Claire Austin: Tax alone can't cover health

New Zealand, in common with most of the world's developed countries, has an ageing population. It is predicted that 22 per cent of the population will be aged 65 and over by 2020. By 2050, it is expected to be more than 25 per cent.

That is not necessarily a bad thing. But mindful of demographic pressures, there has been a consolidated push for building the sustainability of the public pension as well as personal savings and investment.

However, the Government is not taking the same approach with health. How do we ensure we have a sustainable health system? What can New Zealanders expect from the health system, now and in the future?

The evidence about future increases in life expectancy is mixed. Some evidence indicates that people are living longer with fewer disabilities, and that health needs are more compressed in the last few years of life. However, the reality is that older people are high users of health and disability services. In 2000, the Department of Statistics said: "The main concerns are the sustainability of taxpayer-funded superannuation, and the increased health services for older people."

For an ageing population, the recent focus upon investing in primary care and public health services makes sense. The determinants of health and well-being are well documented. Treat sick people earlier, seek to improve lifestyles and prevent chronic disease. For healthcare to be effective - even more so in older age - it must be timely. Sadly, there is a growing public question about the capacity of the public health system to respond to need in a timely and effective way.

Despite the commitment of individuals and organisations in the health sector, the system is constrained by a complexity of bureaucracy, compliance, capacity and viability issues.

Elective surgery patients are being "managed" in a system that in reality doesn't guarantee treatment. Waiting times are amorphous - waiting lists to get on waiting lists. People are left until their conditions become grave before they are treated. Others discover they have been "discharged", yet haven't been treated at all. Rather than trying to conceal the flaws in the health system, we should take a good hard look at all of it. Private and public sectors need to improve their information and data systems.

It is imperative that we openly examine what's working, what's not, how the public and private health sector interface, and ways in which we could work together more effectively.

The private health sector is not just a cosmetic service that operates on the margins of the public health system, offering nominal improvements to health or independence. It provides necessary care that can have a substantial impact.

The public and private sectors are intertwined in primary, secondary, tertiary and aged care. It is an interdependent system where the private sector provides care through pharmacies, general practice, physiotherapy, resthomes and hospitals. Considerable parts of the public health system are already underpinned by private investment.

It is therefore unrealistic to ideologically separate the two. In 2003, the Oxford Policy Institute noted that countries with the highest income per capita have the greatest diversity in health financing - and the size of the government's financial role is limited by the size of its economy, its growth prospects, fiscal policy and policy preferences for health expenditure. This makes sense.

Although countries may have strong policy preferences for one particular system, the reality of economic and demographic pressures may require a rethink to achieve sustainable financing of health.

Whatever your political preferred model of financing, the question still has to be asked: can New Zealand afford or achieve a fully publicly financed health system?

Similar questions are being raised globally. A BBC bulletin commented: "The Government has staked its reputation on delivering better public health services but it is also aware that there is a limit on how far taxes can be raised."

There is a growing international trend among countries traditionally committed to universalist, public health systems - such as Sweden, Germany, Canada and Britain - to turn to their private-sector partners.

New Zealand also needs to look at how it can work towards a sustainable health financing model, just as it has with superannuation. We have a health system that is straining at the seams and is consuming ever more funding, from both the government and private purse, yet not delivering the results New Zealanders expect or deserve.

Common sense requires that ideological bias be put aside and we examine the situation pragmatically:

* What can we reasonably expect from our health system?

* What resources do we have and how can we ensure their most effective use?

* What can be financed by the public system, what by the private?

* What incentives do we need to get the right mix?

* What are the opportunities for better collaboration? Minister of Finance Michael Cullen has regularly raised concerns about demographic pressures on health spending.

In 2003 he said: "There is little to be gained from staking out positions. We need to work out principles, address the hard issues of how to manage limited resources, and find ways forward."

Maybe it's time to just get on with it.

* Claire Austin is executive director of the Health Funds Association, the body representing health insurers.