![New Zealand's Long-Term Fiscal Position [June 2006]](/mastheads/government/longterm/longterm06.gif){kind=small}
The results of the scenarios compared
The results of the six scenarios, and the base case, are presented in Table 6.3 and Figure 6.6.
One striking feature of the scenarios is that they all see health expenditure increasing as a proportion of GDP. The differences are in the rate of growth and its trajectory. This is, in part, a product of the modelling technique used. Health spending in New Zealand (and the industrial world) has been increasing steadily in the past and the model of future spending is based, in part, on the historical trend.
There are, however, reasons to think that this approach might be reasonable. It is difficult to see why New Zealanders would want to spend less of our national income on health care as income increases.
While there is some evidence to support the notion that continued improvements in life expectancy will translate into lower health spending, via improvements in health status, the proportion of the population in old age and very old age is set to increase markedly over the next 50 years and it would be surprising if this did not, at least to some extent, lead to increased spending, given the relationship between age and health expenditure we see today.
Finally, the history of medicine has been one of substantial increases in the range of procedures and treatments available (coverage) and their cost. Again, it is difficult to see why this trend might suddenly come to an end.
Source: The Treasury. The scenarios are numbered as in the above table and BC = base case
| Scenario (% of GDP) | 2005 | 2010 | 2020 | 2030 | 2040 | 2050 |
|---|---|---|---|---|---|---|
| Base case | 5.8 | 6.7 | 8.1 | 9.9 | 11.6 | 12.4 |
| Difference from base (pp of GDP) | ||||||
| 1 Full-cost pressure | 0.0 | 0.0 | 0.1 | 0.5 | 1.4 | 2.8 |
| 2 High elasticity | 0.0 | 0.0 | 0.5 | 1.3 | 2.3 | 3.3 |
| 3 Fixed-cost profiles | 0.0 | 0.0 | 0.3 | 0.5 | 0.8 | 1.0 |
| 4 Disability incidence unchanging | 0.0 | 0.0 | 0.1 | 0.2 | 0.4 | 0.6 |
| 5 Low-cost growth | 0.0 | 0.0 | -1.0 | -1.8 | -2.4 | -2.7 |
| 6 Health status | 0.0 | 0.0 | -0.5 | -0.8 | -0.9 | -0.2 |
Policy lessons from these projections
As just discussed, the largest driver of spending above GDP growth is the residual growth factor, which can be thought of as a proxy for decisions around the “cost and coverage” of the public health system.
As a result, the greatest impact on future spending patterns is likely to come from a focus on non-demographic factors. In the short term, particular challenges are around:
continuing to seek ongoing improvements in the performance of the health system and in the quality of services; that is, continually looking for ways to get better value for money
managing the adoption of new technology (linking the demand for newer, more complex technology to evidence about its impact on health outcomes and the trade-offs involved)
the coverage of, and access to, services; and, in particular, seeking better health outcomes through earlier and simpler interventions.
The longer-term debate should focus on the relationship between health outcomes and health spending (at the macro level), and the relationship between the quality and cost of health services (at the micro level). There is no simple relationship between total spending and health outcomes; more does not necessarily mean better (the United States is the prime example, where a high-cost health system has not produced superior health outcomes). There is some evidence that a lower-cost health system can, with smart use of resources and a focus on quality, deliver optimal health outcomes.
