Health economics: economic history, modelling, and public policy, in the New Zealand health care system

Abstract

The focus of this thesis is health economics and the interface between the public and private hospital sectors within the New Zealand health care system. It summarises the distinctive elements which characterise consumer demand for health care; prices, time costs, third parties, real incomes, quality, environment, agency. Various models of supply of hospital care are considered encompassing the differing incentive structures to the major market participants. An economic history of the New Zealand hospital sector dates back to the early settlers, and helps explain the evolution of the current system.

The thesis then introduces a theoretical model of the New Zealand hospital sector; specifically the area of non-acute or elective surgery which is most relevant for the interaction between the public and private hospital market. The elements of demand for health care are incorporated into the model which encompasses three specific sectors: public hospitals; private hospitals; and health insurance.

Output and pricing policies and derived from the simultaneous interaction between the private and public sectors.

The thesis considers the evolution of health insurance and the reasons behind the rapid growth in private health insurance membership during the 1960's and 1970's. The establishment of a major public accident insurance scheme was also introduced in New Zealand in the early 1970's. An empirical microeconometric study estimating the association between the major health variables lends weight to the hypothesis that public and private non-acute surgical treatment are close substitutes.

Recent public policy changes in health care in New Zealand, are analysed, with emphasis on causes of market failure and an explanation why extensive government intervention is common to health care systems around the world.