Former Prime Minister Bill English talked to the Herald about healthcare. Photo / Mark Mitchell
Former Prime Minister Bill English talked to the Herald about healthcare. Photo / Mark Mitchell
The Herald’s politics podcast On The Tiles sat down with former Prime Minister Bill English to discuss the challenges of the health system and how it might be reformed to do better.
When the Key-English Government left office, health spending was 5.9%, slightly lower than when it took office, when spending was 6% (spending rose, then fell as a proportion of GDP in the intervening 9 years).
Treasury reckons spending is expected to grow to 10% of GDP by 2061.
That nominal figure, which includes things like ACC payments, was $29.9 billion last year.
The money has more than doubled in nominal terms in a decade. If health funding simply kept pace with inflation since 2014, we would be spending about $19.3b.
The agency added 1200 staff (measured by FTEs) in the six months to December 2024. It has added more than 3300 between June 2023 and December 2024.
The scale of that hiring is immense, particularly when set against the “back office” cuts which have resulted in a net reduction in 2700 public sector FTEs in the year to December 2024.
The wider health sector is also growing in size. Data collated by the Public Service Commission shows the public portion of the health system (not including GPs or private organisations) sat at 103,300 FTEs as of June last year. This is up by 31,400 over a decade – and up nearly 5000 on just a year prior.
If the public health system adds another 30,000 people in the coming years, it will be larger than Dunedin.
New Zealand’s ageing population was always going to require a huge funnelling of resources into the health sector, but how is it that a department can enjoy such enormous real-term increases in funding and still be struggling?
The Herald’s politics podcast, On The Tiles, put that question to Bill English, who has some experience with health and the funding of health, having held the finance and health portfolios over his nearly three-decade Parliamentary career, which culminated in taking the top job, Prime Minister, in 2016.
Bill English with Dr Rob Ojala on the roof of the Christchurch Hospital during the 2017 election campaign. Photo / Claire Trevett
English thinks funding is only part of the story – it’s accountability for how that money gets spent that is the challenge.
“It’s getting more, but it is processing less – it is not providing services consistent with that [funding],” he said.
“More money, at the margin, is part of an answer… but it is not the key issue. The key issue is how to extract itself from one of the worst public sector reforms that I can remember,” English said, attacking the past Labour Government’s decision to merge all the country’s DHBs into a single health agency, Health NZ.
“The health policy world became dominated by this idealising of an NHS-style [the British health organisation] system. Let’s just have one big one. It’s precisely the wrong answer to the problems they have diagnosed.
“Those problems are much more to do with what is driving demand,” English said.
Voices from National have been stern critics of the health merger. But support for it is not totally unforthcoming.
“By having a unified health system, the Government now has just one delivery entity to deal with,” he said.
But English said the merger has meant a larger bureaucracy, which has made it difficult or impossible to know which “decision-maker” is responsible for crucial decisions. English said while the old system was complex, it was not necessarily inefficient.
“You can mistake complexity for inefficiency,” he said.
He is still a supporter of social investment ideas, which favour targeted early intervention in people’s lives, rather than costly and blunt interventions later. English founded and chairs ImpactLab, which assesses and measures the impact of social service providers (the firm copped some criticism after Labour alleged not-for-profits and charities were being pressured to get social impact reports to secure government funding, the Social Investment Agency denied there had been a directive requiring the reports).
English shared one example of a provider that struggled to get data from the health system to prove their homelessness intervention worked, and then, after obtaining that data and proving their solution’s benefits, “there was no one in a position to decide to follow through to implement any changes in the system”.
“No one has a good reason to make that sensible decision,” English said.
“If you want to improve [healthcare] at the margin to deal with the pressures on the funding… then it needs to re-orientate away from centralised control to localised problem-solving,” English said.
Hospitals
English was particularly concerned with the imbalance of resources in the health system, which reflected, on a macro scale, his social investment philosophy.
But English said this screws the scrum in favour of hospitals at the expense of primary care. He argued that while the system recognises the need to try and keep people out of hospital, which is by far the most expensive place to treat them ($1200 a night according to a Victoria University study), it is set up in a way which privileges hospitals, which are the loudest voice in the funding discussion.
Health NZ has a vested interest in funding and protecting the hospitals it runs, rather than bidding for funding on a level playing field with other providers, including frontline primary health providers.
“If you go to an ED, they’ll say they’re overwhelmed; you talk to GPs, they’ll say they’re overwhelmed – actually, a lot of that demand is predictable,” English said.
“There are solutions to that at the moment, but there’s no demand in the system for those solutions,” he said.
English said the funding of hospitals should be split out from the hospitals themselves.
“The fact is that the hospitals get more of the money than everyone else. Health NZ’s primary obligation… is to their 80,000 employees. If the people who run the hospitals have control of the whole budget, the hospitals will always be their priority, and that’s been borne out by the track record,” he said.
He said splitting the running of hospitals from the organisation that funds them would “create some tension.”
“What happens now is the hospitals get the lion’s share of the money. They just turn up every year and say, ‘we’ve got cost pressures,’ and the people they’re talking to are their owners, not some separate funder,” he said.
Health Minister Simeon Brown is thinking about ways to better deliver primary care. Photo / Mark Mitchell
The other big change English suggested was reforms to the very front line of the health system, primary care (the family GP).
English, noting he was married to a GP, said while the system did some good work, it had not changed in 25 years.
GPs are mainly funded using a capitation payment, which comes from the central government through a Primary Health Organisation (PHO). This is a sum of money paid by the Government for each patient a GP has on their books. The payment differs depending on the person’s age, whether they are male or female, and whether they are a high user of the health system.
The payment is meant to encourage GPs to keep their books open and to subsidise the cost of care.
English thinks the Government needs to boost the supply of GPs.
He said there is too much “workforce planning” when the simplest solution would be to look at boosting pay.
English cited the example of nurses. The number of nurses with New Zealand annual practising certificates jumped by more than 9000 in the year to March 2024 (an increase of 14% in a year), largely because of higher pay (Health NZ reckoned not all those nurses were currently practising in New Zealand).
English thought GP pay had fallen behind other professional pay.
A pay boost could encourage more GPs into the profession and encourage the current generation to keep working. A Royal New Zealand College of General Practitioners workforce survey from 2022 warned nearly two-thirds of GPs plan to retire in the next 10 years.
He also thought innovations in telehealth and AI might turn around the poor productivity of healthcare. English reckoned the Government should flip the funding for GPs and PHOs.
He said if GP practices were the ones funding the PHOs, there would be a greater incentive for them to provide better service.
“At the moment, you’ve got a lot of primary care money that goes through PHOs. They do some useful stuff, but the incentive should be on the medical practice to manage the patient.
“And at the moment, you’ve got essentially bureaucracies, either in Wellington head office or the PHOs’ [office], trying to design primary care at a time when there’s so much opportunity for innovation.
“Put all the money through the medical practices, and if they need the PHO services, they’ll pay for them,” English said.
Health Insurance
New Zealand has low rates of health insurance uptake compared to the likes of Australia.
TheEconomist, which tends to take a pro-market view of public policy, found that Australians were enjoying better, longer lives than many peers, and put it down to the wide availability of free care and a high uptake of private insurance, which took pressure off the public system.
In 2023, about 1.45 million New Zealanders had private health insurance, representing 37% of the adult population, according to the Financial Services Council (FSC). The number has grown since 2022.
This compares to a rate of coverage of about 54.5% in Australia, having some form of general cover. English thinks uptake of private insurance is important and said one of the most “stale” arguments in health is the public vs private debate. “You need a mixed system – mixed insurance coverage, public and private, and mixed provision,” English said.
Prime Minister Bill English speaks inside Ōrākei Marae to commemorate Waitangi Day. Photo / File
“Unfortunately, in more recent years, the Ministry of Health [and] TWO [Te Whatu Ora], have been actively hostile to private participation,” he said.
English said the “most interesting innovation in health in the last 10 years” had been Auckland iwi Ngāti Whātua Ōrākei partnering with insurance firm NIB to offer health insurance to its members.
“As far as I’m aware, there’s no official attention to it, probably because it involves an insurance company, but actually, the work they’ve done and are doing there for some of the most needy people in the country is just fantastic, and the results are impressive,” English said.
A BusinessDesk report on the fifth anniversary of the partnership in 2023 found results were generally positive. More than 5100 of the iwi’s 6700 registered members had enrolled, and $10 million in claims had been paid out since 2018.
“There should be a trail of officials and politicians going to have a look at that because it works, and it was no initiative of government at all,” English said.
Listen to the full episode of the On the Tiles podcast for more from Sir Bill English on the state of health care.
On the Tiles is available on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts. New episodes are available on Fridays.
The podcast is hosted by Thomas Coughlan, who is the Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
