Listener 27 December, 1997.
Keywords: Governance; Health;
In a paper to the Association of Salaried Medical Staff, the chairman of the Transitional Health Authority (THA), Graham Scott, reported that the 1991 health reforms were predicated upon productivity gains in the public hospital sector, and that they had not occurred. As a result the CHEs are in permanent financial deficit. In Scott’s convoluted presentation – after all he was a past Secretary of the Treasury where the English language is a challenge – “the current deficits in CHEs are not only about inefficiencies and variations in the quality of management but are also an outgrowth of the original efficient pricing policy [whatever that means]. In other words a share of these deficits was made in Wellington, because the policy did not work out as intended. They were in inherent in the policy framework that assumed efficiency gains would be allocated to the deficit.” More simply, the policy failed.
Scott went on to explain the failed theory derived from the experiences of corporatization in other areas of government and on consultants’ reports. The shambles that our health services have got into, the cost shifting from the public to the patient, the family, or the community. and the additional discomfort, illnesses, and death, are a result of incompetent policy making by officials and consultants, not those trying to make the faulty system work.
Recall the 1987 study by Chicago consultants Arthur Anderson, which claimed that public hospitals were inefficient and 20 plus percent productivity gains could be made. Even at the time the conclusion was known to be statistically flawed. Financial gains would only come from cost shifting – the privatisation of public health funding. The Gibbs taskforce, which commissioned the study, then jumped to the conclusion that a reform of the health system based on private generic managers and markets would reap these alleged gains. Their case was entirely ideological – the consultants had not even investigated the efficiency of private hospitals.
In order to implement the Gibbs strategy, the government hired officials and consultants who knew absolutely nothing about the health sector, while those with proven competence were ignored and sacked. Listener readers will recall the interview of the a senior consultant advising on the health reforms who did not know the difference between an intensive care unit and a post operative recovery unit, but nonetheless was confident he would be able to obtain the promised 20 plus percent productivity gains. Detailed questioning of the reform team soon proved they had not the foggiest idea how the gains would happen, other than the odd anecdote based on small gains already made (and not repeatable). Some of the papers I saw from the National Interim Provider Board were like undergraduate essays, for the advisers were teaching themselves routine health economics. (I remember reflecting that real university students were paying increasing fees for such experiences, whereas these students were handsomely remunerated.) The comparison with the corporatization of state owned enterprises both overestimated the gains they made, ignoring that a hospital is quite different from a trading enterprise. What were the advisers thinking of doing: sacking all the brain surgeons?
The advisers were so ideologically committed, so paranoic, that expert critics were automatically dismissed. Accountants Cooper & Lybrand even advised that, in effect, the CHEs sack any staff who was doubtful about the reforms. Ironically, the public who had access to both viewpoints – of the reform advisers and of the critics who were competent – were better advised than the politicians.
What about the government’s chief advisers on economic reforms? I have seen no Treasury paper between 1987 and 1993 which made the obvious point that there was no evidence that there would be the promised productivity gains. The Treasury watchdog, dominated by its commercialist ideology and the opportunity to cut back on government spending, was licking the hands of the burglars.
If mistakes of this magnitude involved a dam or building falling over, there would be a public inquiry. But the response to the health reforms disaster has been quite different. Those involved are still advising the government how to run the health service (and much else besides). Scott, who as Secretary of the Treasury ought to be accountable for the watchdog’s failure, is chairing the THA, which makes critical decisions about the future of the health system. Coopers & Lybrand has just provided another report promising vast cost savings by closing a number of hospitals. Others with as equally impressive advice records continue to guide public policy.
Why? The best parallel I can give involves a tenor performing for the first time at the La Scala opera house. After his aria, the audience – well known for its discernment – shouted “encore, encore.” He sung his aria again, and again an encore was demanded. He sung again, and the demand was repeated. A little breathless the tenor asked how often did the audience want him to sing the aria. A voice called out “Until you bloody well get it right.”
It looks as though we will be demanding of our failed officials and consultants encore after encore.