Evolution Of New Zealand’s Health System Up To Pae Ora Act 2022

Friday, 18 August 2023, 6:20 am
Opinion: Ian Powell

Early this month  I was invited by the New Zealand Branch of the Australian and New Zealand Oral & Maxillo-Facial Surgeons (ANZOMS) two give two addresses to their annual general meeting in Queenstown (4 and 5 August).

It provided a great opportunity to reflect on how Aotearoa New Zealand’s health system how it has evolved to what it is now and ways forward. Further, it was an opportunity to discuss this with such a skilled and committed group of health professionals.

Oral and maxillofacial surgery is surgery of the mouth, face and jaws. Its surgeons are specialists in the diagnosis and treatment of a broad range of disorders affecting the facial complex and skeleton, including the jaws and oral cavity.

It is an interesting speciality falling within the definition of oral surgery but more specifically to the inside of the oral cavity. However, the oral cavity is not their primary specialty. These surgeons have different knowledge that allows them to perform surgery outside the oral cavity.

When I became the Association of Salaried Medical Specialists first executive director in April 1989 the largest group of our members were medical practitioners. However, there were also a much smaller group of dental practitioners. This remains so today.

At that time the two groups of salaried practitioners had separately negotiated national collective agreements (then called awards).

The main difference was that dental practitioners’ salaries were lower. One early outcome I’ve remain proud of was a year later, not only merging the two agreements into one but also achieving salary parity between them.

In this context it is interesting that in 1989-90 oral & maxillofacial surgery was a branch of dentistry covered by the Dental Council. Only a few years later it was also recognised as a branch of medicine covered by the Medical Council.

“How did we get into this crap?”

My first address was on the evolution of our health system up to the legislated restructuring under the Pae Ora Act which came into force on 1 July 2022: How New Zealand’s health system evolved up to the restructuring of 2022.

It had an alternative heading of ‘How did we get into this crap?’

While my focus is on the introduction of universal health coverage arising out of the Social Security Act 1938, I briefly cover the pre-universal period beginning  with the role of hapu in pre-colonial Aotearoa.

This was followed by the need for mainly British migrants to ‘make do’ until the 1885 Hospitals and Charitable Aids Act which set up a largely charity based health system. With refinements this system continued through to 1938.

Drawing in no small part on the experience of healthcare innovation in the rural hydropower based town of Kurow, universal access to healthcare formed part of the 1938 legislation under the first Labour government.

Relationship between culture and structure change, 1938 to 2022

My address focussed on the relationship between culture and structure change arguing that the former was by far the most important. Structural change can help enable the implementation of cultural change but overwhelmingly the latter trumps the former.

Achieving universal coverage was the culture change of the Social Security Act. The structural change was to enable this. The Department of Health was established to ensure access to primary care and be responsible for population health. Statutory hospital boards were to ensure access to secondary care.

The subsequent three major restructurings which occurred in the mid to late 1980s, 1993 and 2001 were also to enable the culture changes which underpinned them. Structure followed culture in all cases.

Area health boards were established in the 1980s in order to better rationalise hospital care and to assume a more locally focussed responsibility for population health. They were also intended to diminish structural boundaries between community and hospital based healthcare.

In 1993 the National government sought to introduce a culture change by changing the health system driver from cooperation to competition through a purchaser-provider split.

Structural change to construct a market was implemented to help enable it. This included establishing state-owned companies to operate public hospitals, establishing new regional purchasing bodies, and putting the health system under the coverage of the Commerce Act.

The Labour led government under new legislation taking effect in January 2001 established new statutory bodies called district health boards (DHBs).

DHBs were to help enable Labour’s culture change of restoring cooperation, establishing statutory local responsibility for the whole of healthcare for geographically defined populations, and integration of community and hospital based healthcare.

This led to a developing, although uneven, positive relational culture in the health system compared to what had previously occurred.

In all these three post-1938 restructurings, culture change came first. Restructuring was intended to enable the culture change to be achieved. In the first and third restructurings, the culture change were consistent with the objective of enhancing universal coverage.

The second was inconsistent contributing to its short lifespan. But in all three cases, the restructurings were underpinned by and consistent with the culture change being sought.

This is what makes the Pae Ora Act different from the restructurings of 1938, 1980s, 1993 and 2001. Structural change (increased vertical centralisation) is the prime driver, not culture change.

To the extent that there is culture change, it is more consequential (negatively; one of vertical control) and largely nebulous. It also halted the previous developing relational operational culture.

Underpinning health system principle for 84 years

My speech discussed the role of a largely unacknowledged principle which had underpinned our health system since 1938. It is called ‘subsidiarity’ which is the foundation of the relationship between local and central government. 

The underlying premise is that things should be done locally (or regionally) except when it is best done centrally. But, in this relationship, central government is the ‘higher authority’.

Since the 1938 legislation, from hospital boards to DHBs, there has always been an influential level of statutory authority located closer to where most healthcare is provided. By abolishing DHBs without any district-based alternative, the Pae Ora Act abolished subsidiarity in the health system.

From Simpson to Little; from cohesion to control

What is not always recognised, but identified in my speech, is that while the restructuring that forms the basis of Pae Ora Act is supposed to be the implementation of the Heather Simpson review of the health and disability system (March 2020), the opposite is the truth.

This is also discussed in my opinion piece published by BusinessDesk (14 August):    How health system went from the Simpson review to a Simpsons’-style farce.

The Simpson review identified a legitimate weakness of the health system – lack of cohesion. Consequently, it focused on how this might be fixed. The Government then set up a largely business consultants-led transition unit to advise on the review’s implementation.

In April 2021 then health minister Andrew Little announced the government’s decision. The effect was to substantially reject much of the Simpson review.

Largely this was through the abolition of DHBs and creation of the substantially different and much more powerful Health New Zealand compared with what from what Simpson had recommended.

In summary, Little and his ‘kitchen cabinet’ colleagues replaced Simpson’s ‘cohesion’ with their ‘control’.

This replacement was the final part of a much bigger evolution of our health system over the 84 years from 1938 to 2022. It is an evolution of a system underpinned by the principle of subsidiarity change to one based on vertical change.

© Scoop Media

Ian Powell

Otaihanga Second Opinion is a regular health systems blog in New Zealand.

Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Association of Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.

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