New Zealand vs US Healthcare

A layman's analysis of US and New Zealand Healthcare Systems

Unless you live in a hobbit-hole, it is hard to avoid the political debate in the US about healthcare, specifically the idea of having “Medicare for all.” It will be a hot topic of debate leading up to the 2020 presidential election.  “Medicare for all” would be vast departure from the current model in the US but quite similar to the single-payer model in New Zealand. 

My colleague Shane and I thought it would be fun to compare the US and NZ systems across three simple dimensions: total spend, access, and healthcare outcomes. In doing so, we are not making a political statement, you know where to find those. Rather we are simply sharing our interest since Mobile Mentor works closely with healthcare providers in both the US and New Zealand and although we are both engineers with no clinical training, we have a genuine interest in the healthcare industry.  

Cost Comparison

The US currently spends $11,172 USD per person on healthcare, representing 17.7% of GDP. Under the current system, healthcare spending growth is expected to rise by 5.5% per year, outpacing GDP, and reaching 19.4% of GDP by 2027, totaling nearly $6 trillion (source, 2019).

New Zealand spends $3,923 USD per person, representing 9% of GDP (source, 2019). Health expenditure in New Zealand increased from 8% in 1999 to 10.3% in 2009 but has since been steady, holding around the 9% mark (source, 2012).

To understand why spending varies so much we looked at the three big categories.

Beds, Heads and Meds

The table below shows a few comparisons of average prices between the US and New Zealand for a few common procedures, practitioners, and medicines.

It is clear from this simple comparison that pricing for ‘beds, heads and meds’ is much higher in the US compared to NZ. The same applies when comparing medicines in the US to Canada or Europe.

Two other factors influence US healthcare in a big way. The first is ”healthcare administration” which is the business of assigning a code to everything, billing patients, reconciling with insurance companies, collecting debts from patients and managing government healthcare programs. The cost of healthcare administration in the US is a staggering $812 Billion (source, 2020). There is an element of fraud, which was $2.7 Billion last year (source, 2020), but it is insignificant in the overall picture. To put healthcare administration into perspective, the NZ GDP is $206 Billion, so the US spends about 4 times the entire NZ economy just on healthcare administration each year.

A second factor is tort, or litigation. It is quite easy to sue a doctor, clinic, hospital or pharmaceutical company for an adverse outcome in the US. As a result, there is a thriving legal industry helping patients to litigate against their doctor and an industry of insurance companies protecting doctors. While malpractice payments are a small percentage of total healthcare spend, a 2014 JAMA study found 28% of orders and 13% of costs were at least partially defensive, meaning they were ordered, in part, to prevent a lawsuit (source, 2014). This “just in case” mentality ultimately increases costs that are then passed on to patients, their employers and insurance companies. In NZ, there is virtually no litigation against the healthcare industry and a single government body, called the ACC, covers the cost of all claims, accidents and compensation.

Access (insurance, waiting lists)

The New Zealand healthcare system is a single payer model that covers everyone, not just NZ residents but also work visa holders. In addition to government provided healthcare, 35% of adults and 28% of children have private health insurance in addition to the public plan (source, 2016). The reason for this is that wait times vary significantly between the two countries.

Comparing Orthopedic surgery, for example, the average wait time in the US is 11 days (source, 2017). Conversely, in New Zealand, elective surgeries could take up to 4 months depending on acuity (source, 2019). This discrepancy in wait times is the reason for a thriving private health system in New Zealand.

8.8% of people are uninsured in the US currently and healthcare for this minority is extremely limited with most using the Emergency Department of the nearest hospital when a health event occurs (source, 2018). By law, US hospitals are required to admin anyone, and cannot reject patients, even those without insurance. However, the extent of care is very limited, and the hospital is only required to ensure the patient is stable.

Outcomes (World Health Rankings, OECD)

The US spends almost 3 times as much on healthcare as NZ (per capita) so it would be logical to conclude that healthcare outcomes must be much better in the US. Sadly not. The Bloomberg ranking of the healthiest countries considers a range of metrics such as life expectancy, infant mortality, maternal mortality etc. so it is a useful way to compare the quality of healthcare across countries.

In 2019, NZ was ranked 18 and the US was ranked 35, just below Costa Rica and just above Bahrain (source, 2019). However, the reality is not that simple and healthcare outcomes vary significantly from state to state within the US. In the US, it is now commonly accepted that health outcomes are determined by zip code rather than by genome. In other words, where you live influences lifestyle choices and access to healthcare services. There are cities where people living in one zip code can have a life expectancy that is 20 years longer than people living in an adjacent zip code (source, 2019).  

As a final shocking note, Texas had the highest rate of maternal mortality in the developed world in 2017 (source, 2017) and sadly the US lags in infant mortality when compared to other industrialized nations.

Do you want to wait 4 months, or pay through the nose?

Sounds harsh but that appears to be the trade-off between public healthcare in NZ and private healthcare in the US. NZ also has some private healthcare to shorten the wait times for those can pay the premium. And the US has some government healthcare for those who can’t pay the premium. Clearly neither country has the perfect model, but both have their merits and challenges.  The next few months will be entertaining, and I look forward to following the debate.

Common Ground

Despite the differences, one thing is clear, every clinician we work with in the healthcare industry wants to work at the “top of their license” – doing the most complex work they are qualified to do and delegating all other tasks. This makes sense and is a noble objective. Working at the top of one’s license requires a commitment to technology to simplify the complex, automate the mundane and reinforce the care part of healthcare.  

Our company, Mobile Mentor, is a tiny cog in the huge healthcare machine, but we are very fortunate to work with many innovative providers who are embracing modern technology to see more patients, improve patient engagement and deliver better outcomes. We see technology as the best strategy to reduce healthcare administration, remove barriers between providers and patients and improve outcomes. Healthcare is a complex industry that demands a lot from everyone, and we are privileged to participate and contribute.

The photo at the top of this article shows the US and NZ flags standing side by side at Scott Base, Antarctica. The flags are equal in size and stature, representing innovation at a wind farm, in a location that relies on collaboration and resource sharing. We like this model.