Published by AHAA (Apologies for the tabulation presentations.)
By way of background, doing some unrelated work I came across some international data on the healthcare sector which seemed to contradict my, and the conventional wisdom’s, view of the healthcare sector. Broadly, it is that the sector has been underfunded. That is not what the international data seems to say. By international standards New Zealand healthcare funding appears satisfactory – no worse generally than average. Why then is there so much grumbling which seems to suggest the healthcare system is in crisis?
Data is always treacherous because of data definitions and structural change over time; international comparisons are even moreso. I proceed with care – and honesty (hence the more conversational tone). The first part of the paper summarises the data. My commentary on its interpretation is in a second part.
OECD: New Zealand’s International Ranking: Health Spending of GDP
Each year the OECD produces a survey of healthcare indicators. The latest is Health at a Glance 2023. It contains many comparisons for the 38 OECD countries (and 10 others which, being much poorer, I ignore). Figure 7: [Public and Private] ‘Health expenditure as a share of GDP’. Table 1, derived from it, ranks the top 13 countries.
I was astonished that New Zealand was so high – seventh. I do not put a lot of weight on the exact ranking. It bounces around from year to year. Moreover, the differences between the 5 and 11 ranking are small after allowing for measurement difficulties. Such cautions do not alter the conclusion that New Zealand is well above (say 16 percent) the OECD average at a level not incomparable to that of countries whose healthcare systems are often admired.
1. Health Expenditure as Percentage of GDP: 2023
<>International Ranking: Comparable Health Spending per Capita
Table 1 is important for fiscal managemeny. [1] Three adjustments are made in Table 2 which refines the understanding for health policy purposes:
– total actual spending (not relative to GDP);
– valuing the spending in the common (PPP) prices, removing country-cost differences;
– converting the spending to age-adjusted per capita. (A country with an older population has its health spending scaled down relative to a country with younger population because its health needs are relatively higher.)
Table 2 shows the outcome for the top 14 countries measured with OECD = 100. [2]
2. Age-Adjusted Health Expenditure per capita 2022
<>New Zealand now ranks 6, one higher than in Table 1 because its healthcare prices are relatively low and its population structure is relatively favourable compared to the rest of the OECD. (Observe how the US score tumbles because it prices are so high; it still retains its top ranking.) Allowing for measurement difficulties, New Zealand seems to rank somewhere in the 3 to 9 range.
Moser’s law says if a statistic is interesting it’s probably wrong. (If it is not, it is really interesting.) It behoves the researcher to check the quality of the data. The figure which has most concerned me here was that New Zealand health sector production prices seemed low (so that the country gets a lot of healthcare bang for its international buck). However, Japan, Czechia and Slovakia are similarly out of line.
Even so, I am cautious. New Zealand health care prices seem to be about 60 percent of the level reported to Australia. Part of those differences may indicate superior efficiency, but given over 80 percent of the costs of a healthcare service are for wages and salaries, it seems possible that New Zealand remuneration rates are markedly below Australia’s. We know that to some extent that is true, but as much as the OECD comparison suggests? I return to the cost difference issue in the commentary.
OECD: Evaluating by Outputs Rather than Inputs
The statistical conventions measure the costs of healthcare, not the outcomes. For instance, they values an episode of surgery at the cost of doing it, rather than the benefit from doing it As far as the conventions are concerned it does not matter whether the operation is necessary, low need or high need; whether it is a failure, a moderate success or resounding success; whether it makes a significant difference such as saving a life, or a small improvement such as removing an ingrown toenail; whether it is done with consideration and respect or with brutality. (The disconnect is well-illustrated by the US top ranking in terms of resources but, notoriously, its markedly lower rank on its population’s health outcomes.) Statisticians are well aware of these limitations but there have not been the resources to tackle them.
The OECD report provides a dashboard of health indicators too complex to detail. Here are the assessments about New Zealand:
Better than OECD Average
Self-rated health
Smoking
Air Pollution
Effective secondary care (Acute Myocardial Infarction – heart attack)
Effective secondary care (stroke)
Close to the OECD Average
Life Expectancy
Avoidable Mortality
Chronic conditions
Alcohol
Population coverage for core health service
Population satisfied with availability of quality health care
Financial protection (coverage by compulsory pre-payment)
Mammography Screening
Health spending
Practising physicians
Practising nurses
Hospital Beds
Worse than OECD Average
Obesity
The above list is those where the
OECD provides a judgement. The report provides many more measures. A
well-resourced researcher could interrogate the data (where they are available
for New Zealand) and add to the list. There is also usually enough data to make
ten-year comparisons.
For this paper’s purposes it is sufficient to conclude that New Zealand health outcomes are usually close to the OECD average, but there are some areas where the country is seems to be doing better than average (and perhaps a few where it may be doing worse).
Commonwealth Fund: Health Performance Indicators
The US-based Commonwealth Fund confines its international comparisons to ten countries with six separate aggregate indicators plus an overall performance measure in Mirror, Mirror 2024: A Portrait of the Failing U.S. Health System: Comparing Performance in 10 Nations. Its focus is on how poorly the US does compared to the other nine. Here are its rankings.
<>New Zealand does well on all the dimensions – 4/10 on overall rankings, 3/10 on health outcomes – except on the equity one. [4]
As a general rule, the differences between the country measures are not very great, except in the case of the US. The study tabulates the ordinal measure of ranking but provides only graphs – not tabulations – of the cardinal measures which underlie them. The countries generally bunch together – excepting the US – so that measurement errors, which are inevitable in international comparisons, could change the rankings. They would not change the basic conclusion that New Zealand is bunched with the other nine.
Except on the ‘equity’ dimension, New Zealand does really badly. It is bottom except for the US.
Commonwealth Fund: Health Performance Indicator of Equity
Supppose the measured difference between the top of the seven countries above New Zealand (Switzerland) and the bottom (France) is X. [4] Then New Zealand is almost another 0.4X down (and halfway between France and the US. Moser’s law suggests this outcome is interesting but we need to check the data.
The report describes its equity assessment procedure as:
Our Equity domain reflects how people with below-average and above-average incomes differ in their access to health care and their care experience. Australia and Germany rank highest for equity, meaning they are the countries with the smallest differences in health care access and care experiences between below-average and above-average income residents. New Zealand and the US rank last on equity, having the highest income-related differences in reported cost-related access issues and instances of unfair treatment or feelings that health concerns were not taken seriously by health care professionals because of their racial or ethnic background.[5]
The one comment the report makes about New Zealand in terms of its equity ranking was:
Australia and New Zealand’s poor performance for rural versus non-rural respondents contributed to their lower rankings. [6]
A reference to the post-code lottery?
The extent to which the international equity measure covers New Zealand concerns such as waiting times, being forced into private treatment by lack of public supply and unmet health care needs is not clear. They may apply in the comparator healthcare services too. (One where New Zealand does badly by the comparator standards is that most have national surveys of unmet health needs.) [7]
Some Local Data.
Before commenting on these findings, a couple of New Zealand specific data bases are added.
According to the Statistics New Zealand National Accounts the contribution of the health sector to GDP has risen from 3.3 percent in the 1971/2 year to 7.2 percent in the 2021/2 year. (An endnote explains why the number differs from the one the OECD uses.[8]) That is an increase of 0.7 percentage points of GDP a decade. The linear trend has short term fluctuations around it, but it is consistent with the finding that healthcare funding has a remorseless upward trend.
A second local source of data is a release of slides by the Ministry of Health: Health System Changes Comparative Analysis between 2012/13 and 2023/24: Key metrics. [9] It has graphs of the following:
– Vote Health Appropriation time series;
– Caseweighted Discharges time series (2 slides);
– Discharges and Bed Days time series;
– Presentations to Emergency Departments (ED) time series;
– Clinical and Non Clinical FTE time series (2 slides).
They report that over the 11 years when population had increased 17%:
– Caseweighted Discharges had increased by 25%;
– Discharges had increased by 30%;
– Bed Days had increased by 21%;
– ED Presentations had increased 29%;
– Clinical FTEs had increased 39%;
– Non-Clinical FTEs had increased 59% (or around 37% if a transfer of staff from the Ministry of Health and the Health Promotion Authority to Health NZ are deducted).
On these measures, treatments increased faster then the population over the period. There are other outcomes not covered by the slides – including the whole of the primary care sector.
It is true that nominal spending has risen substantially faster over the period, averaging 6.3% p.a. (excluding COVID-19 funding). The increases were smaller under National (3.4% p.a.) than Labour (9.6% p.a.) – reported outcomes were rising faster then too. There are no indications of how much this increase was due to rising prices (including remuneration catchups).
Part II: Commentary
In order to avoid rambling, I focus on but four issues.
First, the big conclusion for me is that by international standards New Zealand healthcare compares well. It is not perfect, but neither are the comparators (which certainly do not include the US). Yes we grumble – there are failings – but the aim should be to reduce the failings (knowing that the comparators also have grumblers and are trying to to reduce their failings too). But the approach should be of continuous improvement, not redisorganising – the system is not failing in a major way.
Second, the largest failing New Zealand healthcare has in international terms seems to been in equity – especially the urban-rural divide. However this is a tentative conclusion and needs to be verified – the OECD data base has some material which could be investigated. There may be a post-code lottery, but we need to understand why it exists instead of jumping to the conclusion that, say, a centralised system based in Wellington would resolve the problems facing Kaitaia or the Catlins. Not surprisingly the centralisation seems to have had no effect on post-code lottery.
Third, the apparent cheapness of our healthcare system compared to our comparators may be a concern. Medical professionals are in an international labour market and while it is is not perfectly mobile, New Zealand may be losing skilled personnel to Australia. (If we want international quality personnel, we may have to pay top international dollar.) Whatever, we do need to know more about international cost differences.
Fourth, much to my surprise, New Zealand does not seem to be under-funding its health system. The OECD data in particular suggests we are funding enough resources – compared to our comparators – (although insufficient compared to our ambitions). However accounting conventions are obscuring this conclusion. Following an examination of a batch of papers relased under the OIA, I concluded that the Minister of Health ‘had got to stop talking about a “health crisis” and focus on the funding crisis’. The findings in this paper might suggest the conclusion could have been ‘to stop talking about a “health crisis” and focus on the accounting crisis.’ Having said that, the previous paragraph might suggest we should be funding more to retain staffing from migrating. [10]
Of course, there are serious challenges facing the healthcare sector. Even if there were none we should be trying to do better. The surprising conclusion from the data is that the healthcare system seems to be doing comparatively well. [11]
Endnotes
[1] The ranking does not distinguish between public and private funding.
[2] The OECD does not give this table. I have constructed it by combining two which it does provide.
[3] The missing country arises because it was not possible to collect the data for Sweden.
[4] The report offers two rankings. Reported here is the more refined one. New Zealand does even worse on the less refined one. That the rankings jump around between the two, warns they may not be robust. However the US is bottom on both and New Zealand second to bottom on both.
[5] Some of the input data is subjective. Subjective data may be culturally biased. For instance, a few decades ago little attention would have been given to gender differences.
[6] Australian Institute of Health and Welfare, “Rural and Remote Health,” last updated Apr. 2024; and New Zealand Government, Rural Health Strategy 2023.
[7] The report sometimes specifically applauds New Zealand’s healthcare performance on some dimensions.
[8] The OECD figure includes contributions to health spending from other industry sectors as well as the health sector. Examples include outsourced food and cleaning services and building and construction.
[9] On 25 July, 2024 Lester Levy, just appointed Commissioner of Health New Zealand, stated
‘There’s pretty good evidence over the last 10 years that despite significant increases in the revenue of this and its predecessor organisations, the clinical outputs, the clinical outcomes have been relatively flat.’
<><> https://www.rnz.co.nz/news/national/523162/more-health-nz-job-cuts-to-come-commissioner-lester-levy-says