H. Option: Government restricts spending growth - continued

Can we stop people needing expensive healthcare?

Increased focus on preventative medicine is often suggested as a way to control healthcare costs. It is true that many conditions that are ultimately very expensive to treat are also preventable. However, we should be wary of assuming we can get significant savings through preventative treatment. Preventative treatment is notoriously difficult to target effectively. And even when it is effective, it can sometimes end up costing more than the treatment for the prevented disease. That isn't a reason not to explore preventative care - it's better if people don't get sick - but we shouldn't assume that prevention always saves money.

What other choices might we need to make?

Given that we can't rely on efficiency savings and preventative treatment to eliminate spending pressures in the health system over the next 40 years, we will probably need to make choices about what the public health system provides and the way it is funded.

These are choices we need to think about and plan together. Constraints on the growth of public healthcare spending imposed without public support are unlikely to be sustainable over the medium term. That could result in a boom-and-bust cycle for healthcare spending that would make planning difficult and be unlikely to deliver optimal health outcomes. Equally, a sharp reduction in healthcare spending in response to a fiscal crisis is undesirable and would likely affect more vulnerable groups the most.

Figure 13 depicts a scenario - the dashed orange "Spending path with lower growth in public health spending" line - in which government spending on the health system increases more slowly than it would if it followed a historical growth pattern. Under this scenario, there would be a widening gap between what is provided free by the public health system and the full range of health services and treatments that are medically possible and that New Zealanders will want to access when they become unwell. This would have important equity implications.

It could mean that, as new treatments become available, the public system does not provide them - or at least not all of them. Some discipline in this area is sensible anyway. Not all new treatments represent good value for money. However, limiting the coverage of the public health system may increase the tendency for wealthier people to purchase additional healthcare or faster access privately.

Another way the Government could manage future costs would be to introduce partial payments from patients for more things. Partial payments might also reduce demand by making sure that only people who actually need medical help seek it. If we didn't have to partially pay for our doctor's appointments, we might go to the doctor whenever we have a cold, straining the system further.

Getting the level of partial payments right is tricky though. If we introduce partial payments for a service for which there is a free alternative, people might use that alternative instead. For example, hospital admissions are free and it costs money to go to the doctor. This may result in more people going to the hospital with minor medical issues, compromising the efficiency of the health system. Also, partial payments could discourage people from seeing a doctor when they really need to. As a result, their quality of life may be diminished. They might also end up needing acute care for untreated conditions that could have been dealt with at lower cost if they had been addressed earlier. Partial payments can also be difficult for some people to pay, although this problem can be reduced by having no charge or lower rates for people on lower incomes.