New Zealand attracted much international attention in the late 1980s and 1990s for its radical economic and social reforms. This reforming tendency shows no signs of abating. In late 1999 the national (conservative) government was replaced by a Labour led coalition, which is rapidly and significantly changing the way publicly financed health services are organised.

Before the general election, Labour had criticised the national government's quasimarket system for its narrow focus on the production of services rather than the improvement of health, for having fragmented a public service, for fostering inappropriate commercial behaviour, for increasing transaction costs, and for lacking local democratic input.1 These problems were attributed to the “corporate model” of public hospital provision and a single, national purchasing agency. Both will now be replaced with a system promoted as allowing greater community “voice” in health sector decision making and “putting the public back into the public health system.”

This paper reviews New Zealand's experience with the quasimarket model and appraises the rationale for another round of structural change. We identify challenges policymakers face in achieving their goals, consider the general lessons provided by New Zealand's frequent U-turns in policy, and offer a set of criteria against which the new system might be assessed.