What do they mean by private healthcare provision?

datePosted on 06:00, January 23rd, 2009 by Anita

In a number of threads people have brought up the idea that our existing publicly provided health system is fundamentally flawed and should be replaced by a privately provided healthcare system. Every time I read that argument I want to make a single (bold face) point:

The vast majority of our healthcare is provided by private providers.

The vast majority.

Take me for example, I see my GP (private provider), I have blood tests (private provider), scans (usually a private provider), take medication (private provider) and see a number of specialists (my main one is public but occasionally other public or private specialists). All except the specialists are private providers at least partly funded by the government.  One specialist is a public provider entirely publicly funded.

The only surgery I ever had was in a private hospital fully funded by the government.

So why, if the current health system is so broken, does anyone think that private provision is the answer?

I can see three possible reasons National and Act are arguing for “private health provision”:

  1. Transfer the last of the public money to the private sector to create private sector profits for shareholders.
  2. They don’t mean “private provision” they mean “private funding”, they actually want to cut the government spend and rely on individuals funding their own healthcare. Advantageous for the wealthy (who already have health insurance and would benefit from the tax cuts), disastrous for the poor who can’t afford private cover or care and don’t get tax cuts from the Nats.
  3. Ideological blindness.

Two are awfully cynical and the other requires a level of stupidity I don’t believe they have, any other offers?

35 Responses to “What do they mean by private healthcare provision?”

  1. Edward Sargisson on January 23rd, 2009 at 07:20

    Oh, no, no, no. Please no. Please don’t let NZ have a US-style health system.

    It is *horribly* inefficient. Americans spend 20% of their GDP on healthcare but do they get any better care? Maybe the wealthy do but that would be hard to evaluate. Certainly the vast majority of the population struggle with healthcare and, as for the poor with no insurance, well…

  2. BLiP on January 23rd, 2009 at 08:03

    National voters tell us that “the market” will solve our health needs. Their model says that businesses will spring up to provide for the “demand” and “consumers” will decide which business gives them the best results.

    This market model may work well in the supply of, say, baked beans but, when it comes to the supply of Health it is fundamentally flawed because health is, actually, not the desired outcome. Profit is the desired out come.

    What supplier of baked beans wants to sell less baked beans? What private supplier of health wants to supply less?

    Just like education, health is better supplied to more people more effectively when all of society is involved.

  3. jcuknz on January 23rd, 2009 at 08:30

    As a basic premise I would say that private health insurance is a complete scam and should be outlawed like pyramid schemes et al, and the only satisfactory situation is for premiums to be based on the likely whole-of-life insurance cost. I write as somebody in his eight decade who gave the con game away nearly twenty years ago when my premiums increased.

    Whole of life insurance premiums was what we had with the 1/6d tax on our income way back … as I see it only the government or SOE can satisfactorilly manage this.

    As Anita says most healthcare is provided by private enterpise so perhaps ACT’s voucher system for education could well apply to health …. it also seems foolish that people with means cannot subsidise the public sector according to their means. This would mean more money going into the health sector which means, I hope :-), more procedures. I see this as a question of trust for the health sector … I have complete trust in the sector .. to deal fairly with rich and poor according to their needs as the hypocratic oath all docotors take.

    Another premise … instead of being pre-occupied with waste … the reason for all the beancounters infesting the health sector .. we should accept a little waste is acceptable to enable the health profesionals get on with their job.

  4. rainman on January 23rd, 2009 at 09:05

    I vote for #3. “The Free Market will provide” is a powerful meme that seems to easily take hold in the weak minds that populate the conservative ends of the political spectrum.

    NZ has a brilliant health-care system.

  5. Edward Sargisson on January 23rd, 2009 at 09:41

    In fairness, the market does work extremely well for very many things. However, there are some particular conditions required in order for it to work.

    Experience (mostly the US) suggests that healthcare is not a good place to have a free market.

    I should note that the NZ system replaces price rationing with queue rationing. i.e. in most markets the price rises until demand is completely met by supply (the market clearing price). This means that a limited supply of goods is rationed by the price that someone is willing pay.

    If you lower the price artificially then more people want it so rationing has to happen some other way. In the healthcare this generally means that people get added to a waiting list.

  6. BLiP on January 23rd, 2009 at 10:42

    Jcuknz said

    As a basic premise I would say that private health insurance is a complete scam and should be outlawed

    Abolutely. I would go further and say that all private sector insurance is a scam. The current classic example is the Credit Default Swap scam which was insurance in all but name. A bunch of American banks bet that they won’t lose money, the do lose money, and now the poor in New Zealand are going to lose their jobs. All thanks to a private sector insurance product.

    And now National is going to privatise ACC – no longer will the focus be on rehabilitation, it will be on generating profit for overseas banks!

    Still, whatchya gonna do? Apart from nationalising the industry, what choice do we have?

  7. D on January 23rd, 2009 at 10:45

    The vast majority of our healthcare is provided by private providers.

    Maybe, but the vast majority of our healthcare is publicly funded. Who provides the publicly funded health care is a service related issue, rather than an issue of quality.

    All except the specialists are private providers at least partly funded by the government.

    A lot of people underestimate the extent to which your privately provided health care is publicly funded or supported. Almost all labtests, in all regions (with the notable exception of Wellington) are fully publicly funded. Your GP is funded through the PHO capitation system (unless they are one of the few who opt out of this scheme) which considerably reduces GP-related expenses.

    Also, ultimately all of your private specialists training has been at the expense of the public health system- with very little contribution from private providers (other than in general practice)- unless they are overseas-trained.

    As you say, these decisions shouldn’t be about ideology. They should be a continuation of the approach of providing the best possible healthcare in the most efficient way. Some areas may not have caught onto this approach, and these services might benefit from a national approach, rather than the ad hoc approach in many areas- e.g. laboratories, elective surgery etc- but that raises the question about why the MoH hasn’t taken this approach with funding, and why the DHBs have developed a private organisation to develop these sorts of strategies (DHBNZ), when that should really be the core business of the MoH.

    As for the freemarket approach- we are far too far away from that sort of system, and we risk undoing a lot of what works well. Pharmac, for instance, saves the country an awful lot of money and increasing access to medicines for the peopl who are most in need. The funny thing is that the US approach to health care isn’t truely ‘freemarket’ either which is why it works so badly; Their’s is one of the worst forms of multi-tiered systems, and healthcare costs the US more as a percentage of GDP than both Australia and NZ.

  8. StephenR on January 23rd, 2009 at 10:55

    I can see three possible reasons National and Act are arguing for “private health provision”:

    How about…

    4) The private sector has spare capacity, whereas the public sector often doesn’t, resulting in beds in corridors and long waiting lists. Would be stupid not to make use of it.

    They’ve (National and UF, not so much ACT I think) mentioned this angle (‘making fuller use of the private sector’) several times, and since you’ve been on the receiving end Anita, would you have a problem with this?

  9. Quoth the Raven on January 23rd, 2009 at 12:18

    I am constantly bemused by the right’s ideas on issues like this. The only option they seem to be able to come up with is a corporate one. They can see the income disparity that is created by the sate-corporate plutocratic system and yet want to break one of the few crutches that the state provides to ameliorate the worst effects of its own system. It’s patently obvious that a private corporate system would price many people out of the market. A private system funded by the public purse is not a private system anyway (and as Anita points out the poor don’t get a tax cut under National so they would be paying twice through taxes and insurance). So how about a different approach a libertarian approach. How about the right to self medicate – get rid of prescription laws and stop infantilising the adults of this nation. How about look into patent laws and allow New Zealanders to manufacture their own generic drugs and not be so reliant on the pharmaceutical giants. Why not look at whether all the work a GP does actually requires an MDs level of training and ease licencing – a barefoot doctor type approach. How about instead of corporate owned private hospitals we have cooperatively owned private hospitals. How about instead of corporate health insurance we have mutual aid.

  10. BLiP on January 23rd, 2009 at 12:42

    Stephen R said:

    ” . . . The private sector has spare capacity . . . ”

    What a sickening thing that people are suffering because the profit margin is not good enough for them to be supplied with the treatment they need.

    How else can one explain assets standing around unused? Unless, perhaps, these foreign profiteers are in the know and are just waiting for John The Goober Key to start shoveling cash in their direction.

  11. Greg on January 23rd, 2009 at 12:55

    Healthcare is an interesting one. If you privitised it properly you would get better results than those of a public healthcare system. BUT doing it properly is the issue, we certainly don’t want to end up like the US!

    All these comparisons to the US are somewhat redundant. It is not a fully privitised system and when we talk about privitising the healthcare system we generally don’t mean ‘copy the US’.

    Also profit motivation is a non issue. Yes corporations are motivated primarily by profit BUT this also incentivises them to give the best service to their customers. Customers provide the profit!

    However, the question becomes how do you privitise a healthcare system and ensure that everyone is provided for – whether rich or poor. Its certainly not something you want to stuff up!

    Maybe some sort of mixture of compulsary private health insurence, with state assistance to those who cannot afford to pay for it…….

  12. StephenR on January 23rd, 2009 at 13:09

    What a sickening thing that people are suffering because the profit margin is not good enough for them to be supplied with the treatment they need.

    One could also say ‘what a sickening thing that people are suffering because the last government couldn’t stomach using the private sector to treat those in need’.

    Maybe people could afford private treatment and their ‘profit margins’ if they had bigger tax cuts eh? ;-)

  13. StephenR on January 23rd, 2009 at 13:13

    Healthcare is an interesting one. If you privitised it properly you would get better results than those of a public healthcare system. BUT doing it properly is the issue, we certainly don’t want to end up like the US!

    I often hear that health providers jack up the costs of care due to the high insurance premiums they need against malpractice, as we know it’s awfully easy to sue for pretty much anything over in the US. I don’t have any numbers though.

  14. Edward Sargisson on January 23rd, 2009 at 14:06

    I’ve just listened to a very interesting podcast on what it’s like to be a CEO of a hospital system in the US.

    A couple of points helped explain some of the issues in the US healthsystem:
    1. They have partial public funding through Medicare and Medicaid. Those systems basically insure people over 65 and the disabled.
    2. However, the payments that Medicare/Medicaid provide are statutorily determined and don’t meet the cost of providing the service. This means that the other sources of payment have to pay extra to cover the shortfall. Medicare/Medicaid fund about 40% of this hospital system’s services.
    3. The insurance companies pressure the hospitals to provide a discount for prompt payment. However, where this might have been 2% it now might be 50%. The costs don’t change so where the cost might have been $100 it’s now 50% of $200.
    4. The hospitals have to fund social missions of caring for the un-insured and teaching future doctors, nurses and technologists.

    Does that help explain why the US system is so difficult?

    Lastly, I’m not sure that complete private provision would work either. If people can select the insurance they need then the ones who think they are most likely to be sick will select the plan with the most coverage. This means that the only people with the most coverage are the ones most likely to need it. Because the likelihood of a payout is so high the resulting premiums need to be high – getting on towards the full cost of the service.

    This has been called “cafetaria” insurance.

  15. Greg on January 23rd, 2009 at 15:57

    Ed

    Lastly, I’m not sure that complete private provision would work either. If people can select the insurance they need then the ones who think they are most likely to be sick will select the plan with the most coverage. This means that the only people with the most coverage are the ones most likely to need it. Because the likelihood of a payout is so high the resulting premiums need to be high – getting on towards the full cost of the service.

    I would have thoughts this is the desirable outcome? Those that use the system more pay more.

  16. DeepRed on January 23rd, 2009 at 16:00

    Anyone’s seen the movie “John Q“? It’s a vague idea of what the American health system is like.

    Also, NZ Treasury, hardly a bastion of raging socialism, published a report a couple of years ago pouring cold H2O on subsidies for private healthcare insurance.

  17. Edward Sargisson on January 23rd, 2009 at 16:18

    I would have thoughts this is the desirable outcome? Those that use the system more pay more.

    Well…no.
    1. As the probability of all those in the insured groups making one claim each approaches 1 then the premium paid will approach the full cost of that claim. In other words, people will pay the full cost of their medical care as a premium. This would likely be many 10’s of 1000’s of dollars.
    2. Poor people need medical care just as much as rich people – quite possibly more. Do we consign people to being sick all their life merely because they are poor. Do we deny them any chance to become not poor by denying the chance to become well enough to work?
    3. People don’t really have a choice in the health care they require. If you require a new kidney, you require a new kidney. If you get cancer you need surgery, chemotherapy or radiotherapy – or you die. Arguably there is some limited scope to personal choices reducing the incidence of diseases such as diabetes or heart disease but is the best way to reduce these diseases making people pay more if they get them? Given that actions you take today take many years to cause either of these diseases and the way humans think (not thinking long term that well) then is not education the best way to deal with it.

    In fact, Greg, can you explain why people paying more for healthcare will help anything?
    (I’m not trolling, I’m actually asking the question.)

  18. BLiP on January 23rd, 2009 at 16:30

    One could also say ‘what a sickening thing that people are suffering because the last government couldn’t stomach using the private sector to treat those in need’.

    One could also say: take the tax cuts and shove them up your proverbial – leave the money where it will do the most good.

  19. Anita on January 23rd, 2009 at 17:10

    StephenR writes,

    4) The private sector has spare capacity, whereas the public sector often doesn’t, resulting in beds in corridors and long waiting lists. Would be stupid not to make use of it.

    I’ve never been convinced by this argument. The private sector has the capacity it has because it fits the business model. I can’t see any reason it would have “extra”. Secondly, if one says to the private sector “If you have some spare thumbergle I’ll buy it” odds are they’ll find, build, borrow or steal some more thumbergle.

    Finally, if the public sector is short of infrastructure capacity then it is quite capable of building more. If it is short on capacity then it’s because the government hasn’t been willing to pay for it.

  20. Anita on January 23rd, 2009 at 17:12

    Greg writes,

    Maybe some sort of mixture of compulsary private health insurence, with state assistance to those who cannot afford to pay for it…….

    Why would compulsory private health insurance be better than compulsory public health insurance (which is what we have in practice). In your case there will be profits being sucked out of the system, in the current case there isn’t.

  21. Anita on January 23rd, 2009 at 17:20

    Greg writes,

    I would have thoughts this is the desirable outcome? Those that use the system more pay more.

    Why?

    I mean … like … um … why?

    One uses healthcare because one must not because illness is a fun way to pass the time.

    Would you also argue that people who use the Police more should pay more? (So $450 each time you report a burglary and $7,500 if you get raped plus extra if there will be forensic tests).

  22. BLiP on January 23rd, 2009 at 17:23

    Anyone’s seen the movie “John Q“? It’s a vague idea of what the American health system is like.

    Michael Moore’s “Sicko” also provides a glimpse into the sickness that is at the heart of the US health system.

  23. Anita on January 23rd, 2009 at 17:34

    D writes,

    Maybe, but the vast majority of our healthcare is publicly funded. Who provides the publicly funded health care is a service related issue, rather than an issue of quality.

    Yes! :)

    Which is why I think the “privatise service provision” argument is so bogus. Are we arguing about who’s paying or who’s providing or who’s making the decision?

    My hunch is that National and Act think we, as individuals, should be paying directly. So they’ll up my tax cut but I have to pay for my own blood tests – then either I’m paying a lot more or my health insurance premiums are about to increase hugely.

    They might also argue that it gives me more choice. But the existing system allows me quite a few ways to exercise choices that are meaningful to me: I can choose my GP, my pharmacist, and even my specialist (including my public hospital one). I’m not sure how I’m supposed to exercise “choice” for a blood test provider or how I’d make that choice, so I’m ok with some limitation of choice.

    Mostly where Pharmac gets people bent out of shape is the idea of it limiting choice; I can’t get my current medication from the other manufacturer. But the cost savings balance against the lack of choice (and truly informed choice about those things is the luxury of the educated elite).

  24. StephenR on January 23rd, 2009 at 18:51

    I’ve never been convinced by this argument. The private sector has the capacity it has because it fits the business model. I can’t see any reason it would have “extra”. Secondly, if one says to the private sector “If you have some spare thumbergle I’ll buy it” odds are they’ll find, build, borrow or steal some more thumbergle.

    Fair enough. That would be a good reason not to just have the government out of healthcare and simply funding work in the private sector. I should’ve added that the private sector currently has extra capacity, so it would be a waste not to use it to relieve the bottlenecks we are currently experiencing – a short term solution, yes. I don’t really have anything concrete further out than that.

  25. StephenR on January 23rd, 2009 at 18:54

    One could also say: take the tax cuts and shove them up your proverbial – leave the money where it will do the most good.

    Care to expand without being obnoxious?

  26. BLiP on January 24th, 2009 at 01:46

    Stephen R said

    ” . . .

    Care to expand without being obnoxious?

    I’m not sure that I can help being obnoxious, but, since you asked nicely, I will try.

    My suggestion that the tax cuts be shoved up your proverbial was made because you might as well do that for all the good they have done.

    IMHO – the liquidity injected into the market via the tax cuts would have been better used for government spending on, for example, health.

    Back to the baked beans – how many baked beans could be purchased by a million people each spending $10 and how many could be purchased by one person spending $10,000,000? Of course, it would be the latter who would have far more baked beans than all the others combined.

    So, my premise is, by giving a million people a little sum every payday instead of keeping a big lump sum “in the bank”, society lost its purchasing power.

  27. jcuknz on January 24th, 2009 at 08:07

    >>Anita …Finally, if the public sector is short of infrastructure capacity then it is quite capable of building more. If it is short on capacity then it’s because the government hasn’t been willing to pay for it.<<

    Becuase people want tax-cuts without appreciating the problems it causes. Personally I have never objected to my tax level even though most of the time I was paying above average because it is our collective responsibility to care for those less well off.

    The responsible society of Bill Sutch.

    I repeat .. if there were fewer folk running around counting the beans there would be more money for procedures. It is ironical that there is no problem, except for the shareholders, when private money is wasted but hell breaks loose when public money is. Which in itself creates wasted effort in minimising that :-)

    My mother-in-law when public health care came to the UK after WWII started going to the doctor for aspirin that she was quite capable of buying at the chemist becuase it was free from the doc. People!

    Micheal Moore’s “sicko” was a rabbid and inaccurate portrait of the American system, and the others which were held up as shining examples, which in some ways is far superior to what we have … their problem is that so many cannot access it rather than how it works from a medical point of view. So don’t knock the American system just how folk access it.

  28. riskfactor on January 24th, 2009 at 23:26

    While this is all very interesting I propose that we step back a moment and consider what it is modern health care systems, whether private or public, actually purchase. I suggest (and can back up with evidence) that the vast bulk of costs are expended during the last 6 months of a person’s life and significantly for people aged over 85. From this I further suggest that much of this purchasing is inefficient, ineffective, and inappropriate although it lines the pockets of the medical profession and pharmaceuticals companies. Personally I think the values that underpin much of this purchasing should be revisited, and no doubt will be with the looming health related fiscal pressure prompted by population aging. Rather than focusing on extending life we should consider how best to enable people to pass away with dignity. This is only applicable in specific instances and shouldn’t be misconstrued as a call to “cull old people”. But having witnessed instances where people have wished to pass away but have had their lives extended through very costly medical inteventions, I believe we as a society need to revisit some of the fundamental vaules and assumptions that underpin health care service provision.

  29. jcuknz on January 25th, 2009 at 06:59

    It is the question of do we want quantity or quality of life. The medical ethic seems to encourage quantity and the professional kudos of keeping people alive where common sense seeks quality. Some of this comes from adapting to what one’s body can cope with and is a very personal decision. As I said to my doctor on my last visit ‘when the time comes I’m not sure what I will say even though now I believe in quality’.

  30. Lew on January 25th, 2009 at 09:55

    JC, RF: My father-in-law is dying of cancer. It’s inoperable and he has refused the few possible options for treatment. That’s his right, but it doesn’t just impact on him: it impacts on his daughter and our young daughter, who’ll only ever know one grandparent (two died long ago).

    So a little bit of quantity would go a long way.

    L

  31. BLiP on January 25th, 2009 at 17:46

    Risk Factor said:

    ” . . . Rather than focusing on extending life we should consider how best to enable people to pass away with dignity . . .

    Now, where have I heard this before . . . umm, I know! Mein Kampf.

  32. Anita on January 25th, 2009 at 17:57

    It took 1,001 comments, but eventually someone had to invoke Godwin’s Law.

  33. Lew on January 25th, 2009 at 18:40

    Actually, I think BLiP has the dubious honour of having been beaten to this particular punch by James.

    L

  34. jcuknz on January 26th, 2009 at 12:24

    Yes it is sad Lew for them not to continue knowing their grandparent but we all have to go sometime and better the memory I have of one of our family playing Monopoly on the floor with grandchildren at the age of 92 and then a couple of weeks later dying in her sleep. That is as opposed my memory of my grandmother who brought me up … a dried husk in a coffin .. after fighting cancer [ back in 1942-48 without modern drugs ]
    While we all wish for quantity the essential factor should be quality as viewed by the person concerned rather than ‘state policy’ as suggested in Mein Kampf.
    It is foolish and snide to link the two points of view.

  35. randal on January 27th, 2009 at 13:33

    what they mean is if you cant afford it then you die
    there
    that was easy

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