New Zealand: #17 in the 2022 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, Grant Rigney, and Avik Roy
Introduction
New Zealand ranked 17th overall in the 2022 World Index of Healthcare Innovation, compared to 15th in 2021 and 20th in 2020. The island nation ranked highest in Quality (8th). In particular, its pandemic preparedness and response rank (4th) boosted New Zealand’s high score. Nevertheless, New Zealand ranked at or below the median on the three other WIHI dimensions: Fiscal Sustainability (17th), Science and Technology (21st), and Choice (22nd).
Background
Established in 1938 as a taxpayer-funded, government-run system, New Zealand’s socialized healthcare system provided mostly free point-of-service care for patients. Yet, over six decades, the healthcare 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 most of the care for citizens and permanent residents. Subsequently, private hospitals cover 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. New Zealand’s public health insurance also covers inpatient and outpatient prescription drugs listed on New Zealand’s national formulary. In addition to these, 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.
Quality
New Zealand ranked 8th for Quality. In particular, New Zealand’s performance in pandemic preparedness and response (4th) bolstered the country’s strong standing. Similarly, New Zealand’s score in patient-centered care at 7th strengthened its ranking. The only measure in which New Zealand scored below the median was for preventable disease (18th).
Choice
New Zealand ranked 22nd in Choice. New Zealand ranked highly in affordability of health insurance (5th). However, it ranked poorly in freedom to choose healthcare services (28th) and access to new treatments (23rd) — a tradeoff inherent to its socialized healthcare system.
Science & Technology
New Zealand ranked 21st in Science & Technology. New Zealand’s electronic health record adoption rate ranked it in the top half of countries (measured in health digitization, where it ranked 14th). However, its contribution to global medical innovation lagged behind other countries, measured in medical advances (30th) and scientific discoveries (19th).
Fiscal Sustainability
New Zealand ranked at the median (17th) for Fiscal Sustainability. It ranked respectably in its debt-to-GDP ratio (measured in national solvency at 5th). Further, its growth in public health spending ranked 7th. However, it ranked in the bottom half for public healthcare spending at 23rd. Thus, while New Zealand’s overall debt-to-GDP ratio was low (below 32 percent), its healthcare spending is growing.
