The New Zealand Health and Disability System

1. The New Zealand Health and Disability System Anthony Hill Deputy Director-General Ministry of Health

2. Contents • Overview • New Zealand • Public/Private in New Zealand • Public Health and Disability System • Issues • Pressures facing the system • Strategies • Government priorities • Examples of changes • Primary Health • Service Configuration • Elective Services • Pharmaceutical Management Agency (PHARMAC) • Shared Services Agency • Health Workforce New Zealand • Health Quality and Safety Commission

3. Contents • Overview • New Zealand Health and Disability System • Issues • Strategies

4. New Zealand

5. 1,313,100 3.4m 197,300 381,900 1.0m 382,200 114,900 New Zealand population Current Total: 4,365,600 Figures for estimated resident population at 30 June 2008: city totals are for urban areas; source Statistics NZ.

6. New Zealanders

7. The Treaty of Waitangi 1840 • Partnership • Participation • Protection

8. The New Zealand Health and Disability System Predominantly publicly funded system (from general taxation) • taxes on the basis of our income • provision of comprehensive health services for all System results: - free hospital care for all New Zealanders; - substantial public funding/subsidies for primary healthcare; - most hospitals are publicly owned; - private hospital sector is largely for people with private health insurance (or willing to pay), who want to receive early care without waiting; - primary care is operated by private providers with subsidies available for patients; - specialists can work in both the public and private system (greater remuneration to retain workforce). Extremely cost effective system (8.5% of GDP) - delivers good and necessary care for most people in a timely way

9. Public/Private • Government • Public funding services is about 78% of health care costs: taxation (86%), levies on employers (13%) and local government (1%) • Enduring public preferences (eg. 80% public funding; NZ’s particular mix of public and private providers; equity matters) • Private insurance • About one third of NZers have private health insurance; it covers 6% of total health care expenditures (2008) eg, for elective surgery in private hospitals • Out of Pocket payments • account for 16% of total health care expenditure (2008): patient co-payments for General Practitioner services, pharmaceuticals; private hospital/ specialist care, or adult dental care • Coverage for accidents and injury is for everyone • financed by a separate quasi-government organisation (Accident Compensation Corporation)

10. Private Market • Private total 22% in 2007/08 • Out of Pocket -16% • Insurance - 5% • Not-for-profit organisations – 0.9% • Private Provision • Private Hospitals • General Practitioners (component not subsidised) • Long Term Care • Home Care • Private Specialists • Non-Profit Organisations • Disability support • Palliative care

11. Sources of Funding Source: Health Expenditure Trends in New Zealand, 1996–2006, Ministry of Health, 2008

12. New Zealand Public Health and Disability System

13. Public Funding • Population Based Funding Formula (PBFF) • Aggregate formula to determine the share of funding to be allocated to different districts across New Zealand • Based on the population living in each district: • Size of population • Age, sex, ethnicity, socio-economic and unmet needs adjustments • Rural adjustments • Overseas visitors adjustment

14. Pricing Mechanisms • Provider Payments • Population Based Funding Formula • Crown Funding Agreements • Inter-District Flows • Pricing (National Pricing Programme) • joint Ministry of Health/District Health Board programme • purchase units for an agreed price • average costs of services • tertiary and efficiency adjustor

15. How does the system rank? $$ per person Life expectancy at birth

16. Contents • Overview • New Zealand Health and Disability System • Issues • Strategies

17. Pressures Demandpressures Supply pressures • Demographic changes • Workforce constraints • Long-term conditions • Unsustainable funding growth • Health inequalities • New technologies • Public expectations

18. Particular Pressures – Health of Older People • ~ 580,000 people in New Zealand are aged over 65 (13% of the population) • 2009/10 - 35% of public health spending was on people aged 65+ • Expected 85% increase in the population of people over 65 in 20 years (to 1 million) • Key numbers: $4-6 billion will be required for new investments before 2026 ($275 million per year) • For comparison – 2.5% of public money needed for residential building investments in the economy and 10% of the expenditure on roads

19. Age Distribution of Population Statistics New Zealand, March 2006

20. Particular Pressures - Obesity Data: OECD Health Data 2006-2008

21. 85 80 European females 75 Pacific females life expectancy at birth (years) European males 70 Pacific males Māori females 65 Māori males 60 1 2 3 4 5 6 7 8 9 10 NZ Deprivation scale Life Expectancy by Ethnicity and Deprivation

22. Contents • Overview • New Zealand Health and Disability System • Issues • Strategies

23. New Government was elected in 2008 with a strong health policy agenda • Better, Sooner, More Convenient: clear policy focus on strengthening services • Priorities: electives; hospital productivity; clinical leadership; workforce; primary care • Need for long term sector plan identified • Global fiscal crisis: ‘the future is now’

24. Two major initiatives Ministerial Review Group “Meeting the Challenge” • Independent Review • Recommendations: • Establishment of National Health Board • Improved Regional/ National/ Local decision making • Quality Agency • Prioritisation • Legislative change 100 Day Action Plan • Halt the growth in health bureaucracy • Elective Services • Plunketline • 12-month course of Herceptin • National's Tackling Waiting Lists plan • Voluntary Bonding Scheme

25. Examples of changes to the system • Primary Health • Service Configuration • Elective Services • Pharmaceutical Management Agency (PHARMAC) • Shared Services Agency • Health Workforce New Zealand • Health Quality and Safety Commission

26. 1. Primary Health Why focus on primary health? Countries with strong primary health care demonstrate: • improved population health outcomes • reduced health inequalities • and deliver this at lower cost Primary Health Care in New Zealand • Complex public/private partnership where District Health Boards contract (on behalf of the Crown) with Primary Health Organisations who contract with over 1,000 privately owned General Practitioner Practices

27. Meeting Primary Health Challenges • Primary Health Challenges • Health inequalities – access barriers, more chronic disease • Workforce shortages • Funding pressures • Safety and quality – unexplained variability in performance • Meeting the Challenges • Improving performance through practice accreditation and a Primary Health Organisation Performance Programme • Increasing access by reducing fees • Greater use of nurses • Focus on chronic care management

28. 2. Service Configuration -Local / Regional / National • Increased collaboration to obtain efficiencies • Shared services around ‘ back office’ functions • Increased use of clinical networks • Vulnerable services • Clinical leadership

29. Trends in Models of Care & Service Design • How health service design is responding to the intensifying pressures of: • demand (demographics; long term conditions; health inequalities; public expectations) and • supply (workforce; funding; new technologies) • Review of New Zealand and international trends • Overall theme: • ‘Localise where possible, centralise where necessary’

30. Rethinking service configuration

31. 3. Elective Services • Issue: long waiting lists for surgeries • Solution: separate elective care from the pressures of acute (emergency) care: • address issues in the National Booking and Reporting System and the Patient Management Systems • theatre utilisation • increase operating theatres ($180m over five years)

32. Bed Days and Potential Savings • In 2008/09 there were 1,587,000 hospital bed days across all Provider Arms • Analysis at DRG level (including population standardisation) reveals 136,000 bed days are in excess of sector averages • At marginal bed day costs, this is equivalent to $60M ($ 2008/09). If excess bed days were released to other patients, DHBs could serve 32,000 additional inpatients • As a percentage of total bed days, the percentage of excess bed days varies across DHBs from 4.7 to 14.9 percent • Of excess bed days, 72 percent are acute and 28 percent are elective/arranged • The bulk of excess bed days lies in a relatively narrow band of DRGs (and further investigation should therefore be feasible)

33. Theatre Utilisation • New Zealand provisional theatre data (2007/08) compared with Australian benchmarks. Considerable variation within peer groups, with few facilities matching benchmarks. • If the benchmarks had been matched, this would have equated to an additional 70,000 operations during 2007/08 (28 percent increase).

34. Outcomes? More surgical discharges

35. Outcome?More surgical assessments

38. 4. PHARMAC • What is PHARMAC? • agency of the New Zealand Government that decides which medicines to subsidise • balances the public’s growing demand for new medicines within a defined budget • What does PHARMAC do? • manages the Pharmaceutical Schedule of over 2000 Government-subsidised community medicines • promotes best possible use of medicines • manages the subsidy of some medicines and products for public hospitals • manages the Exceptional Circumstances schemes (medicines funding for people with rare conditions) and other special access programmes

39. Outcomes? • pharmaceutical expenditure growing second slowest in OECD

40. Future considerations for PHARMAC-like model • Effective model – can it be used of the procurement of medical devices, vaccinations and hospital medicines? • Government consulting with stakeholders on future possibilities

41. 5. Shared Services Agency Background • 20 District Health Boards each with individual administration and support services • Examples of administration and support services include: • Information Technology • Food Preparation • Procurement of supplies

42. Shared Services Agency (continued) • Studies indicate substantial savings available by consolidating District Health Board administration and support services • Government keen to see all possible efficiencies in the public sector recognised • In May 2010 Cabinet determined to establish a Shared Services Agency as a company under the Public Finance Act

43. 6. Health Workforce New Zealand • New Zealand faces an increasing demand for workers across the health and disability system • Workforce development activity previously fragmented, uncoordinated and driven by district needs • July 2009 - Clinical Training Agency board (later rebranded Health Workforce New Zealand board) was established as an interim measure to drive immediate change relating to workforce • Consolidation of health workforce activity into a Health Workforce New Zealand Business Unit in the Ministry of Health • Business Unit – oversees and drives the rationalisation of workforce planning, training and purchasing within the public health sector

44. Foreign Born Health Workforce Percentage of foreign-born doctors and nurses from selected OECD countries (Source: OECD. Health Workforce and International Migration: Can New Zealand Compete, 2007) Proportion of International Medical Grads between 1980 and 2008 (Source: Medical Council of New Zealand, The New Zealand Medical Workforce in 2008)

45. 7. Health Quality and Safety Commission • Concerns about insufficient priority being given to quality and safety measures • Creation of a new separate quality and safety improvement agency, independent of the health system’s regulatory, funding and performance monitoring functions • December 2009 – Government agrees to establish the Commission, to perform the following functions: • public reporting of quality and safety indicators including, initially, serious and sentinel events • leading and coordinating work to improve quality and safety across the health and disability system • any other functions that it is authorised to perform by the Minister of Health by written notice after consultation with it, including the collection, analysis and dissemination of information. • Commission is to be established as a Crown agent under the Crown Entities Act

46. Summary • New Zealand’s health and disability system is cost effective and delivers good and necessary care for most people in a timely way • Mix of public and private provision • A number of pressures facing the system – particularly an increased number of people over 65, obesity and inequalities • Government has a number of strategies to address these: • Primary health • System reconfigurations • Elective services • Prioritisation • Efficiencies • Health workforce • Quality and safety

47. Grazie Associazione Italiana Ospedalità Privata!