How can we improve health sector productivity and health outcomes in New Zealand?
Written by Tom Varghese
By 2060, the combined cost of healthcare, superannuation, welfare payments, and debt financing costs (33% of GDP) would outstrip government revenue (31% of GDP), leaving no room for education, law and order, defence, or other key portfolios.
Over the next few decades governments will increasingly need to balance the new and growing demands facing the health system with a tighter fiscal outlook. The performance of the health sector matters. Not only is it a major area of government expenditure (about 21% of core Crown expenses in 2017) and a major employer in New Zealand, it is important for living standards and economic growth.
NZ’s health sector often ranks highly in international comparisons of outcomes. Yet, as Statistics NZ has estimated, in health, average growth in output of 3.9% reflected input growth of 3.0% with labour productivity contributing 0.9%.
The concept of productivity can be misunderstood. It is an indicator of the output produced for a given set of inputs. It is about making the best possible use of resources like funding and labour (not necessarily increasing hours of work or cutting budgets) and if measured properly should account for changes in the quality of care.
Improving productivity is a key step towards improving the final outcomes of the health sector. It is not possible to achieve the best possible health outcomes for New Zealanders unless health services are productive. It may, for instance, be possible to decide on what outcomes are desired and to even predict the likely contribution of particular outputs to these outcomes. But unless the health system can effectively convert the resources available into outputs it will be unlikely to maximise desired outcomes.
At this juncture, it is worth focussing on primary care. Primary healthcare receives a relatively small proportion of overall health spending. However, more accessible and comprehensive primary healthcare has long been thought of as leading to better population health status at lower cost. The reason primary healthcare is such a focus for managing costs and improving outcomes across the whole health system is twofold. First, early intervention or prevention has potential to reduce demand for more expensive hospital-based services, by treating the right people in the right place. Second, primary healthcare’s position in the health system makes it well placed to improve the coordination of health services, especially those required to manage chronic health conditions.
The demand pressures on the health sector are real, and innovative new models of primary healthcare offer opportunities to address them. There is still more work to be done, but there is some evidence that innovation in primary healthcare delivery has the potential to drive both productivity improvement and better outcomes across the wider health system.