Explained: Decades of tinkering with NZ’s health system
Tuesday, 6 August 2024
The words ‘health crisis’ have been thrown around so often and casually in recent years.
It’s usually politicians who’ve been doing the throwing. It’s been used 175 times in Parliament since 2003 - and that’s only the times it’s been recorded in Hansard. It’s impossible to know the true number.
But behind all the rhetoric and blame-games is the very root of the problem: the tens of thousands of Kiwis - or more - who aren’t getting the health care they need.
The system that should deliver that health care has been reformed, centralised, decentralised, rationalised, corporatised, de-corporatised, expanded and contracted over decades by politicians.
Let’s take a look back. This is not comprehensive but it gets a bit dense in places - so strap your brains in.
Early Days
It’s pretty hard to find accurate records of exactly how health services developed in the 1800s. Among Māori, rongoā was the go-to and was widely used to treat ailments by tribal healers called Tohunga. While there was a spiritual element to it, much of the treatment used plants, herbs, seeds, roots, flowers, fibres, and saps. The practise still lives on today.
Europeans arrived in increasingly large numbers over the course of the 19th century and brought disease with them. Given Māori hadn’t been exposed to many of these, they were disproportionately affected and their population plummeted. The death rate only began to ease off by the end of the century.
The first hospital was likely a military one in Auckland in 1841. The first non-military hospitals were commissioned in 1846 with funding granted for them in Auckland, Wellington, Whanganui, and Taranaki. Wellington was the first to open its public hospital in 1847. There are records of hospitals for Māori in Rotorua and Te Awamutu in 1862.
Otago University’s medical school opened in 1875 and a year later, a Board of Health for the entire New Zealand colony was established with central government assuming control of all public hospitals.
For much of the 19th century, primary health care was for those with money. Wealthy people were treated in their homes, and almost all doctors were male. Nurses and midwives were almost always female (with the first district health nurses beginning in Christchurch in 1896). Many health workers were missionaries.
The 1900s: Birth of the Public Health Department
In 1901, the Department of Public Health was established by central government amid fear the bubonic plague would spread across the country. The first plague death was noted in the year 1900.
A measles epidemic broke out in 1902, and smallpox arrived from Tasmania in 1904. Typhoid broke out across the upper half of the North Island in the 1910s, plague was still a concern, and there were smallpox and polio epidemics.The Spanish flu arrived in 1918 and led to the death of more than 8,000 people - disproportionately killing Māori.
In the early part of the 20th century, there were big scientific advancements in medicines and treatments like the introduction of X-rays and anaesthetics. Research into microbiology meant bacterial infections could be managed. The new agency required doctors, nurses and midwives to be registered.
Plunket formed in 1907, and a raft of laws came after that governing dentists, lunatics, alcohol, social hygiene, quakers, and charities.
Fun Fact: In 1911, the Department of Public Health’s headquarters in Wellington had only 12 public servants working there.
The ‘20s: Post-war Growth
After the First World War and the Influenza pandemic came the first wave of appetite for health reform. In 1919, a proposal was tabled to completely reorganise the Department of Public Health and that came in 1920 with a new Health Act.
The Act built on its 1900 predecessor but included much of the radical reform recommended by the Epidemic Commission.
The reform (and this is not the beginning of a joke) was carried out by an Englishman (Dr Valintine), two Scotsmen (Dr Mason and Dr Makgill), and an Irishman (Dr Frengley). Their reform was so solid, it served the country well for 30 years without too much further change.
The change included renaming it as the Department of Health, making the Board of Health fully independent, shrinking the size of the health districts, and addressing staff shortages and pay rates of health workers. Legislative double-ups and overlaps were an administrative burden and were removed, and the restrictive relationships with local bodies were streamlined (or attempted to be).
Dental services were reformed in 1921 with the establishment of the School Dental Service which saw the state fund oral health checks and procedures for people at primary and intermediate school.
Fun Fact: Around this time, an inquiry was launched into venereal diseases (sexually transmitted infections) given its increasing prevalence among young people. There were quite a lot of concerns about these diseases, and even a Social Hygiene Society was established in Christchurch.
The ‘30s: Welfare State
The first Labour government came along after the Great Depression and introduced the first building blocks of the welfare state. This was in the form of the Social Securities Act of 1938 which enshrined a fully universal and free public health system.
The law meant everyone had access to general medical and hospital services as well as maternity care. Much of the decision making power was in the hands of the Minister of Health who - according to this document - was responsible for “radiological and laboratory services, administration of anaesthetics, specialist and consultant services, dental and optical services, the ambulance service, and home-nursing and domestic assistance”.
Physiotherapy was covered by the public health system in 1942, and artificial limbs in 1947.
It wasn’t smooth sailing for many years. Doctors and other medical professionals opposed the move, arguing the current system was affordable for the public and a universal system would see medical standards deteriorate, as well as polarise the class system. The stand off lasted many years, meaning the Michael Joseph Savage’s dream took a while to be realised.
Modern medicines came about during this period too with an immunisation against diphtheria introduced in 1937. However, there was a measles epidemic in 1938 and polio epidemics in 1947, 1952, and 1955.
Fun Fact: In 1941, free prescriptions were introduced. Before that, people had to pay for their drugs entirely. This lasted until 1985.
The ‘50s: A new system
Change was slow so by the 50s, reform came knocking. The stand-off between doctors and the government’s plans saw a number of reports and reviews and ultimately a new Health Act of 1956.
It overhauled the structure of the entire health system and added many layers of new bureaucracy. Primarily though, it gave overall power to the Minister of Health. The law saw the formation of the Board of Health and the Hospitals Advisory Council. The Board’s role was advise the minister on matters relating to general health policy, whereas the Council’s role was advising the minister on matters relating to hospitals.
The Department of Health sat below the minister, and was responsible for 18 District Health Offices and 29 Hospital Boards (which regulated both public and private hospitals, and had elected members).
New Zealand’s 230 Territorial Local Authorities also played a part in this new system with responsibility for environmental health. They were overseen by the Board of Health and the Department of Health.
The new Health Act also saw funding was centralised through the minister, with central government’s tax revenue paying for the vast majority of the public health system, with subsidies to private operators.
Huge leaps in medicines were made during this time. Water fluoridation was trialled, and there were vaccinations available for TB, polio, diphtheria, whooping cough, and tetanus.
Fun Fact: The Accident Compensation Corporation (ACC) didn’t come along until 1974.
The ‘80s: Bureaucratic Cuts
With the country on the brink of going broke, the Fourth Labour Government came in swinging the axe at the structure created in the ‘50s. Changes were proposed in the latter years of Muldoon’s government and a few reforms began but it was David Lange’s government that radically reformed the system.
The main aim was to decentralise management and allow hospitals to function autonomously.
Gone was the Board of Health, the Hospitals Advisory Council, the 18 District Health Offices, and the 29 Hospital Boards. The 230 Territorial Local Authorities were uncoupled from the health system.
The new structure saw 14 Area Health Boards created across the country. These were essentially a merging and renaming of the Hospital Boards. Each of the new boards had a performance agreement directly with the minister which outlined their responsibilities, output expectations, and financials.
Private hospitals, GPs, and voluntary organisations reported to the Department of Health. GPs still ran independently and charged for their services, although they were taxpayer-subsidised. A proposal to cap GP fees came in 1984 but was quickly scrapped after GPs opposed it.
Fun Fact: In 1985, free prescriptions came to an end. The government continued to subsidise them but patients had to pay the rest.
The Early ‘90s: Bloated Reform
Tinkering was just around the corner. Just a few years after the Lange Government’s reforms were rolled out and in action, Jim Bolger and his politicians came along and were hungry for reform. The 1990s arguably saw the most reform and tinkering than any other time in the public health system’s history. The plans wanted to step away from health system universalism to a system for those on low incomes. It was the closest the public health system has come to privatisation.
The purpose of the reforms was primarily to save money. To do this, they wanted to corporatise health services, make them more competitive, which in theory would make them most cost effective. The other element of the reforms was ideological and part of National’s market-driven outlook.
In reality, the new structure was a bloated bureaucracy that didn’t last the distance. (The following is a bit of a list).
Change 1: A new Minister for Crown Health Enterprises was created (see ‘Change 4’).
Change 2: The Department of Health became the Ministry of Health.
Change 3: Four ‘Regional Health Authorities’ were created: Northern, Midland, Central, and Southern. They would purchase health services from both public and private hospitals in the hope the competition would drive cost efficiencies. All GPs had to sign agreements with these new authorities too.
Change 4: Lange’s 14 Area Health Boards became 23 Crown Health Enterprises and were run in a commercial way with boards appointed by the government, not elected locally. During the transition, the board members were sacked and replaced with commissioners.
Change 5: A ‘Public Health Commission’ was established as a Crown Agency. But after 2 years, it was scrapped because it added too much complexity to the system and its advice clashed with government policy.
Change 6: A new Crown Company Monitoring Advisory Unit was created to monitor the Crown Health Enterprises and ensure they were meeting their financial targets.
Change 7: A new National Advisory Committee on Core Health Services was established to rank health services and advise the minister on which ones were expendable.
Pharmac came along during this time too. It was a joint venture between the 4 Regional Health Authorities to manage the pharmaceutical schedule.
Given the changes to GPs and the provision of primary health care, many of them banded together to create Independent Practitioner Associations (IPAs) to help with their bargaining power with the Regional Health Authorities.
Fun Fact: Community Service Cards came along in 1992. They gave bigger health care subsidies to those on low incomes.
The Late ‘90s: Winston Intervenes
The first ever MMP election was in 1996 and the resulting coalition government between Jim Bolger’s National and Winston Peters’ NZ First saw the radical reforms wound back. Peters took nearly two months to choose whether to prop up a third-term government or anoint Helen Clark as the country’s first female Prime Minister.
He went with Bolger and got a slew of health system promises. It saw a pivot away from the path of privatisation and back towards an actual public health system. All that tinkering from the early years of Bolger’s government got a whole lot of tinkering.
GONE: Regional Health Authorities. These 4 entities were scrapped and merged into one new centralised Health Funding Authority. During the transition, there was a Transitional Health Authority.
GONE: The 23 Crown Health Enterprises. These were re-named Hospital Health Services and by 1999 there were 24 of them. The mandate to be profit-driven was dropped and replaced with a cooperation model with business-like expectations - although they still had to operate within budgets.
GONE: Minister of Crown Health Enterprises portfolio.
GONE: National Advisory Committee on Core Health and Disability Services. This was replaced by the National Advisory Committee on Health and Disability Services.
NEW: National Guidelines Group was formed to give evidence-based health advice.
NEW: National surgery booking system for elective surgeries. This aimed to reduce the long waiting lists for non-urgent procedures and ranked patients based on numerous criteria.
NEW: Mental Health Commission was formed due to the need for leadership in this space across the whole country.
Understandably, this was a pretty brutal time for those working in the system. Change on top of change on top of change took its toll on workers who were just trying to look after sick people. The tinkering saw redundancies and uncertainty of job security.
To add to the pain and lack of stability was the collapse of the National - NZ First coalition agreement in 1998. It started with Bolger being rolled by Jenny Shipley as Prime Minister. National wanted to sell the government’s stake in Wellington Airport, which Winston Peters refused to allow. Shipley sacked him, and the coalition went out the window with National continuing to govern as a minority government until Helen swept into power in 1999.
Fun Fact: There’s no fun fact for this period because it wasn’t a fun period.
The 2000s: Hello DHBs
A new government meant yet another overhaul. Helen Clark’s Labour Party had promised a health system overhaul during the election and they immediately set about doing it. It gave birth to a system that would last the next two decades: District Health Boards.
SCRAP HEAP:
The 24 Hospital Health Services.
Health Funding Authority.
School Dental Service
NEW HEAP:
21 District Health Boards (DHBs)
Primary Health Organisations (PHOs)
Health Promotion Agency
Public Health Units
Community Oral Health Service
The Ministry of Health was restructured during this period too, taking on the roles of the abolished Health Funding Authority. The Ministry’s role was to monitor the performance of DHBs, develop policy, and purchase health services for the public.
DHBs were set up as Crown Entities and covered geographic areas across the country with varying population sizes. The smallest covered around 30,000 people and the largest was around half a million people. Their role was to deliver the necessary health services to that population and adapt to changes within it.
Their governance structure was partially elected. At local government elections, members of the boards were also elected. Of the 11 DHB members, 7 were elected this way. The rest were appointed by the minister, including the chairperson.
There were provisions for the Māori population too. Each board needed to have 2 Māori members whether appointed or elected. The DBHs were also required by law to form partnerships with local iwi.
The Health Promotion Agency came about under Clark’s tenure. It was charged with promoting healthy lifestyles, wellbeing, and preventing illness and disease.
Public Health Units were set up across 12 parts of the country. They were charged with delivering health programmes and responses to outbreaks of disease and health challenges like smoking.
PHOs were established to provide a range of health services across the country. They were community-run, not-for-profit and ran alongside privately-run GP clinics and health centres. They were monitored by the DHBs.
In 2006, the School Dental Service was reformed and became the Community Oral Health Service. Free dental services were available to those under the age of 18.
Under John Key’s National Government, the 21 DHBs became 20 DHBs with the merging of the Southland and Otago entities into one.
Also under Key, Whanau Ora was established as part of his confidence and supply agreement with The Māori Party. It saw a shift in the delivery of health services away from corporate entities towards communities and family-oriented services. Much of the health services were delivered in the home or very locally rather than in a health centre. Whanau Ora Commissioning Agencies rolled out from 2014.
Fun Fact: GP services for under-6s were free from 2008, and extended to under-13s in 2015 by John Key’s National government.
The 2020s: Centralisation
The health system’s “ postcode lottery” prompted another round of reform in the 2020s. Given the DHBs operated independently from one another, the level of care differed depending on where patients lived and the state of their local DHB. If their DHB was in debt or their hospitals full or services unavailable, patients couldn't access care unless you moved to an area with a well-run and well-funded DBH.
Health statistics were pretty bad and they became enormously bad after the outbreak of Covid. Elective surgery waiting lists were soaring and shortages of specialists were impacting care across the country: a shortage of GPs meant access to primary care was problematic, a shortage of gynaecologists was impacting Southlanders, and mental health practitioners were in hot demand.
There were nurse shortages too across all sectors and pay disputes compounded the pain.
GOODBYE:
20 DHBs
Health Promotion Agency
12 Public Health Units
HELLO:
Health NZ Te Whatu Ora
Public Health Agency
Māori Health Authority Te Aka Whai Ora
GOODBYE:
- Māori Health Authority Te Aka Whai Ora
The reforms came after Heather Simpson’s 2018 review of the entire health and disability sector. She recommended reducing the number of DHBs from 20 down to between 8-12, and scrap the elected members with entirely appointed members.
However in 2021, Health Minister Andrew Little went even further than those recommendations and announced all 20 DHBs would be merged into one single centralised agency: Te Whatu Ora Health NZ. This would prevent staffing and remuneration competition between separate DHBs, and strengthen the purchasing power for supplies.
The new Health NZ consumed the roles of the Health Promotion Agency. While it was a single entity, it was split into 4 regional divisions in a similar vein to the Regional Health Authorities of the early 1990s’ reforms.
The 12 Public Health Units were merged into a single Public Health Agency. It would allow for a more cohesive response to public health threats like epidemics and pandemics.
Alongside Health NZ would be the Māori Health Authority Te Aka Wahi Ora to focus on boosting the inequities in health statistics for Māori . This was scrapped in 2023 by the new National-ACT-NZ First coalition government.
Fun Fact: The proposed-then-axed Māori Health Authority was not the first body to focus on Māori health. As far back as 1846, funding was allocated for Māori hospitals. In 1911, the Māori Nursing Service was established. In 1920, the Division of Māori Hygiene, and Māori Health Councils were created. In 1960, 1984, and 1989, various Māori health committees were set up. The Maori Health Commission was created in 1997 then scrapped in 1999.
Next Steps?
With a new government comes more tinkering. The Māori Health Authority has been scrapped, despite half a billion dollars being spent on the overall reforms. There are still staff shortages, hospitals needing upgrades and running on empty, and patients waiting way too long to receive treatment.
New Health Minister Dr Shane Reti still describes the current state of the health system as in a “crisis” and will unveil a plan to fix it within the next month.
Hospital Bed Numbers
It’s worth noting how much the hospital and bed numbers have changed over the years.
1980: 186 public hospitals with 26,345 beds + 163 private hospitals with 5,139 beds
1987: 344 public hospitals with 30,645 beds + 173 private hospitals with 6,157 beds
1994: 126 public hospitals with 16,468 beds + 204 private hospitals with 7,652 beds
1998: 109 public hospitals with 14,298 beds + 278 private hospitals with 15,984 beds
2002: 85 public hospitals with 12,484 beds + 360 private hospitals with 11,341 beds
2024: 87 public hospitals with 11,007 beds + 78 private hospitals with 1,911 beds