The New Zealand Way: Another Approach to Health Care

After 28 years as a primary care physician in the U.S., Dr. Ken Fabert traveled to New Zealand to see what patients and doctors think of their single-payer system.
Stethoscope, photo by Lidor

Photo by Lidor

For more of Ken Fabert's blogs from New Zealand, click here.

As I discussed earlier, a well-organized and well-trained primary care base is vital to the rational utilization of health care resources, and a key part of the New Zealand system. Surprisingly, though, at the initial point of access, which is often a physician-owned practice, the patient is expected to pay some or even most of the cost of the encounter. Many patients, however, are able to obtain a community health services card; with it, co-pays are on a sliding scale based on income. Further subsidies are available for patients with chronic illness who have more than 12 visits per year. Despite these subsidies, I was rather surprised to learn that computerized patient account systems prompt for information about bad debts and previous payment status; this seems to be generally accepted as a necessary evil if the system is to maintain financial viability and overall fairness.

After being seen by a primary care doctor, all laboratory investigations, radiology tests, emergency hospital evaluations, hospitalizations, and surgery are paid for. No deductibles, no co-pays, no maximums.

This is, however, the only part of the system that requires out-of-pocket payment. And despite the potential barrier to access posed by these co-pays, my experience in the sites I've visited so far is that it doesn’t seem to be a significant barrier to access. I do want to continue to observe the potential effects of this system. But that’s where the potential financial barriers end.

After being seen by a primary care doctor, all laboratory investigations, radiology tests, emergency hospital evaluations, hospitalizations, and surgery are paid for. No deductibles, no co-pays, no maximums.

Recently, primary care subsidies have been changed to include free care for children under six and full prenatal and obstetrical care. These costs are administered through primary health organizations, or PHOs, one of the primary conduits through which the annual national health budget directly pays general practitioners and other primary providers.

The Accident Compensation Corporation (ACC) is one of several pillars on which the New Zealand health care system is based. It is a no-fault national insurance program funded directly by the government to cover medical expenses stemming from any accident that occurs in New Zealand. The rules of the ACC preclude further litigation because both medical expenses and subsequent compensation are provided for. Thus, the absurdities and excesses of a litigation-driven system of compensation—such as that found in United States, where many doctors feel they must practice "defensive medicine," ordering unnecessary tests and procedures to make sure their bases are covered in the event of a malpractice lawsuit—are simply rendered irrelevant. Health policy academics—frequently law school professors and economists rather than medical clinicians—often downplay the impact of litigation on the U.S. health care system's high costs, but the corrosive effect of this lawyer-driven adversarial system is pervasive. Just ask any clinician. In a future blog I will address this issue more comprehensively, but for now let’s continue to look at what makes the New Zealand health care system tick.

Another recipient of government funding is the District Health Board, or DHB, which pays for hospital and laboratory services. (This is a simple mandate on paper, but as with hospital systems everywhere, efficient, fair allocation of these funds is an enormous and politically charged task. In fact, New Zealand's health minister recently announced significant budget cuts to the DHBs, stating that more funds are to be devoted to clinical care.)

A third entity that makes up the foundation of the health system is PHARMAC, the Pharmacy Management Corporation. PHARMAC is the national pharmaceutical supplier. It negotiates directly with pharmaceutical manufacturers for supply and pricing of essential medicines. All covered drugs are $3.00 NZ ($2.10 USD) per prescription.This includes at least one, if not more, representative drug from virtually every therapeutic class of medications utilized in modern medical practice. In my three weeks of prescribing in New Zealand, I have yet to feel constrained by PHARMAC's options. Labeled on-patent drugs are still available, but at substantially more cost to the patient—just as in the U.S., where patients do not benefit from the advantage of collective bargaining.

A Second Opinion on Health Care
In medicine, it's a time-honored tactic to obtain a second opinion if the diagnosis is unclear or if the therapy isn't working. Dr. Ken Fabert on why he wanted to explore New Zealand's single-payer system.

Finally, there is a private sector. Occasionally, patients feel that wait times are excessive for elective surgery such as joint replacements. They can then opt to be treated through the private sector, in which wait times frequently are shorter for such elective procedures. The general perception is that timing, not quality, is the difference between private and public sectors. The specter of a two-tiered health system, with better care available for the rich than the poor, doesn’t seem to have arisen. There is, not surprisingly, a growing health insurance industry for those who prefer to seek their care in the private sector. In general, the insurance industry is better regulated here than in the U.S., but I have heard stories of limitations, asterisks, exclusions, and fine print similar to those employed by the U.S. health insurance industry. But in New Zealand, of course, insurance for private care is entirely optional.

So to summarize, a medical patient in New Zealand can expect the following:

  • Co-payment or full payment is needed to access a general practitioner, though subsidies are available.
  • All required lab tests, investigations, emergency treatments, hospitalizations, and surgeries are free.
  • Prenatal care, childbirth, and care for children under six are free.
  • If the patient is injured in an accident, care is free (and subsequent compensation is provided for).
  • If medications are required, covered prescriptions cost $3.00 ($2.10 US).

Is everyone in New Zealand happy with this scheme? Obviously not. But by and large, people seem to be satisfied with the provisions available to them. There is occasional grumbling, but when I ask New Zealanders if they would rather have a system like that in the United States, the response is a unanimous and unequivocal “No!”

The New Zealand health system is not socialism. It is an example of an intelligent, educated population and government understanding that one of the cornerstones of a human rights-based society (as well as a healthy, productive, and creative society) is the social provision of health care.

I see words like “landmark” and “historic” used to describe the recent health care legislation signed by President Obama. But compared to the New Zealand system, these legislative reforms are functionally inadequate and morally lacking.

I hope to gain deeper insight into this system as I continue to work here for the next two months. As I do, I’ll share them with you. This includes problems and shortcomings, but also the kind of problem-solving that is taking place to keep the citizens of this country healthy and productive.


  • Read more of Dr. Ken Fabert's blogs from New Zealand .

  • The United States pays far more than Canada per capita for its health care services, yet Canadians get better care, according to various experts.

  • Americans spend the most, get the least, and have no health care security. The solution is not that difficult.
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