New Zealand: #15 in the 2021 World Index of Healthcare Innovation
New Zealand’s socialized health system performs well on health outcomes but aggressively restricts patient choice in the face of rising costs.
By Gregg Girvan, Mark Dornauer, and Avik Roy
Introduction
New Zealand ranked 15th overall in the 2021 WIHI Analysis — up five spots from its inaugural 2020 ranking. The island nation ranked highest in the WIHI Dimension for Quality (6th). In particular, the Element “Pandemic Preparedness and Response” (5th) boosted New Zealand’s high score (as noted in American media). Nevertheless, New Zealand ranked at or below the median on the three other WIHI Dimensions: Fiscal Sustainability (15th), Science & Technology (18th), and Choice (19th).
Background
Established in 1938 as a taxpayer-funded, government-run system, New Zealand’s socialized health care system provided mostly free point-of-service care for patients. Yet, over six decades, the health care system fragmented regionally. In 1997, New Zealand consolidated its system into one single-payer system — with hospitals and clinics predominately run by government agencies. Today, New Zealand’s public hospitals provide the majority of care for citizens and permanent residents. Subsequently, private hospitals corner more niche sectors focused on elective surgery and specialized long-term care.
New Zealand’s publicly funded health insurance system covers inpatient and outpatient hospital services at its public hospitals. It also covers preventive care and primary care via private providers (with exceptions for optometry, adult dentistry, and orthodontics). It also covers inpatient and outpatient prescription drugs listed on New Zealand’s national formulary. Furthermore, it covers mental health care, long-term care hospice care, and disability support services.
New Zealand’s public hospitals are essentially free of charge, with no mechanism to cost shift to patients. As with many socialized systems, the government strictly regulates prices and access to care to contain costs. Likewise, the Pharmaceutical Management Agency uses mechanisms like reference pricing to establish fees for (publicly subsidized) drugs dispensed at hospitals and community pharmacies. Thus, if a patient wishes to purchase an unsubsidized drug, he or she will pay the total price out-of-pocket. This strategy helped keep drug expenditures per capita the fourth lowest in the Organization for Economic Co-Operation and Development (OECD).
Quality
New Zealand ranked 6th in the WIHI Dimension for Quality. In particular, New Zealand’s performance in the Element “Pandemic Preparedness and Response” (5th) bolstered the country’s strong standing. Similarly, New Zealand’s score in the Element “Patient-Centered Care” at 7th strengthened its ranking. The only metric where New Zealand scored below the median was for the Element “Measures of Preventable Disease” (21st).
Choice
New Zealand ranked 19th in the WIHI Dimension for Choice. New Zealand ranked highly in the Element “Affordability of Health Insurance” (3rd). However, it ranked poorly in the Element “Freedom to Choose Health Care Services” (27th) — a tradeoff inherent to its socialized health care system.
Science & Technology
New Zealand ranked 18th in the WIHI Dimension for Quality. Notably, New Zealand’s EHR adoption rate ranked it in the top third of countries (measured in the Element “IT” at 11th). However, its contribution to global medical innovation lagged behind other countries, measured in the Elements “Medical Advances” (26th) and “Scientific Discoveries” (19th).
Fiscal Sustainability
New Zealand ranked at the median (15th) for the WIHI Dimension for Fiscal Sustainability. It ranked respectably in its debt-to-GDP ratio (measured in the Element “National Solvency” at 5th). However, its public health spending per capita (measured in the Element “Growth in Public Health Spending”) ranked 22nd. Moreover, while New Zealand’s debt-to-GDP ratio was low (below 32 percent), health care spending grew over the last decade.
