what the evidence tells us

Because Health New Zealand has refused to reveal how much it is paying private hospitals to perform elective surgeries under a new government contract, it is difficult to assess whether taxpayers are getting value for money.

The government has committed to an evidence-based, cost-effective health system that provides equitable access to all New Zealanders.

At the same time, it is actively funding private healthcare and has directed Health New Zealand to give ten-year contracts to private hospitals for elective surgeries such as cataracts and joint replacements.

The government also recently designated Tend Healthcare as the first for-profit primary health organisation, allowing it to contract directly with Health New Zealand.

Private healthcare may seem alluring. Surely outsourcing services such as knee replacements frees up public beds?

But while the government wants more services delivered by the private system, studies from New Zealand and other high-income countries show private and for-profit healthcare is less efficient and leads to poorer quality care.

Research in Europe also suggests private care doesn’t necessarily improve health outcomes.

Experts in New Zealand and beyond have concluded health is not a commodity that fits with market mechanisms, and private care doesn’t play out to benefit the wider public.

Studies suggest private providers may sacrifice quality in return for large cost reductions. This can include selectively choosing profitable (less complex) patients, shorter allocations for surgeries and over-prescribing services.

Private hospitals can also shift the costs of surgical complications by discharging patients back into the public health system on Friday afternoons to avoid overtime payments to staff in the weekend.

As a public health doctor and researcher, I have found multiple negative impacts of private healthcare in low-income countries, as well as in New Zealand.

Several strands of evidence show how public funding of private healthcare can lead to less cost-effective and poorer quality care, offers fewer opportunities for health workforce development, doesn’t provide for those with the poorest health, and fails to recognise health as a public good.

Higher costs and lower outcomes

Privately provided care is more expensive than publicly funded care. This is illustrated by the predominantly private health system in the Unites States where the average annual health expenditure per person is NZ$25,000, compared to $5,658 per person (about a fifth) in New Zealand.

Despite this lower expenditure, however, New Zealand has slightly better health outcomes, including an infant mortality rate of five per 1,000 births. In the US, it is 5.4. Boys born today in New Zealand can expect to live 80.1 years, while life expectancy for males in the US is 78.4 years.

A 2018 study examining health expenditure and health outcomes across many nations concluded that instead of shifting funds to private healthcare, the best way to improve health is to focus on improving equitable access and quality of care within the publicly funded health system.

Private care does not “free up a bed” because the same limited pool of doctors and nurses work in private as well as public care. When patients are cared for in private, fewer patients can be cared for in the public system.

Government funded private healthcare increases inequities because it preferentially provides care to non-complex and more healthy patients. Studies show greater private provision often accompanies higher rates of avoidable hospitalisation.

Yet inequities in health outcomes are expensive, and for Māori alone cost more than $800 million annually.

A recent analysis in Europe showed public hospitals better address the avoidable differences in health outcomes (inequity) because they are more likely to treat people with lower socioeconomic status and multiple health problems.

And while public hospitals provide care to people who are less well and less advantaged, studies across multiple countries suggest they are at least as efficient as private hospitals, if not more so.

Health as a commodity

Studies show public healthcare is more likely to lead to better health outcomes, and diverting public funds to private healthcare erodes the quality of public care.

In New Zealand, doctors work in both public and private systems and reduce their hours in public hospitals for higher pay in private hospitals. Overall, this leads to poorer outcomes and lower healthcare provision.

While the current government has described a commitment to strengthening workforce development, evidence suggests the best way to find doctors who want to work in rural or low-income communities is to ensure they can train in these settings.

Private healthcare diverts cases from low-income and rural communities and limits the volumes of procedures done in public hospitals. When operations are done in private care, this further reduces learning opportunities because the cases most suited to trainees (low complexity and without multiple health problems) are moved to private care.

Good health allows people to live well and flourish. When people are unwell or disabled, they are restricted from the full opportunity to work and live, meaning healthcare must be recognised as a vital good and a human right.

Health (like other public goods such as education) is not a commodity. Despite the government’s voiced commitment to evidence, equity and cost-efficiency, there’s an abundance of evidence that moving public funding to private healthcare is more expensive and less equitable.

Health researchers like myself are left to wonder who will really benefit from an influx of government money into the private system – patients in need of vital healthcare or business owners?