Published in Newsroom, 7 August 2025

The Minister of Health Simeon Brown is clearly energetic in his approach to the health portfolio, but  has arguably made several missteps, including his directive to Health New Zealand  to give ten-year contracts to the private sector for elective surgery.

This may seem a sensible decision, but the problem is that rather than asking the public sector to raise its game, it is being set on a path to providing what will amount to a “charity service”.

Senior clinicians will now have future-proofed, well-paid private practices guaranteed. This has always been the case for those who split their time between private and public, but this system will encourage more practitioners in public hospitals to either start a part-time practice or increase their hours in private practice.

In this case, what incentive will there be for a clinician to ensure that their public hospital practice thrives when that is likely to be at the expense of their private practice?

I saw this in Auckland in the 1990s where the public sector provision of ophthalmology had the appearance of a charity service run by part-timers. So, if there were staff shortages in the public hospital, the list (for that day, or even half of that day) could be cancelled, something that would un likely to happen in private because of the immediate financial implications. Patients might also be encouraged, if they had insurance or were well off, to side-step the public waiting list and “go private”. A two-tier service developed.

In due course, however, Auckland hired a senior clinician who set about making sure that the public sector provision of ophthalmology was fully staffed. The public system rose to the challenge.

I would also argue that the decision to wave through a third medical school to be hosted at Waikato, doesn’t bear close scrutiny.

At present the two existing medical schools – Otago and Auckland – produce (or will soon) about 600 medical graduates a year. Australia produces about 3,000. Australia has five times the population and five times the number of medical graduates (plus internationally-trained graduates, including from New Zealand).

So, if we take Australia as a benchmark, New Zealand is producing as many medical graduates proportionately as it should. The problem is not that we aren’t producing enough medical graduates; the problem is that we cannot keep them. A third of our graduates leave these shores within ten years, and nearly half of our medical workforce is foreign-trained.

Rather than jawboning and requiring our existing two medical schools to raise their game – for example, by exploring a four-year medical degree as Waikato is proposing – the Government seems set to allocate major public resources to a third medical school to add to our current output, many of whom may well follow their colleagues to work elsewhere in the world. Nowhere in this scenario is a system of bonding considered to safeguard the taxpayers’ huge investments in medical education.

Another area for concern is the way our drug-subsidy agency, PHARMAC, has become an “Aunt Sally” for the Deputy Prime Minister (who also in his role as Associate Health Spokesperson has special responsibility for the agency). Yes, it can be asked to raise its game and be ever more efficient, but the frequent harping on the slowness of the agency’s decision-making and  the acceptance of new drugs on the New Zealand market overlooks the key limiting step – the budget.

PHARMAC has a fixed budget. It barely shifted under the Key government and only received major increases recently. The agency has taken the heat for decisions made by politicians to cap its budget.

Rather than thanking the agency for giving the wider health vote an extra billion dollars in the savings made, it is berated by politicians, talkback hosts, and activists for its failures to support the latest medications, most of which are very expensive, and many of which are poorly substantiated by cost benefit analysis.

I worry  that the current crop of politicians will so undermine public confidence in PHARMAC, and make it so weak-kneed in its negotiations with pharmaceutical companies, that New Zealand will end up paying far more for the drugs it buys.

Finally, there is the purchase of Primary Healthcare Organisations (PHOs) by corporates. We are well on the way to a scenario where traditional, professionally-run general practice will only exist in the leafy suburbs of our major cities, while elsewhere patients will be dealing with corporates focused  on their bottom line.

The OECD has recently released a report highlighting the growing financialisation of health services through purchase and operation by investors and for-profit corporates, such as private equity. New Zealand seems to be part of this trend, and this is potentially another step on the path to a two-tier health system.

Health is always a difficult area, and almost impossible to get it completely right, but at present a number of strategic decisions are being made that are setting our system on a future path that can only offer less value to the public.

Peter Davis, Emeritus Professor of Population Health and Social Science, University of Auckland, and former elected member to the Auckland District Health Board

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