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Education And Debate

New Zealand's new health sector reforms: back to the future?

BMJ 2001; 322 doi: (Published 12 May 2001) Cite this as: BMJ 2001;322:1171
  1. Nancy Devlin (, senior lecturera,
  2. Alan Maynard, professor of health economicsb,
  3. Nicholas Mays, adviserc
  1. a Department of Economics, University of Otago, PO Box 56, Dunedin, New Zealand,
  2. b York Health Policy Group, Department of Health Studies, University of York, York YO10 5DD,
  3. c Health and Education Directorate, Social Policy Branch, Treasury, PO Box 3724, Wellington, New Zealand
  1. Correspondence to: N J Devlin
  • Accepted 5 February 2001

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.

Summary points

New Zealand is implementing major changes to the way the health system is organised

The key elements are the development of national strategies and radical restructuring of the healthcare system

The changes reject the current quasimarket approach. Twenty one largely elected district health boards will be responsible for planning most services and delivering hospital services

Challenges facing the new system include the tension between local autonomy and national consistency, avoiding hospital domination designing a defensible formula for allocating funds to district health boards, and ensuring that the reorganisation achieves the government's health goals

Evaluation …

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