The market reform of the New Zealand health care system searching for the Holy Grail in the Antipodes.

Everywhere there is a recognition that the delivery of health care is ineffective and inefficient and that these unpleasant outcomes are a product of the perverse incentives inherent in all health care systems. In New Zealand the Government documented the defects of the health care system and has introduced radical competitive market reforms, with a purchaser-provider split, in the belief that these will improve the system's performance. The nature of these reforms, centred on the purchaser-provider divide, is similar to changes introduced in the Netherlands, the UK, Sweden, Israel and Russia. The reforms which have been introduced in New Zealand are evaluated in terms of the eight major problems its Government sought to eradicate. It is shown that instead of mitigating these problems the reforms may worsen them, with the system becoming fragmented and less equitable. The move away from a single (tax) source of funds (i.e. the single pipe) may make cost control more difficult. The Government is seeking to address the issue of information generation to facilitate market trading but it is not clear how effectiveness and efficiency data will be produced in adequate volume and quality, let alone how it will be used to change producers behaviour. Many of the problems identified by the New Zealand Government are significant and in need of resolution. However whilst the political imperative may require immediate action, the economic case for these reforms is quite poor. Incremental change, with careful evaluation, would 'inform' policy change with knowledge of the attributes of competing management mechanisms and reward systems. Instead there is the too familiar combination of political assertions and an unwillingness to measure the impact of change, behaviours which may create the causes for the advocacy of the next 'redisorganisation' of the health care system.