Gordon Campbell on the funding crisis in the public health system

Much as Health Minister Jonathan Coleman may like to muddy the water, the crisis in our public health system is hardly the fault of the managers of the nation’s 20 District Health Boards. This crisis has been brought about by systematic under-funding by central government, not by inefficiency at the local level. The outlook is just as bleak. In Westport and Canterbury, the government appears to be contemplating public private partnerships for new health-related construction projects – yes, the same model that has failed so comprehensively in Britain – and that approach will leave DHBs even less able to cope with its deficits in future.

Briefly, what’s the big problem with fostering PPPs in health? Basically, the private sector partners will extract a level of profits over 30 years in interest payments far in excess of what it would have cost the government to borrow and build the facilities. That’s just what loan sharks (or hire purchase agreements) routinely do. Problem being, this kind of profiteering from public health will then cripple the ability of DHBs to meet core health services over the ensuing decades, because of the diversion of funds into servicing these onerous PPP contracts. So why do it? Because the PPP approach will remove a large chunk of health funding off the government books, thus enabling the politicians to brag about how ably they manage the economy. Look folks – a surplus on the government books! Haven’t we done well! (More on this below.)

There are three main facets to the story of how the current government has set about trashing the health system over the past nine years.

1.Efficiency. Coleman has told the DHBs to reduce the deficit without cutting the core services that would provoke a voter backlash. Yet for the past 20 years, the public health system has been squeezed for health gains. Any excess “fat” disappeared a decade or more ago. The increased throughput that Coleman brags about – he routinely cites statistical increases in operations and turnover – are the signs of an overstretched system that’s been running to keep pace with rising demand, and is headed for burnout.

2.Funding. Meanwhile, the system has been systematically under-funded, in that it has received a declining share of the nation’s wealth (GDP) ever since 2010 – which was not co-incidentally, the same year National found money for tax cuts. The subsequent ‘record’ amounts of health funding that National talks about have not kept pace with inflation, population increases, rising equipment costs and the health needs of an ageing population. Currently, the system is an estimated $1.4 billion short of what it would be, if it was receiving the same share of GDP as it did back at the start of this decade.

The products of this systematic under-resourcing of public health are plain to see everywhere beyond the Beehive. It is being manifest in staff burnout, staff “presentee-ism” (ie, medical staff feeling obliged to turn up for work even while they themselves are sick) and gaping holes in everything from mental health services to specialist care. ( National’s much-vaunted $224 million Budget 2017 allocation for mental health is in fact, a funding decline in real terms.

In addition: high levels of unmet need exist, and there have been examples of this leading to needless suffering (eg blindness) and death, because of deferred treatment. Poor housing and related Third World diseases continue to make inroads into vulnerable sectors of the community. Elective surgery is going backwards as research by the Association of salaried Medical Specialists has recently pointed out:

Despite elective surgery being a priority area for the Government, elective services will take a funding cut of $26 million in real terms in 2017/18. Again, this is an area where New Zealand already compares poorly with many OECD countries. The World Health Organization ranks us in the bottom half of OECD countries in terms of surgical procedures per head of population.

The outlook is bleak. Both the primary care and hospital systems are highly dependent on foreign trained staff whose rapid turnover is of concern. Our aspirational aim to achieve parity with Australia by 2021 in the ratio of specialists to 1,000 people continues to recede.

Three years ago, Werewolf reported in depth on why New Zealand work conditions had all too typically driven one such specialist – the expert cardio electro-physiologist Dr Alejandro Jimenez – away from Capital Coast Health, and out of New Zealand altogether.

Inevitably, a tension will always exist between the wishlists of specialists and the resources that are affordable. That reality, Jimenez says, was acknowledged and accepted. However, the electro-cardial mapping capability was an essential part of the service: “It was not a want-to have, it was a need-to have.” That aside, had he had plans to enhance and expand the quality of service available in his specialty that the funding constraints prevented him from pursuing? “Absolutely,” Jimenez replies. “We had many areas where we could have increased the access of patients to procedures like atrial fibrillation ablation, ventricular tachycardial ablation, ICD implants ..”

Across all the DHBs in New Zealand, he says, there has been a steady growth in the availability of cardiac device implants. “But it is still way, way behind other comparable healthcare systems like Canada, the United States, and even Australia. This basically means that a lot of patients in New Zealand are not getting devices, because they don’t have access to those services. Obviously, those were areas where the service would continue to grow, and without the appropriate resources, it was not going to happen. Or if it happens, it will happen very slowly. There was a lot of talk about committing to the service, but there wasn’t really an expansion plan, or a serious commitment to say OK, how are we going to put this into action…”

DHB Deficits

On recent figures, DHB deficits have now blown out to $117 million up from Coleman’s “less than $100 million” attempt at re-assurance less than a fortnight beforehand.

The minister’s admission comes as Northland DHB chief executive Nick Chamberlain said he was refusing to provide the board’s annual plan unless it got more funding.

There have also been complaints of funding problems at Canterbury DHB, which has been ordered by the ministry to cut its deficit from $54m to $17m, and Southern DHB, which had serious problems in its urology department.

Dr Coleman reaffirmed that services would not be affected, and said no DHB would “run out of cash”.

Plainly, the current DHB deficits either need to be written off, or require an infusion of substantial extra funding by central government. Stressed out DHB managers and their medical staff would be better employed satisfying the needs of their patients, rather than the desires of politicians seeking to spin the good news about cost containment. In the meantime, DHB managers fixated on cost reduction to bring down their deficits have been – understandably – neglecting their critical role in providing clinical leadership.

PPP Solutions

Turning to public private partnerships to resolve the health funding shortfall will merely invite predatory profit-taking into the equation. Across Britain, this PPP “solution” has had dire consequences:

My hospital trust, in north-east London, spends nearly £150m a year repaying its PFI debt – nearly half of which is on interest payments…New research from the Centre for Health and the Public Interest (CHPI) shows just how much these debts are hurting our NHS. Over the next five years, almost £1bn of taxpayer funds will go to PFI companies [ie, PPPs] in the form of pre-tax profits. That’s 22% of the extra £4.5bn given to the Department of Health in the 2015 spending review, and money that would otherwise have been available for patient care.

The company that holds the contract for University College London hospital has made pre-tax profits of £190m over the past decade, out of the £725m the NHS has paid out. This alone could have built a whole new hospital as 80% of PFI hospitals cost less than this to construct. This is not just about poor financial control in the NHS – UK PFI debt now stands at over £300bn for projects with an original capital cost of £55bn….

Private finance initiatives are like hire-purchase agreements – superficially a cheap way to buy something, but the costs quickly add up, and before you know it the debt is crippling.

This aim of using PPPs to build health infrastructure is being driven by political expedience, not medical best practice:

For decades, governments of both main parties have used them for the simple but ultimately short-sighted view that it keeps borrowing off the books – helping reduce the amount of debt the country appears to have, but at great longer-term expense. Its now painfully clear that the intended benefits of private sector skills to help manage projects have been subsumed in the one-sided nature of these contracts, to devastating effect on budgets.

In New Zealand, this same door is already ajar, as Ian Powell of the Association of Salaried Medical Specialists (ASMS) recently pointed out, in the organisation’s July newsletter:

Partly through ideology and partly through the shortsighted incentive of short term gain, the Government is pressuring DHBs that require major capital works development to adopt a funding arrangement similar to Private Public Partnerships in England that will worsen DHBs finances. The first example is the small new $12 million ‘integrated family health centre’ in Westport.

The Government, through its misnamed partnership group, is pressuring West Coast DHB to adopt a method of funding branded as ‘capital recycling’ that is a PPP by another name. The practical effect is that the DHB is likely to pay between $750,000 to $1,000,000 annually for about the next 34 years more than would it would have to under the normal way (Government loans repaid at a lower interest rate). In order to make the Government’s books look good, the DHB’s financial position has to worsen, thereby increasing the likelihood of deficits.

Imagine if this new system of funding continues with the next and much bigger new outpatient facility as part of the post-earthquake Christchurch Hospital rebuild. This new facility could end up costing somewhere in the vicinity of $100 million which would then involve Canterbury DHB incurring extra annual costs of up to say $100 million. In fact, one does not have to imagine anything. It has already been acknowledged that ‘capital recycling’ is on the cards…

Clearly, in the health debate at this election, a pressing question for both major parties is whether they plan to pursue PPPs in the building of health capacity in future. DHB extra funding – or deficit write-offs – also have to be put on the agenda, before the election.

Mighty Storm, before Houston

One hundred years ago, songwriters would be treating the pounding that Hurricane Harvey has just given to Houston as being a sign of God’s wrath or man’s sinful hubris, or both. (The Titanic sinking in 1912 triggered an avalanche of gospel and minstrel songs along those lines.) Back in September 1900, another great storm also swept in off the Gulf of Mexico and hit the same part of Texas – at the port city of Galveston. It remains the most deadly natural disaster in US history. Eric Larson’s book Isaac’s Storm offers a fascinating history of the Galveston flood, which led to enduring improvements in the US weather prediction system.

As late as 1934, folklore collectors John and Allen Lomax collected this Galveston-inspired song by a convict called Sin-Killer Griffin, who was in jail for trying to finance a black nationalist return to Africa. Good versions of Griffin’s song have since been recorded by Tom Rush, Nanci Griffith, James Taylor and Eric von Schmidt – but Griffin’s version offers the right mixture of dread and spiritual fatalism:

BTW, this time around Galveston has emerged relatively unscathed from Hurricane Harvey.