Author: Peter Davis NZ

Dear Minister,

The health portfolio is one of the most sensitive and complex. It absorbs 15% of government expenditure and supports 80% of all health transactions. The sector is vociferous, high profile and well populated by clamorous interest groups. Demand is almost infinite and cannot be fully satisfied.

You arrive in office at an opportune time: the COVID pandemic has provided a salutary “stress test” of the sector, the findings of the review of the health and disability system (the Simpson Report) await implementation, and you enter office with a mandate and a support partner with strong commitments.

The COVID-19 pandemic has underlined some issues that need close attention.

The “missing middle”. The urgency of the pandemic revealed an operational gap between the role of the policy Ministry in Wellington and the providers of care on the ground. This gap could be bridged by the implementation of the Health New Zealand agency proposed by the Simpson report.

Procurement and asset tracking. While New Zealand has a world-class agency in PHARMAC for assessing, funding and tracking pharmaceuticals, there is nothing comparable for health technology, medical devices and related health material. This became quickly evident in the early stages of the pandemic with failures in the tracking of ventilators and in the purchase and distribution of PPE. Implementing a proposal drawn up in 2012 to extend PHARMAC’s brief would address this shortcoming.

Digitisation and telehealth. The pandemic revealed weaknesses in New Zealand’s health digital infrastructure: manual processes were required for tracking and tracing, information systems did not articulate, the National Health Index number could have worked better, and the widespread use of fax machines in the sector is an anachronism. The potential productivity and quality of care gains from an integrated digital infrastructure are well known. This needs vision and leadership.

Pharmaceutical legislative reform. The world is addressing the potential for the creation of a vaccine. New Zealand’s framework potentially hampers our access: tight controls of compulsory licensing; inability to speed drug approvals if overseas agencies do so; limited access to data for generic companies. You should now promptly advance the re-writing of the Medicines Act that was initiated in the early stages of the first term of your government. This is unfinished business.

The review of the health and disability system brought to the fore somef issues for consideration.

According to the Simpson report, only 20% of gains in health status are due to health care providers. Much of the remaining 80% is attributable to the environment, lifestyle behaviours like exercise and transport, commercial determinants such as diet, alcohol and tobacco, and social factors such as housing, education, and income. We need an agency that has a focus on this 80% complex of factors. A precursor model of such an agency was the Public Health Commission of the 1990s.

The Simpson report rightly identified the plethora of health agencies in New Zealand as problematic. I agree, but the exact configuration is another matter. For example, the four Auckland and Northland DHBs have shown an ability to cooperate and plan together as a region through the pandemic, and yet still wish to retain distinct sub-regional connections and identities. I suggest four regional groupings of DHBs with centres in Christchurch, Wellington, Hamilton and Auckland. The commissioning, funding and planning functions would be aggregated into regional commissioning agencies, which would also absorb such roles from the PHOs and the Ministry. As in the 1990s, this would provide a mid-level set of four agencies using their commissioning power to knit together regional health systems.

The Simpson report also identified structures that do not add value but instead divert vital funds, namely: PHOs and the multiple opaque private agencies they have spawned which, anecdotally, divert a good five per cent of primary care funding; and corporates that may return 30% to their private equity partners. Action is needed to return these funds to patient care from structures that do not add value, possibly in the form of Primary and Social Care Networks devoted to maintaining people in the community and preventing hospital and institutional admissions.

A series of working groups could address other issues in the Simpson report.

Finally, your support partner. The Green Party has proposed an extension of ACC into the area of illness. 2023 will be the 50^th. anniversary of ACC, and yet, after half a century, it remains unmodified and fixated on injury. Extending levies beyond injury to other illness-causing commercial activities in the areas of tobacco, alcohol, sugar, saturated fats and other harmful consumption products would not only extend health cover for New Zealanders beyond injury, but also reduce harmful consumption and improve health outcomes such as cancer, obesity, diabetes, particularly for our most vulnerable populations.

Peter Davis

Elected Member, Auckland District Health Board; Emeritus Professor, University of Auckland             

https://www.nzherald.co.nz/nz/peter-davis-advice-to-the-incoming-minister-of-health/UDA3OBRW4WKS6VWE7PPIQW45DQ/

Very unfortunate and troubling though it has been for all concerned, in retrospect the Auckland outbreak has been a salutary experience from which everyone can learn something.

The commentariat have been working off our first wave. But the cases then seemed to involve for the most part youngish and healthy middle-aged, middle class, travelling Pakeha and their networks, and was thwarted by a complete lockdown. Now we have a very different “demographic” affected, including multi-generational households, people gathering in churches and on public transport, and with more at-risk health profiles and poorer access to health services. This is the mix that has fomented so much of the spread internationally. The commentariat need to re-calibrate accordingly.

The Government has been tip-toeing around issues of public consent. Yes, it has been “following the science”, but it has also had to take the public with it. Can you charge people for their quarantine? Can you require pre-departure virus tests as some airlines and countries already do? Can you require border workers to take regular tests? Can you stop nurses moonlighting between border and hospital employment? Can you require masking in confined spaces and on public transport? In contrast to the firmness and rigour of the first lockdown, all these have had to be negotiated in real time. This outbreak provides an opportunity to resolve many of these issues of public consent.

The Auckland outbreak has demonstrated that our laboratory testing and contact tracing systems are now up to scratch. But, If any further evidence was needed on the balkanised nature of our health system, then this outbreak has provided it; we have a system in which there is a policy health ministry in Wellington, there are 20 DHBs normally focused on hospitals rather than broader health considerations, we have family doctors and corporate primary care usually driven by their local business models, and we have under-resourced public health units. Under circumstances of crisis these different segments unite and rise magnificently to the occasion – as they did with the first outbreak under lockdown – but in the present circumstances the operational weaknesses of the system are revealed, particularly the threadbare IT systems that are barely interoperable, are sometimes no longer supported by the vendor, and are often on the verge of collapse.

It goes without saying that the health system endured nine years of “soft austerity” as the system was treading water while easy and discreet cost savings were quietly stripped out of it. That said, the system has always placed higher priority on hospital staff, beds, and bricks and mortar, and IT systems have been left to languish. For example, the National Immunisation Register is said to be on its last legs. Furthermore, the broader register of which it is part has an “opt on” system over the age of six, which means those in the community most in need of scrutiny and help are often least likely to be in touch with the outreach potential of such a register of record. Also, a good five per cent of the population is not even registered with any family doctor. Furthermore, while we have a unique national health identification (NHI) number, there are duplicates, NHI details held by different parts of our system are not routinely updated and reconciled, mobile phone numbers are not routinely entered, and lesser trained personnel at the border were having difficulties dealing with finding and determining NHI numbers, despite the fact that a name, a date of birth and gender should give you almost all you want t identify an NHI (at least for people who have been allocated one).

This outbreak has also been a “wake-up call” for our public service beyond the health system. For all the talk of an all-of-government approach, somewhere something went wrong in the chain of command and among the silos of different parts of the bureaucracy such that an apparent edict from Cabinet was not fully implemented, despite reassurances. It was said that in ancient times the orders of the Emperor might never go beyond the palace gates, and certainly no further than the boundaries of the surrounding city. It appears that this may apply to the modern New Zealand public service, albeit under conditions of an unprecedented crisis with multiple system changes and many moving parts. At the very least the State Services Commissioner should be initiating his own inquiry into the capacity of the system since much can be learned for future improvement from the successes and failures under these conditions of duress.

Finally, unfortunate as it might have been, this has been an outbreak that was, in retrospect, predictable, but one from which we must learn very fast as it will not be the last, even with the best systems in place. We had got complacent. We rejoiced in a return to our old freedoms. The public needs further guidance, so that we can return to a “new normal” that takes into account the new sense of alertness and urgency we need to have, while also getting back to as normal a life as is possible during a global pandemic. We also need to have those discussions about how we can manage around this virus for the forseeable future, how our public services can adapt and respond better, and how our economy can flourish and be more resilient and effectively future-proofed for a very different world.

Peter Davis

Elected Member, Auckland District Health Board

Emeritus Professor in Population Health and Social Science, University of Auckland 

Published in the New Zealand Herald, Monday 31st. August 2020     

      https://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=12360420

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Ngā mihi,

Peter Davis

This article is part of the Covid -19 Issue of Policy Quarterly, published in August 2020 by The Institute for Governance and Policy Studies, School of Government at Victoria University Wellington.

This article was published in NZ Herald on 6th of July under the title, ‘Auckland must seize health opportunity report presents’.

The Health and Disability System Review (known as the “Simpson” Report after the chair, Heather Simpson) was recently published. It draws substantially on submissions from the sector and has been a couple of the years in the making. It is the most substantial review of the sector for about 30 years. 

The “Simpson” report has made little impact in Auckland, yet in many respects it presents an opportunity for the region. Firstly, the pandemic has forced health services in the region to operate in novel and more coordinated ways. There is an openness to change. Secondly, the region has flourished as a single “super city” for a decade now. There could be synergies with this structure. Thirdly, primary and community health services are becoming increasingly stretched for Auckland’s lower socio-economic and ethnic minority communities. A combination of health risks – obesity, poor housing, insecure employment and so on – together with inadequate health infrastructure and the incursion of barebones and semi-predatory practice operators means that the most disadvantaged are also in danger of receiving sub-optimal care in the community with the hospital sector picking up the pieces. On these three grounds Auckland stands out as being the one major area in the country that could make the most of the “window of opportunity” offered by the “Simpson” report.  

But what are the major recommendations of the report – and are they likely to be implemented?

Its major recommendations, that are likely to be implemented in one form or another, are:

• A new crown entity, Health New Zealand, for central co-ordinating, initiating and planning.
• A Maori Health Authority that has an advisory, planning and advocacy function associated with the Ministry of Health, but without a separate health system budget. 
• Fewer DHBs, without elected members. 
• Networks: local primary and community health organisations, hospitals and specialist services.  
• A recognition of the need for monitoring and enforcing efficiency and effectiveness in the performance of hospital and related services.
• An encouragement to workforce development and training to move towards a competency-based approach to regulation rather than a profession-based focus. 
• A data-driven, digitally-enabled ecosystem. 
• Improvements to the management of asset and capital expenditure and planning. 

It is hard to disagree with any of these proposals, and the pandemic has brought their necessity into sharp relief. But how will they affect Auckland? What potential is there in the report to enable Auckland to try something more clearly tailored to its requirements as a regional health system?

Firstly, there is the impact of the pandemic that has forged the makings of a regional system.

Second, the ten-year existence of a single city, Auckland Council which has within it 21 ready-made communities of interest of 85,000 each that could provide the basis for primary and social care practice networks and community input. As with the Council, these could provide the “step down” from a single regional health authority. There is also the potential for the Council’s regulatory functions in health-related areas to find synergies with the otherwise free-standing Auckland Regional Public Health Service. 

Finally, the primary care system in the region is on a cusp with the middle class enjoying high-quality services but low-income and other disadvantaged populations increasingly dealing with barebones corporate and other practices that are struggling financially and professionally to provide adequate levels of care for these otherwise poorly-served groups. Indeed, in the recent pandemic thirty general practices just shut up shop. What other anchor medical specialty dealing with 90 per cent of patient encounters would find itself in this predicament? Quite aside from the sub-optimal service received by these groups, the DHB essentially acts as a provider of last resort through avoidable hospitalisations and late presentations for acute and emergency care because the first line of defence is simply not working well enough. On top of this add a growing and ageing population, chronic illness, and multi-morbidity.

Essentially primary and community care needs to move to a regional system of “health maintenance”, the function of which would be to work closely with specialists and social agencies to keep people out of hospital. This would require a transformation of existing umbrella organisations to a single regional commissioning and active management entity based on a model of leveraged primary care, like the Kaiser Permanente in the United States. Family doctors would need to be recognized as a core specialty with matching salaries, and require physician assistants, and work with multidisciplinary teams.  

This is the potential for the region. In other words, the “Simpson” Report is best seen as a starting point for what could be a process of intelligent, long-term reform that could gain bipartisan and stakeholder support. It is a window of opportunity that Auckland should use to the full.

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

This article appeared on stuff.co.nz on the 17th of June 2020.

The “Simpson” Report: Cautious steps towards a national health system?

The last time we had a review as comprehensive as the “Simpson” Report (Health and Disability System Review) was in the early 1990s with the so-called “Green and White Paper” which was an ambitious, centrally-driven reform process which left its mark in a more business-like approach to managing health care and the establishment of PHARMAC. Little else survived.

With the “Simpson” Report we have a document that draws substantially on submissions from the sector, that has been a couple of the years in the making, and that sets the stage either for a cautious realignment of our current system or a much more far-reaching set of reforms that, with leadership and sector buy-in, could have long-lasting consequences.

What are the major “probable” innovations? 

• A new crown entity, Health New Zealand, is mooted as a central co-ordinating, initiating and planning body that fills the gap of an operational function that the Ministry of Health, as a policy ministry, was not established to perform.
• A Maori Health Authority that has an advisory, planning and advocacy function associated with the Ministry of Health, but without a separate health system budget. 
• Fewer DHBs, without elected members. 
• Networks – of local primary and community health organisations (so-called Tier 1), and of hospitals and specialist services (so-called Tier 2).  
• An emphasis on equity, yes of course, but also a commitment to monitoring and enforcing efficiency and effectiveness in the performance of hospital and related services. At present we simply do not have the indicators and benchmarks in place to perform this well.

What are some of the “possible” innovations?

• An encouragement in workforce development and training to move towards a competency-based approach to regulation rather than a profession-based focus. As the wording of the report suggests, this will be hard to achieve, but I am aware in my role as a DHB member that we are constantly frustrated by demarcation disputes and an inability to work flexibly in many domains.
• PHOs are not encouraged. In many instances it is hard to see what value PHOs add. In Auckland several new PHOs were formed, the function and utility of which it is hard to fathom. PHOs add another layer of complexity that at present does not help us organize primary and community care effectively, particularly where there are competing corporate interests.
• The report tip-toes around the issue of the privacy obstacles to the use of New Zealand’s unique National Health Index for bona fide public interest purposes (screening and enrollment among others). If a full-blooded panel cannot insist on this flexibility, who else can?
• A data-driven, digitally-enabled ecosystem. We have wasted a good twenty years and we still have competing systems not only across DHBs but within them too. One of the problems in the response to COVID-19 was the inability of data systems to talk to each other and collate information.

What remain some of the problem areas?

• Primary care, general practice. In the recent COVID experience in Auckland alone thirty general practices just shut up shop. In Auckland we also have corporate practices driving barebones primary care for low-income populations. In such circumstances ethical, professional primary care practice can simply not survive. The report talks much of primary and community care, but at the heart of it is a big hole in funding. In the United Kingdom primary care is seen in many ways as the driver of the system, with high professional prestige and associated state funding, but not in New Zealand.
• Regional entities. These could be another layer, or a useful grouping of networks. Unclear.
• Health outcomes. The DHBs are to tackle health outcomes. But health outcomes are largely determined by factors outside the health sector. A delivery system can probably make a difference to about 30% of life expectancy and maybe 50% of heath expectancy. We need to be realistic about what the delivery system can do, and hold it to account accordingly.
• Population health as a driver. The report emphasises population health as the driver of the system. But from my experience the system is not population focused, and never can be, because the hospitals are so dominant. The bulk of DHB staff work in hospitals and most of the DHB’s budget funds hospital work. This is in turn is driven by everyday activity arising from the needs of the population.
• Population health as a social policy. The major determinants of population health lie outside the health system. And the major initiatives required to advance the health of the public have to be politically driven – such as social housing, tackling the industries that foster our obesity epidemic, clean water, and so on. New structures will not solve this, only political will.
• Hospital focus. The DHBs are dominated by their hospital focus. As an elected member 90% of my time is spent on matters to do with the hospital sector. This cannot be wished away. There needs to be serious attention to home-based care, reducing admissions, ambulatory alternatives, specialist outreach to prevent admissions and so on. 
• The funding recommendations in the report are not convincing, for me anyway. Ringfencing for non-hospital services? This has never worked, for the simple reasons that saving lives in an acute setting will always trump the more prosaic work in the community. No mention is made of how to make primary care financially viable for the long term. I still think the Woodhouse report that established ACC should be dusted off and revisited. It argued for an ACC-style social insurance system not just for injury, but for illness as well. 

The “Simpson” Report is best seen as a starting point for what could be a process of intelligent, long-term reform that could gain bipartisan and stakeholder support. These are cautious steps towards the national health system that a population of just five million surely deserves.

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

Published in the Herald in August 2018:

A recent Herald editorial is headed “Pension not enough even for ‘no frills’ retirement” and concludes “The future of an ageing New Zealand needs a lot of close attention”. Could this be a topic to exercise the Tax Working Group (TWG)?

The background paper prepared for submissions to the TWG outlines a number of broad “challenges” to the future tax system. The first of these is “changing demographics, particularly the ageing population and the fiscal pressures that will bring”. To date this topic has been little canvassed in public debate on possible future tax changes. Perhaps the Herald editorial can start this.

The steady ageing of our society is putting pressure on our two most substantial taxpayer-funded programmes – superannuation and health. On top of this demographic pressure there is the stress we have put on ourselves by relying so substantially on personal taxes to fund these large items. New Zealand is heavily reliant on personal taxes in its revenue system; while the average in the OECD is less than a quarter, in New Zealand it is nearly 40 per cent.

With our “pay-as-you-go” (PAYG) superannuation system we have assumed that the payments of taxpayers and the receipts of beneficiaries will more or less balance out. With ageing this assumption becomes increasingly untenable as the ratio between contributors and beneficiaries increasingly gets out of balance. Indeed, the system looks increasingly like a Ponzi or pyramid scheme where current taxpayers are supporting a set of financial arrangements that they are unlikely to be able to benefit from when they come to retirement age.

With health, ageing is also placing pressures on current PAYG arrangements. Again we have a system of inter-generational transfer that is becoming less viable as the ratio between contributors and beneficiaries increasingly gets out of balance. In particular, the demands of long-term and social care, the multi-dimensional nature of health problems for older people, and the fact that a disproportionate amount of health expenditure is committed in the last year of a person’s life are all starting to weigh heavily on current provision.

In consequence we have massive unfunded future liabilities associated with our state superannuation scheme and an annual wrangling exercise with the health sector. Yet, at the same time, we also have the rudiments of pre-funding and tagged social insurance schemes for both sectors – KiwiSaver and ACC respectively – which we could be in a position to formalise and develop. And we also have the example over the Tasman, where the Australians have a levy-based superannuation scheme and a universal Medicare based on an income levy, together with their National Disability Insurance Scheme (NDIS). 

We could, building on Kiwisaver and ACC, establish twin social insurance schemes for future superannuation and health respectively. These would be based on actuarial estimates of the required rates on a regular basis, be set up at some arm’s length from short-term electoral politics, and underpinned with regulations and structures to ensure their durability, efficiency and flexibility for future generations. This would permit income and company tax rates to lower, but in part be replaced by actuarial levies on employees and employers.

Taking the pension first, KiwiSaver and the Superannuation (Cullen) fund should be considered together so that we can progressively transition our state pension scheme from a Defined Benefit to a contributory scheme with a guaranteed benefit (as currently offered). Individuals would be free to save more than required for the basic superannuation, but the role of KiwiSaver and the Superannuation fund would in the first instance be to ensure that no citizen of New Zealand with the requisite residential qualifications would fail to gain the current “National Superannuation” pay-out (although necessarily adjusted for future living costs).

As for health, ACC should be extended to cover illness and social care, but with the income support element taken out and placed in an entity equivalent to the Australian NDIS. ACC rates vary by industry risk for injury. This could be extended for illness to other harm-inducing industries such as alcohol, tobacco and sugar, which could be levied in proportion to their estimated impact on the health budget (this semi-actuarial work has already been done in the Ministry of Health’s “Health Loss” report of 2016). This change would be carried out progressively, and individuals could still, as they do now, take out private insurance cover over and above their social insurance. 

Pensions (superannuation) and health are two very large components of any developed country’s budget. Historically, these were introduced in response to clear “market failures” in a pragmatic fashion alongside other budgetary items and we can see in retrospect that they are a form of inter-generational risk pooling. As such, these can be characterised as inter-generational transfers that have a strong insurable element about them.

As pragmatic responses to social need of an earlier era, these arrangements are starting to look archaic and dangerously vulnerable financially. We should now build on two current New Zealand pre-funding schemes – KiwiSaver and ACC – that provide the rudiments of social insurance but that have to date not been allowed to meet their full potential, even while we have well-established models across the Tasman. These schemes would provide budgetary certainty for their respective sectors and communities, they would improve the national rate of saving, and they would allow income and company taxes to reduce accordingly.

Peter Davis

Emeritus Professor in Population Health and Social Science

Department of Statistics

University of Auckland

09-6388-055; 021 348 659

This article was published in September 2019 in NZ Herald with the title ‘Primary and community health services are lagging.’

According to a recent news item, District Health Board (DHB) deficits are set to expand to around $500 million for the year, a substantial sum on a total annual health budget of about $20 billion. (https://www.tvnz.co.nz/one-news/new-zealand/health-boards-deficits-forecast-hit-508m)

Perhaps this is to be expected after a decade of a funding squeeze, and the current government is to be applauded for its larger Budget allocations to health. 

But is the money going to the right places in the health system? 

Hospital services seem to be the main beneficiaries, and yet there is a very substantial and important primary and community sector that has lagged well behind in funding and staffing. This points to a weakness in our funding system which the DHB model seems unable to overcome – the neglect of primary and community services.

This is not only an issue about the funding system. It also relates to a delivery model. We need to become less reliant on costly hospital structures, and move to a model that can provide the same services – but “closer to home”, at the level of family doctor, health centre, and other services that are intermediate between hospital and community.

This approach is already working overseas. For example, Denmark – a country of a similar population size – has reduced the number of hospitals over the last 20 years from 98 to 32. This involved moving to a greatly-expanded primary care system (https://www.afr.com/work-and-careers/management/why-denmark-is-reducing-hospitals-while-we-are-building-more-20190219-h1bg9d). Another example: the United Kingdom’s NHS uses over 3 times the number of acute hospital bed days for over 65s compared to the Kaiser Permanente in the US, a large non-profit, primary care-led organization that uses active clinical management by cooperating specialists and primary care doctors (https://www.ncbi.nlm.nih.gov/pmc/articles/PMC286244/).

As it is, apart from emergency and acute admissions, most of our public hospitals have greatly reduced operational capacity at weekends, which suggests that some reallocation of services outside hospital walls is possible. So, how could this work in practice? I suggest that we can:

1. Improve the capacity of the primary and community sector by grouping up, combining multidisciplinary teams, enhancing the deployment of upskilled practice nurses, and providing local diagnostic facilities together with intermediate-level services such as observation and social care respite beds, and care delivered in the home.
2. Reduce hospital admissions by targeting disorders that can be treated in the community and by providing a comprehensive, affordable “after-hours” care service.
3. Move those in-hospital procedures that can be so treated to a day-stay approach, and, where possible, shift outpatient visits either to family doctors or to mobile and “virtual” specialist and nursing services.
4. Develop common contract terms and shared clinical pathways across the sector, and reduce inter-sector competition and boundaries to increase the availability of flexible solutions.
5. Ensure IT services that can work across sectors and systems, telephone triage services, along with IT innovations such as shared electronic records (with patients too), and comprehensive practice enrolment systems that facilitate prevention, screening, and health maintenance. 

There are elements of all of these operating at present, but we need to bring it all together. 

A major part of that would mean committing to a more functional alliance framework between the hospital sector and Auckland the Primary Health Organisations, putting them at the front of health service delivery – a requirement that should be written into DHB CEOs’ performance expectations. 

Also, Central government needs to look again at the primary care funding formula in order to facilitate new and more efficient models of care while retaining continuity of care.

And if we are looking for an area where this reinvigorated alliance framework might start its work, “after hours” care is an obvious field of common interest between the primary/community and hospital sectors. Auckland consumers should not have to resort “after hours” to expensive commercial facilities or inconvenient hospital Emergency Departments for conditions that they would normally take to their family doctor. 

This could be the testing ground for a new health and social care alliance in the region. Once proven, it could then be repeated for other services that can be brought “closer to home” and better tailored to Maori, Pasifika and other populations with inequitable outcomes.

Peter Davis, ADHB Candidate, City Vision Health

Here an article that was published in NZ Herald last September:

Impressions from a newly elected member of the Auckland District Health Board (ADHB).

ADHB is big “business”: turnover of $2.2 billion and 11,000 staff; the third largest enterprise in New Zealand (just under one per cent of GDP). Aside from serving the Auckland isthmus, it also provides specialist services to other DHBs for difficult and complex cases. 

But ADHB has one big problem – it is operating at a substantial “loss”; in other words, it has many more expenditure commitments than revenue. This is a new phenomenon. Over the last decade ADHB has broken even practically every year. But these last two years are different.

Why? One important factor is that the arrival of a new government broke a “drought”: staff got pay raises, new staff were hired, staffing ratios have been eased, capital charges have been offset, properties and assets have been revalued (higher depreciation charges), the cost-price gap for services Auckland supplies to other DHBs is starkly apparent, migration-driven population growth continues, and public expectations have risen.

Auckland is by no means the worst affected. The initial deficit across all 20 DHBs is just over half a billion, 2.5% of the health budget. That may not sound a lot, but is the highest for nearly 20 years, and other public services are not allowed to run such deficits without central government intervention (look at the recent experience of the polytechnic sector).

One way in which DHBs have tried to deal with this deficit has been to raid the budgets of non-hospital services. This takes about $100 million off the initial deficit, but it is unjust, unsustainable, and terribly short-sighted. After all, who is going to prevent young children taking up valuable hospital dental services, who has a chance of limiting use of emergency departments and preventable hospitalisations, who could better manage sick and older people with multiple illnesses, disabilities, and medications over the long term? You guessed it – the services in the community that supply 90% of usual care under normal circumstances, much of it at the family doctor.

Apart from staring down the government of the day to come up with a lot new money, there are other options that are constructive, practical, and probably overdue. As Winston Churchill once said: “never let a good crisis go to waste”!  

The “sleeping giant” of primary, community and social care needs to be given a seat at the table and empowered to do its vital job properly. From my observation after just one meeting, the non-hospital sector is practically invisible; in essence, DHBs are hospital boards in all but name, and we need to draw on international best practice to empower and coordinate the non-hospital sector to do its cost-effective work, particularly with allied health professionals.

Secondly, with hospital productivity clearly on the decline, there is much more that could be done to reconfigure hospital services in a more cost-effective direction – such as moving much more elective surgery to day stay. A similar argument might be made for moving more outpatient visits to family doctors and skilling family doctors in areas where they can make a difference (for example, skin care). In the same vein, each hospital department should be asked to conduct efficiency and effectiveness audits, using international benchmarks where possible, and coming up with solutions, many of which will come from existing staff themselves who often know where the obstacles to efficient work practices lie.

Finally, the costs of outsourcing should be reduced, PHARMAC or some other central procurement agency could assist with getting better and more standard deals on equipment, time-consuming paper-based administrative systems are shockingly-overdue for replacement by modern IT-based systems, and there needs to be close attention to the roles of different staff to ensure that we are not applying personnel to jobs for which they may be “over-qualified” and not professionally challenged (the so-called Role Delineation Model has not been updated for practically a decade).

The sector’s half billion deficit might look like a “threat”, but actually it is an opportunity. Let’s do it!

Peter Davis

Elected member

Auckland District Health Board

This article was published in The Dominion Post late April 2020.

For anybody with a belief in the public interest benefits of evidence-based policy, the shelving of a comprehensive capital gains tax (CGT) after a short debate is a setback. It suggests we do not have the “policy space” to take on big issues in New Zealand. If a leader with good will, vision and stature cannot advance an evidence-based policy in the public good, who can?

And it is not as if we are talking about policy made on the hoof. GST is a policy element that is embedded in the tax architecture of every advanced economy of consequence, including the heart of capitalism – the United States – and our cousins across the Tasman. This is a policy component that has been worked into tax systems in different forms around the world (including ours through the bright-line test), with various wrinkles ironed out, delivering fairer taxes and more even-handed investment incentives. This was not a proposal of whim or caprice, but one with substance, strong analytical foundations, and a proven track record in many countries we compare ourselves with.

What this case suggests is that we simply lack the “policy space” in New Zealand to take on big issues. From my observation, there simply was not the attention given to presenting and discussing the merits of the proposal in a balanced manner. The “debate”, such as it was, was dominated by commentary from individuals and agencies with a vested interest in defeating the proposal, greatly amplified by the media. This is what one might expect, but there was little push back: the universities were largely absent; the economic columnists hedged their bets, as did the consulting companies and bank economists; other commentators largely treated the issue as a political one. I am not sure I saw a single authoritative, independent source giving the proposal a fair hearing, although some media outlets provided useful summaries close to decision day.

With a three-yearly electoral cycle, an intense arena of political contest, a media consumed by sensation, and a diminished public service, we have a limited “policy space” in which issues of substance, contention, and long-term import can be developed and debated without the oxygen being sucked out of them in short order by the intensity of partisan contest, the short-term calculations of the political cycle, and the surge of vested interests.

With the growing pressure to publish, universities have largely absented themselves from too close an engagement with contentious policy questions, although some have developed policy institutes. The PHARMAC and State-Owned Enterprise models are other instances where long-term policies, often of a politically-sensitive nature, can be developed and implemented by experts and technocrats, to a large extent shielded from direct political intervention, although in the case of PHARMAC that space is also regularly contested. 

Appointing a Royal Commission is another device for developing policy. Without that, Auckland would not now be marking a decade as a single city (rather than an arena of fractious local authorities). That could never have been achieved under “normal politics”. Another approach is to establish independent commissions and commissioners that report to Parliament, thus retaining their independence and authority. There is also the Productivity Commission.

However, some countries have seen the opening up of space necessary for long-term policy development with the founding of think tanks, many of them independent and non-partisan. For example, senior public servants, academics, and corporate and NGO leaders in Australia lobbied for the establishment of a heavyweight independent think tank to support evidence-based policy. Thus was established the Grattan Institute in 2008 with an initial $34 million endowment and a stream of policy briefs since then around seven key policy areas under the overarching theme of “a liberal democracy in a globalised economy”.

Of course, in the end it is politics which decides policy issues of any kind, and in a democracy that is how it should be. But at present it is arguable that “the politics” – whether it be the mechanics of MMP or the actions of vociferous and powerful vested interests – is pre-empting the policy debate. It is conceivable that a well-stocked and flourishing policy space could actually influence the politics. Some minds might be changed. Public opinion might shift. 

Without sufficient policy space, however, there is the danger that New Zealand is destined to let the dynamics of the electoral cycle, the contest of party politics, the short-term focus of the media, and the thicket of veto groups pre-empt important policy developments and debates of long-term consequence. 

Peter Davis is Emeritus Professor in Population Health and Social Science, and founder of the COMPASS policy research centre, at the University of Auckland.