This week's announcement that all district health boards (DHBs) would be abolished and replaced with a centralised health agency took a lot of people by surprise.
Most key health sector interest groups appear to support the proposed agency, provisionally known as Health NZ. But the Labour Government has created some very high expectations, and the hard work of making this new structure work now begins in earnest.
Running through the reform proposal is a strong emphasis on collaborative relationships between the various government and non-government organisations. New Zealand's public-sector reforms of the 1990s cultivated a culture of distrust in relationships between such organisations.
In the health sector, this was manifested in the deteriorating relationships between district health boards and non-government organisations, particularly in primary healthcare. Hard-wiring a collaborative ethos across the sector will not be easy.
What needed to change?
New Zealand currently has 20 DHBs. Each has responsibilities to provide healthcare within a defined geographical area. The Covid-19 pandemic highlighted the regional fragmentation when some DHBs were slow to adopt a national contact-tracing system.
While the review's final report acknowledged New Zealand's health system was overly fragmented and complicated, it recommended a single, central health sector organisation to work alongside a reduced number of DHBs. This was not a recipe for reducing fragmentation.
It's only 20 years ago that a previous Labour Government led by Helen Clark ushered in the DHB era. The 1990s – an era of competition and "contracting out" – had stimulated some significant innovations in the way health services were organised and delivered, most significantly the growth of hauora Māori providers.
But, overall, these reforms inspired by the notion of "public choice" were deeply unpopular with health professionals — and the public.
The fading promise of the DHB system
The big new idea in 2000 was that DHBs were to look after all publicly funded health services, not just hospitals. They were to plan on behalf of their regional populations and facilitate greater integration of hospital and community-based services. The Clark Government reintroduced the elected local boards that the National-led Government had abolished in the 1990s.
But the promise and appeal of regional governance began to fade for a number of reasons. DHBs came to the conclusion they really did not have that much discretionary power over the allocation of resources.
These dynamics were entrenched throughout the 2010s when there were no significant increases in per-capita health funding. Only a handful of DHBs took a creative approach to developing relationships with primary healthcare providers.
The Canterbury Clinical Network in Christchurch developed a "one system, one budget" approach to identifying service needs first, and then working out who would provide them and how they would be paid for. But few others followed their lead.
Nor were DHBs champions of local democracy. The scale of the districts and organisations, particularly in larger urban areas, made any democratic representation symbolic at best. Board members were primarily there to implement government policy.
Three big questions
How centralised will Health NZ really be? The answer is likely to vary significantly across health services. For hospitals, I anticipate the regional divisions of Health NZ will be most significant.
For primary care and services in the community, it is possible services may be organised and tailored more locally than they are now. That will depend on what happens with the proposed "population health and well-being networks".
What will "local commissioning" look like? "Commissioning" is a widely used word in the reform proposals, as opposed to "contracting". The latter is based on the idea that the principal (the government agency) knows best and the agent (the providers — mostly non-profit NGOs and for-profit primary care practices) are obliged to carry out the principal's wishes.
Commissioning, on the other hand, entails a more relational, negotiated approach where local communities and service providers define what services would look like. This means those who deliver the services are part of the design.
Where does the health "consumer" come into it? Instead of elected members on DHBs, consumer and community input is to operate through all levels of the system. According to the Cabinet paper, "entities will determine how best to engage people but will need to adhere to nationally set principles for consumer engagement".
Another major plank of the proposed health reforms is the creation of a public health agency to sit within the Ministry of Health. In the era of Covid-19, the marginalisation of public health advice that had occurred over the past decade became a fundamental weakness.
Post-Covid-19, public health's star has arguably never been higher. So it will be interesting to see how much clout this agency has in influencing policy on alcohol, food and gambling.
The view of many public health advocates is that a separate and independent crown entity would be preferable. However, a unit within the ministry at least has the advantage of being at the top table. An independent agency may be more easily sidelined, and more easily dismantled after changes of government.
Producing a radical health system reform proposal that has widespread sector support is no mean feat for any government. With expectations so high, of course, the difficulty will be sustaining that momentum through to implementation.