving the deck chairs around?

The debate about privatisation of health care has sparked up again following comments from ACT Party Leader David Seymour in January stating that New Zealand needs to “get past the squeamishness” when it comes to the issue.

Newly appointed Minister of Health Simeon Brown has been visiting private hospitals and on 13 February attended the opening of an expansion to Wakefield Hospital in Wellington.

At the opening, Brown reiterated the Government’s key line that “targets save lives” and that improving the health system was the Government’s top priority.

Of note, he said achieving those targets will “require working in a more collaborative way, especially when it comes to reducing waitlists for electives”.

“Partnering with the private health sector is a key part of our plans to deliver for Kiwis,” he said.

“Aside from ensuring our public systems are working as effectively as possible, we also need to consider how we can make best use of the capacity and expertise the private health sector can offer.”

Some people would see the relationship between public and private health care as symbiotic, others might describe it as more parasitic. But as workforce shortages continue to worsen, the balance of views might be changing.

As New Zealand’s population grows there are more people with private health insurance with about 30 per cent of the entire population of New Zealand having some form of private health care.

Health insurance sees surge in patients and cost

Southern Cross is responsible for about 71 per cent of all health insurance claims in New Zealand and has 60 per cent market share.

Chief medical officer Stephen Child says the net rate of people seeking private insurance is climbing but so too are the costs of providing it.

Southern Cross’ latest annual report showed it paid out $1.498 billion in health insurance claims over the last financial year. Compared to the total premiums it collected over the same time period, that left a deficit of $88.2 million, which the report described as due to “extraordinarily high demand for private healthcare from our members, particularly in the second half of the financial year”.

The annual report also noted the organisation faced significant price increases in medical supplies, and wage inflation in a tight labour market with shortages of medical professionals.

Child says the rising cost of delivering health care will likely result in premiums increasing.

“The way our premiums work, they are based on age and gender,” he says. “Basically, if you are a 56-year-old male, you basically pay the premiums of all 56-year-old males last year plus about 10 per cent.”

As patients get older, the premiums can increase, and so people can become unable to afford private health insurance, which creates an equity issue.

Child says each year about 60,000 people “churn” out of the system. “We lose that many a year.

“When you look at our surveys from 2019 to 2024, members’ concerns about the cost of living are rising even higher. They say they cannot afford the insurance, or they will drop to a lower level of cover.

“We have had growth, but it is not keeping up with the rising population of New Zealand.”

Child recognises the private health care system is not a standalone solution to workforce shortages.

Stephen Child

“Public health care can do everything the private health care sector can do, but private health care cannot do everything the public health system does,” he says.

“About 70 per cent of all elective surgery is now done in private health care. So private is an elephant when it comes to elective surgery, but a mouse when it comes to other health provision.

“Private does not do chronic health conditions.

It does not do mental health. If you have a chest pain or faint or have a blood clot in your leg or a pneumonia – that is not covered in the private health care system.

“Private health care is procedure and surgery driven. It cannot stand alone. It is complementary to the public health care system.”

Child says the private health care system does offer some incentive to the public workforce and can, in some cases, be used to incentivise doctors staying in New Zealand.

“We wouldn’t have dermatologists in New Zealand if they were not able to top up their salaries in the private sector,” he says.

“Dollars are part of the driver, but it is also job satisfaction. The more autonomy a person has in their work the greater the satisfaction they can generate. Practising medicine in private, you have more choice and ability to influence what you do than in the public system. It must be soul destroying to be an orthopaedic consultant working in public and seeing patients in pain but not being able to get them up the waiting list.”

Privatisation creep leads to for-profit hospitals

There has been gradual creep of privatisation in New Zealand and it does not appear to be slowing down.

Another for-profit hospital is set to open in the Wellington region in the next few years, with a developer gaining approval to build a sevenstory hospital in the suburb of Mount Cook (just down the road from the existing public hospital).

There have been conversations about other for-profit hospitals in more remote areas such as Wanaka. It seems business leaders have cottoned on to the need for more health care facilities and see a way to provide them – and a dividend.

But the rise in facilities is also tied to a rise in SMOs working in the private sector. Research completed by ASMS reveals between 2021 and 2024 there was a net growth in the number SMOs working in the private sector or other employment of 9.6 per cent, compared to the public hospital specialist’s workforce, which grew by just 4 per cent.

In the three years leading up to June 2024, 15 specialities saw a drop of 25.6 FTE in public hospitals, while those same specialties gained 177.9 FTE in the private workforce. Two of the biggest shifts were in anaesthesia and psychiatry.

So private is an elephant when it comes to elective surgery, but a mouse when it comes to other health provision.

ASMS policy and research lead Virginia Mills says the trends revealed in the research are worrying, particularly from an equity standpoint.

“The shift towards greater dependency on private secondary health services creates a double disadvantage for those who can’t afford health insurance or to self-fund their care. They are the same sections of the community – mostly Māori, Pacific Peoples and lower-income groups – who miss out in accessing private primary health services due to the costs and consequently have higher preventable hospitalisation rates,” she says.

“The cost barriers to primary care and the uneven distribution of general practices have prompted calls from health professionals and researchers for reform of primary health care services.

“This action would remove user charges and employ GPs like every other specialist working in a public hospital: on a salary, with regular benefits and paid continuing medical education, the right to collective bargaining, and most importantly, the ability to take care of all patients, regardless of income.”

Doctor Sanket Srinivasa will be the clinical lead when the for-profit Mount Cook hospital is built.

He says the project is being driven by unmet need, in particular the ability to conduct surgery. The hospital will feature operating theatres, endoscopy wards, radiology services and some other services such as a laboratory.

There will also be consultant rooms to allow physicians to practise out of the hospital.

“Public and private are often thought of as mutually exclusive things, but they are not,” he says.

“At a basic level, every single person who has got health insurance and access to private health care creates capacity for someone else to be treated in the public system.”

Does private just move deckchairs?

The issue with comments about increasing capacity is that it is not always that simple. At first glance, more surgery is more surgery. The question is who is performing that surgery.

In many places, the SMOs who will treat someone in private also work in public, which means theoretically there is an offset loss of potential time working in public when they work private.

It can also lead to equity issues when it becomes more and more like queue-jumping for those who can afford the money and cannot afford to wait.

One SMO who spoke to The Specialist said in their region, the anaesthetist and surgeon and most of the medical staff doing private surgery are the same ones from the hospital.

“The only difference is the way they are paid for it,” they said. “We can only do so many surgeries a day whether that is in public and private. We do private work in non-rostered hours. The workplace shortage of SMOs means that we cannot always covers shifts, so surgery lists get cancelled because they cannot fund cover, so there is not really a gain of people getting treated.

“If it was going to reduce wait lists, it would have already done it.”

Dr Renee Liang wrote in a column for North and South about the same issue. “We have a finite pool of doctors in this country,” she said.

“The same doctors who staff public hospitals also work in private, which means that the widespread belief that private health care is somehow ‘higher quality’ is also wrong, even if the waiting rooms have more expensive couches.

“Siphoning off those highly trained consultants to work in private affects public waiting lists, and most of those doctors would actually prefer to work in public if they were given the resources they needed to work effectively and efficiently.

“I know that ‘queue jumping’ is commonly discussed in patient forums – for example, if you pay to see a specialist in private you might get prioritised onto their public waitlist. Apart from this being unbelievably unsporting, it also bleeds resources from a public system which has been built on the principles of ‘the greatest good for the greatest number’.”

Ethical issues from monetisation

Child says there is an inherit ethical question when it comes to building private hospitals for profit, and clinicians have to walk a careful line.

“By definition, patients are vulnerable,” he says.

“It would not take me too long to convince someone that the slight discolouration on their left forehead there probably isn’t melanoma but for $1,000 I can take that off. I can probably get that $1,000 out of your pocket, and it is for that reason doctors have a sworn code of ethics.

“As doctors we are supposed to swear to the patients’ best interests, but in a business environment in which I have to maximise a return to shareholders there is always going to be a tension.

“I am personally concerned about corporate primary health care. One reason I work for Southern Cross is they walk the walk, with 93 per cent of all premiums being spent on purchasing health services.

“My code of ethics as a doctor says I am entitled to reasonable remuneration for health care services provided, but what is reasonable? What do shareholders expect for their return?

“The issue comes from unreasonable profit, and we need to have a discussion as a whole about what reasonable profit for health care is acceptable to society as a whole.”

That discussion will need to include the value from having a healthy population and not be just about dollars and cents.