Has the sun set on New Zealand’s health reforms?

Like the Scandinavian countries, New Zealand had in the post-war years been viewed by the world as a model of social democracy.

Our welfare state, largely built under the first Labour Government of 1935-1949, was being strengthened even in the 1970s with the addition of a no-fault accident compensation scheme and universal income support for students and sole parents.

People like me were invited to conferences like this to talk about the successes of the welfare state not, as is the case today, to raise a siren of warning.

But if it is a warning that is needed here I will certainly give it.

Here is our story.

A Labour Party Government elected in 1984 began a process of reform in 1984 that was consistent with the programme of structural adjustment promoted by the International Monetary Fund.

The recipe is now familiar to many countries:

  • Financial deregulation
  • A narrow focus on inflation rather than a broad focus on employment and economic development
  • Deregulation and privatisation of strategic infrastructure including telecommunications, the national airline, banks and railways
  • The removal of tariff protection for local industry

The result?

  • Sudden death for provincial New Zealand, and much of the manufacturing sector
  • A dramatic rise in unemployment
  • Massive windfall profits for overseas investors, who took around 80 per cent of the huge increase in the value of the privatised companies
  • The Labour Government added to its unpopularity by introducing the first fees for university and other higher education, and a charge for prescription medicines. These had previously been free.

In 1990 it lost the election, only to be replaced by a National Government that began work spreading the reform agenda to social services and industrial relations.

Until the early 1990s, the health system itself had been largely protected from the market madness. Changes had occurred but they had been gradual. Locally elected Area Health Boards were responsible for their local health services.

But in 1991 those who had been pushing for radical health sector reform found a receptive government.

As with all neo-liberal public sector reforms, the aim was to replace democratic planning and co-operation with competition in the market place.

The democratically elected local Area Health Boards were abolished and replaced with 4 Regional Health (funding) Authorities and 23 private sector style Boards to run the hospitals along business lines. Just to make sure that we all understood the nature of the reforms, the hospitals were renamed «Crown Health Enterprises».

At the heart of the reforms was the separation of the funding and the providing of health services.

Hospitals would compete with each other and with non-government organisations and private health companies for the funding held by the Regional Health Authorities.

Rather than fund a local health body to provide for the health needs of its local population, as had been the case with the Area Health Boards, the Crown Health Enterprises became businesses whose job it was to deliver health treatments and operations according to the contracts they negotiated with the Regional Health Authorities.

The reformers believed that competitive hospitals would deliver more with less.

In fact, hospital waiting lists, which had been increasing before the reforms, kept growing during them. Hospitals were made to introduce booking systems, which meant that if the hospital couldn’t treat you, you did not get a booking and you just vanished from the waiting list.

Because different areas have different capacity, how sick you have to be to get a booking varies.

The public hospitals were required to make a profit every year. This was to be achieved by spending less providing the service than the amount the regional Health Authority, paid for it. It also meant that private hospitals would not be disadvantaged in winning contracts because both the public and private sector had to make a profit.

This was, of course, nonsense.

After the first year of the reforms public hospitals were spending 11% more than they were earning and the government had to write off $300 million worth of debt. The following year they had to put over $600 million more in to cover hospital debt.

For the first time ever, public hospital charges were introduced, although these did not last long. Public opposition and boycotts led to the scrapping of the in-patient hospital charges a year after they were introduced.

Most people lost their right to subsidised GP care. Those on the lowest incomes were made to apply for a Community Services Card, which became known as the «poor card», to qualify for a subsidy.

The government broke its promise to maintain the level of public health spending, and the reforms led to a significant shift in favour of private spending on health, particularly through the growth of private health insurance. This led to the development of a two-tier health system, where those who can afford to go private, and others waited, sometimes dying on waiting lists.

Between 1991 and 1993 the government’s share of health spending dropped from 82% to 76%. Meanwhile, by 1995 55% of New Zealanders had taken out private health insurance.

At the same time, the introduction of new industrial legislation did further damage to the system.

Under the 1991 Employment Contracts Act national awards were replaced by a fragmented system where every group of workers in every service had to bargain separately.

The legislation became an added incentive for business-focussed boards to contract out services to cut costs. Services such as cleaning, laundry and food catering are almost all now in the hands of private contractors. Laboratory services were also privatised in many cases.

The combination of so-called business efficiency and the general decline of provincial areas under the new right’s economic policy led to the centralisation of services and hospital and service closures around the country.

Almost all long-stay older person’s care has been privatised and is in the hands of some of the country’s meanest-minded employers.

All of these changes were in the hands of a massively increased health bureaucracy.

From 1993 to 1998 the number of health bureaucrats doubled. One of the largest public hospital services began the reforms with one accountant and finished them with seventy people designated as accountants.

At least some of those new business minded managers discovered that you couldn’t run a health service as if it was a business. One private sector manager who was brought in to run the biggest health board left in disgust, criticising the bureaucrats and praising the health professionals:

«[The health professionals] have nowhere to go. They see politicians, bureaucrats and administrators as a passing parade. They carry on looking after the patients – and thank God they do. I’ve not been captured by them, just amazed by them.»

Just as one director of intensive care at a large urban hospital described the ideologues behind the reforms:

«The architects of these ‘troubles’ are not unlike religious fanatics: they have an irrational belief that they – and they alone – are right»

Cost cutting in hospitals has had a very serious impact on the wellbeing of the health work force.

Workforce planning was an early casualty of the health reforms. Leaving it to the market has made shortages in all professional groups much worse. The removal of a central workforce planning function and reliance on «competition and market forces to drive the sector» failed to provide for workforce needs.

In 1998, accountancy driven restructuring at one hospital led the independent, government-appointed health watchdog, the Health and Disability Commissioner to issue a warning that patient safety was being compromised by the financial requirements.

From 1990 to 1994 nursing staffing levels dropped by 12.4% while in-patient and day patient numbers increased. Whole layers of nursing leadership were removed from hospitals, as the ranks of the general managers swelled.

International research tells us there is a strong relationship between the organisation of nursing services in a hospital and patient outcomes and that these changes are likely to have worsened patient safety.

By 1999, an international survey of public discontent with healthcare found that New Zealanders were by far the most worried of the five countries surveyed about their access to health services.

But change is also possible, and we know from our experience that the longer you wait to reverse these reforms the deeper the damage and the greater the struggle to rebuild services.

I am sure that political pride stood in the way of common sense when it became obvious that the New Zealand reforms were failing. As the damage mounted the tide started to go out on the reforms quickly, and under pressure from a populist coalition partner after the 1996 election, the National Party began some reversals.

The four Regional Health Authorities were amalgamated into one health funding authority and free health care for under six year olds was introduced. Plans to allow private insurance companies to run local health services under a US style managed care system were abandoned. By the end of the 1990s not a single political party supported the model that was introduced.

Importantly, communities and unions never surrendered to the health reforms and reversing them became a priority for the government elected in 1999. We fought to keep services open through the eighties and nineties and fight still. Sometimes we win.

Since 1999 a number of steps have been taken to reverse the direction of the health reforms.

The 23 Crown Health Enterprises and 4 Regional Health authorities have been replaced with 21 District Health Boards which have a majority of elected members and are responsible for running hospitals and planning and organising primary and community health care services in their areas.

Public hospitals are no longer required to compete with each other or with the private sector to provide services.

A new primary health care strategy is designed to improve access and reduce costs to patients.

The Government now sets national health goals and targets to guide local health planning.

These changes are certainly improvements, but the under-funding of the health service continues and the legacy of commercialisation and business management of hospitals remains a barrier to getting the sort of health service we as citizens and health unions want.

Nursing services, for example, are run down, and so are nurses. Heavy workloads and relatively low pay have made nursing a less and less attractive job.

The New Zealand Nurses Organisation has launched campaigns for pay increases and workload reductions.

Without adequate resources, no structure will meet the health service needs of a community. We might have won the battle to restore democratic control to the health service, but we are yet to win the funding needed to support it.

The neo-liberal agenda dictated that the state take less and provide less.

This meant reducing both taxation and public spending.

We in New Zealand are familiar with comments like those made by the IMF about Norway in March 2002, where you were told:

«(…) to increase the efficiency of public spending through better pricing, management and incentives structures» and concern was expressed at «Norway’s high level of public spending and the high share of its labor force employed in the public sector, and encouraged – to reduce bureaucracy and increase the use of private participation in the provision of public services.»

New Zealand, on the other hand, was congratulated by the IMF for our disastrous reforms.

I grew up in a country that was one of the most equal on earth.

After two decades of new right economic and social reform New Zealand is now a deeply unequal society where the conditions for good health have worsened.

The eighties and nineties saw a massive transfer of wealth upwards. From 1984 to 1998 the incomes of the top 10 per cent of households rose by 43 per cent, while the incomes of the bottom 50 per cent fell by 14 per cent.

In New Zealand now one in three children live in households with incomes below the poverty line. This compares to Norway’s reported rate of child poverty of between three and eight per cent.

Class divisions are increasingly ethnic divisions also. Maori life expectancy, which had improved to seven years less than European New Zealanders by 1980, is now ten years less than European New Zealanders. The blow out in unemployment hit Maori at three times the rate of Pakeha

There are now «high rates of serious health problems [including] high infant mortality; (…) low immunisation rates and epidemics of infectious diseases (…). All of these diseases and conditions occur more commonly in poor neighbourhoods.»

The new right reforms were also an economic failure. Comparisons with Australia, which do not follow this extreme course, tell us that more conventional policies would have resulted in a national income ten per cent higher than it is now. This would have allowed a doubling of social expenditure.

So as well as undermining the health services themselves, new right economic, social and public sector reforms have impacted on the health of New Zealanders by creating the conditions for poor health – a widening gap between rich and poor, crowded and expensive housing, benefit cuts and unequal access to education and educational resources.

Casualisation of work on the one hand, and the long hours culture on the other, have reduced time for family life and recreation.

Of course, the corporate hunger for a share of public services does not recognise national borders. The extended GATS agreement currently under negotiation in the WTO will make commercialised and partly privatised services even more vulnerable to further competition, and will make it much more difficult for future governments to roll back commercialisation of public services.

For example, under GATS New Zealand could not cut funding to private aged care hospitals in favour of public hospitals.

The solutions to health service efficiency and effectiveness must be found, but they will not be found in the reports of the International Monetary Fund or in textbooks on accounting.

They lie within communities and within the health workforce itself.

No one gets more upset when precious public resources are wasted than those who know what more they could do with those resources in a well-organised health service.

New Zealand’s experience shows that it is much easier to dis-organise a public health service than to re-organise it.

I want to finish by endorsing your fightback with the words of history’s most famous nurse, Florence Nightingale:

«Were there none who were discontented with what they have, the world would never reach anything better.»

Kia ora koutou katoa, Kia kaha

Thank you and be strong

Bla i arkiv

Forfatter: <a href="https://www.velferdsstaten.no/author/for-velferdsstaten/" target="_self">For Velferdsstaten</a>

Forfatter: For Velferdsstaten

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