Shifting more healthcare to the private sector calls for a clear government plan – where is it?

Access to public elective services such as hip replacements or cataract surgery has long been inadequate in New Zealand, with extended wait times and exclusion of those not assessed as high priority despite genuine clinical need.

Workforce shortages are adding pressure, and those unable to afford private treatment are increasingly experiencing unmet need, with wide-ranging impacts.

Current government policy intended to reduce public waiting lists by increasing provision through private services has therefore focused attention on the role of the private sector in the healthcare system.

Most recently, a report by the Westpac bank has detailed the growth of the private sector in health and government support for the trend. It positions private funding and provision of services as increasingly valuable, solving healthcare challenges and creating investor opportunities.

The latter may be true. Westpac recommends a public-private partnership model, with the private sector investing in infrastructure (hospitals and clinics), IT systems and digital services.

But if public-private partnerships are to be supported, some fundamental questions need addressing first.

Role of the private sector

In capitalist economies such as New Zealand, there will generally always be a role for the private sector in healthcare.

New Zealand has long had a mixed delivery model, with general practitioners (GPs) largely private and subsidised by government, and parallel public and private hospitals. GPs are the gatekeepers; specialist appointments require their referral.

Many specialists work in both public and private systems and GPs refer to either, with private options depending on the patient’s ability to pay. More than a third of New Zealanders hold voluntary private health insurance; others use their savings.

Emergencies and intensive care are dealt with by public hospitals only. The system is complex and can be difficult to navigate.

Many countries operate a public-private mix and partnerships. Each is different. Australia, for example, has what some consider the world’s best health system.

The mandatory tax-funded Medicare public insurance programme provides support for public and private services. There are also private insurance tax incentives for the better off.

However, Australia performs less well on equitable access to care, and a large for-profit private hospital group failed in 2025, requiring the public sector to step in.

Australia also has a reasonably self-contained private sector. Similar systems are found from the United States to Singapore, which have different mixes as well as access and equity challenges.

Need for clarity on policy

If private infrastructure is to be built up at a rate faster than public, then the government must consider the risk of potential market failures.

This means it needs to be clear about the architecture for a public-private mix, the policy levers it will apply, accountability arrangements and outcomes it expects.

Technology businesses are legendary for failing to deliver. This ranges from large-scale IT project failures such as the SWIFT project at the former Counties Manukau district health board to security lapses such as the recent data breach at Manage My Health. These come at massive taxpayer and system cost.

The same applies to equitable access to private care, patient charges and mounting private insurance costs.

New Zealand has some unique workforce arrangements and backup systems. Determined through a historical political agreement, public support for the private system is significant. This comes through GP subsidies for patients referred to private specialists, staff training through publicly funded tertiary providers, and public emergency and intensive care backup when things go wrong in private.

If political leaders want to facilitate growth in public-private partnerships, they must be clear about how this works and what their expectations are.

There is a need to debate how patients with complications from private treatment are paid for when transferred to the public sector, and whether taxpayers should subsidise GP appointments for those seeking private referral.

With private insurance premiums going up at rates way beyond inflation there may be limited appetite for extending insurance to such patients. Yet this important part of the health economy needs to be factored in.

Ensuring equity of access

The private sector is not self-contained and needs public input. Politicians need to consult on whether there is interest in designing effective public-private partnerships that will not favour the better off and not detract from the public sector.

As the private sector builds up, the public workforce and capacity will be undermined unless more specialists are recruited. Private work is more lucrative than public, and political leaders would be prudent to outline how the balance will be maintained.

Particularly important is attention to overall system architecture, including the funding model. If public-private partnerships are pursued, equity (if valued) requires a guarantee that every citizen has equal access. This means clarity on funding.

Perhaps New Zealand needs to consider extending the accident compensation scheme to cover healthcare, or a funding system similar to Australia’s Medicare or Japan’s insurance funds.

There are many examples New Zealand could draw from to ensure a public-private mix delivers as intended. But we need to know what the intention is. So far, political leaders haven’t delivered a clear plan.