Agenda Transcript: Pete Hodgson and Lee Kuan Yew

AGENDA

March 24 --- Pete Hodgson, Lee Kuan Yew.

©Front Page Ltd 2007 but may be used provided attribution is made to TVOne and “Agenda”

Presented by Lisa Owen

CUTTING THE COST OF HEALTH

LISA Well let's have a look at what's been in the news this week, more problems in the health sector and they're not just in Auckland. The Marlborough Express its editorial asks why pharmacists have been forced to raise prescription costs, once again members of the public will have to reach deeper into their pockets it says. Now the Dominion post laments yet more resignations from Capital and Coast District Health Board, it says "…the scenario is depressingly familiar with only the details changing."

Well earlier this week the High Court overruled the decision by the Auckland District Health Board to award their laboratory testing to a new company. Justice Asher cited a conflict of interest putting on hold the Health Board's plans to save 15 million dollars a year. Saving money with one hand so that it can be spent with the other is a fact of life when it comes to the provision of health services, but are we doing this as efficiently as we can, have we got our priorities right. Well Minister of Health Pete Hodgson joins me now from Dunedin. Good morning to you Minister.

Now the Auckland Health Boards were aiming to do the right thing with this, aiming to save money, it appears they just went about it the wrong way, so how does this whole saga highlight the dilemma of finite resources in the health system?

PETE HODGSON – Minister of Health

Oh it's kind of hard to take money out of health and when you’ve got big dollar contracts, this is near enough to a half billion dollar contract, people will rock up to the court with their Queens Counsels and they will fight, that’s what's happened, some process deficiencies have been discovered, we're back to the drawing board. The really important point is that if we were to save 15 million dollars out of the laboratory contract in Auckland it's equivalent to 20 extra hip operations for Aucklanders each week, these things matter, value for money does matter.

LISA Well since you’ve raised value for money let's look at Herceptin as an example, where treating about 400 women for a year costs I think the estimates are about 20 million dollars, where total budget for cancer drugs is just 50 million how do you decide which is the better investment?

PETE Well Herceptin has been a famously difficult issue, I mean you’ve just given some figures which show that Herceptin is expensive as the rest of the cancer drugs put together. Here's another figure. If we treat 100 women with Herceptin we will save the lives of three of them and yet in society you have this feeling that if I've got this particular type of breast cancer and I don’t have Herceptin I will die and if I do I will live. For 97 out of a 100 women that is absolutely not the case. The more important question for me though is how do I reduce breast cancer deaths and to be honest with you Lisa the long and short of it is that I can get much bigger gains by improving screening and that’s why we've got an extra I think it's four or five mobile screening units coming into the country, it's why we're trying to increase the number of women who get screening.

LISA I mean very clearly Minister you're saying there that these are tough decisions to make and I just want to be clear about how do you decide which perhaps lives to save?

PETE I think which lives to save makes the question of course awkward, but it's also somewhat inaccurate if you think of the issue around Herceptin I've just indicated to you that for 97 of a 100 women their prognosis does not change with or without Herceptin, but if you stick with Herceptin the idea of a nine week treatment in cooperation with another drug if you like so that the two are able to proffer up a synergy, and this is work that’s come out of Finland, looks like it might be as effective for about one fifth the cost. Now I have to be hesitant because these data are not strong but they're certainly very suggestive, and I think that tells you that as so long as you look hard at an issue you can usually find a way to do something more effectively.

LISA So generally speaking can you nail down the process for us. How do you decide what are the best investments for the health dollar?

PETE It depends what you're looking at, if it's drugs then we have Pharmac, if it's vaccines then we use an expert committee, if it's me putting together a budget then we're using in essence a political process. So for example we're increasing funding a lot to improve children's dental health, some people would say that is not as important as doing something else, some people would say the government's got it right, so that becomes if you will a political decision, nearly always backed by strategies and discussion documents that go prior because our health system belongs to the public and the public has an ongoing never ending interest in it and are always involved in those decisions.

LISA Well in terms of the public then how much does lobbying play a part in how this money is going to be spent, I mean does the squeaky wheel get oiled? Again if you look at Herceptin huge public lobbying over that so how much influence does that have?

PETE I don’t want to be dismissive of anyone's feelings about Herceptin but self evidently it hasn’t been effective in this country yet although it's been effective in most other western nations, and I wouldn’t say that Herceptin was by any means a bad drug, it's just probably not yet giving us good value for money.

LISA Minister I just used that as one example, so generally speaking how much is that public lobbying and being out there in the public saying you want this causing perhaps political embarrassment, how much does that play in the choices that you make?

PETE I think that’s the measure of whether or not a government or indeed a Health Minister is managing his or her job very well, because ideally one should base these decisions on evidence, evidence based decision making for how we expend health. It's not perfect but in New Zealand we are very transparent and the prospect for lobbying delivering services to people who frankly in some cases don’t need them is a very common feature of the American health system and a very uncommon feature of the New Zealand health system, which is why I might say Americans spend about three times per capita on their health as we do and we live a little wee bit longer.

LISA Can I get a clear ruling from you, what is Labour's policy on free health care, free to what extent, how much is everyone entitled to?

PETE I think the answer is increasingly free so let me try and explain that. There is more surgical activity, medical activity, mental health activity, primary health activity, bla bla going on now in any area of the New Zealand health system than there was before the change of government, so clearly people are getting assistance that they wouldn’t otherwise have got. But wait, we do not provide for example adult dental care in this country, never have, we do not provide a bunch of stuff around what gets called appearance medicine, never have, and so there are always going to be limits, but within the core of the health provision that does exist in this country it continue to grow each year and it's quality continues to improve each year and it's still not good enough, it never will be good enough.

LISA So there's not the perfect health system waiting round the corner, you're admitting that?

PETE That’s exactly right we don’t do perfect, we set out to do better and better and better but I don’t think we should set out to do perfect, or to put it in a very crude way, people die, we reach the end of our lives, so you know that’s where the health system finds itself.

LISA How much does personal responsibility play in free health care, should we where things are clearly rationed, there's not enough to go around, people who don’t look after their health as well as they could, should they have the same access to health care as everybody else?

PETE That’s a really really big deal but I think if you don’t mind me saying I think you’ve framed it wrongly. What you’ve got in your mind is that if someone has not given up smoking that they should therefore not be eligible for treatment for lung cancer. I understand that proposition I personally would never go there. What we have to do as a country is more and more reduce our smoking prevalence, more and more reduce our obesity, more and more reduce the abuse of drugs, and improve our housing and in short all of the things that lead into a good healthy life are given good attention and then you will see New Zealanders live longer still, it's not as if our lives are not already becoming longer, but we can do better, we can do better.

LISA Well this morning we're talking about how to effectively spend our health dollars with Health Minister Pete Hodgson, we're going to bring our panel into the conversation now, going first to Marie McNicholas your question for the Minister.

MARIE McNICHOLAS – www.newsroom.co.nz

Yes Minister I wanted to pick up on your mention of going back to the drawing board, how extensive will that be in terms of the public Health and Disability Act, I mean would you go as far as looking at how many DHBs you’ve got, you’ve got 21, in the past the previous Minister didn’t like the number, would you bring that number down to get those economies of scale and efficiencies you’ve been looking at?

PETE No I don’t think there's much economy of scale to be got. So long as the DHBs collectivise their efforts, in the case in point we did have three DHBs collectivising their efforts and that’s kind of happening around the country, so if you look at the relationships between Otago and Southland they're getting closer, across the midland region they're getting closer and so on, and I think the idea of sort of going to five DHBs or ten or whatever would be hugely disruptive politically and all you'd end up is saving some board fees, you wouldn’t actually save much more so I think the much more important thing is to say 21's the number whether it's right or wrong, however those 21 DHBs must work more closely together, and for example in the case of Otago/Southland since that’s where I'm sitting at the moment, those two boards have got – they’ve got two boards they’ve got two chief executives and they have now only one management team, one chief financial officer and on it goes.

MARIE Yeah but on that issue Minister I mean you said in a speech a year ago, or last year that and I quote you 'that a more market approach to health reduces cost effectiveness and that generally cooperation improves cost efficiency over competition'.

PETE That’s right.

MARIE Why then for instance in the case of the Auckland District Health Board laboratory contract, were you expecting DHBs to harness market disciplines, more market disciplines to drive those costs down through a competitive tendering process. I mean it seems to be you're sort of saying one thing but in practice something else is happening and is this unrealistic?

PETE No we're talking cross purposes Marie and it won't take long for me to explain myself, I'm sorry that my speech has caused confusion. In the case of DHBs cooperation does improve cost effectiveness and competition is costly, so if you go back to the awful old days of Crown Health Enterprises and the RHA and the THA and the HFA and all of that do you remember, that was all a time when we were trying to use a competitive model to get our hospitals to compete against each other and it didn’t work. On the other hand if you're going to go into the market for laboratory services, go into the market for drugs, whatever it might be then of course you behave - with large companies in the private sector then of course you behave commercially, I mean otherwise you simply won't get cost effectiveness. So it's important to distinguish between secondary provision, hospitals competing against each other, and the ordinary old market where a hospital tries to go and buy something whether it's a motorcar or a drug, you will always have a competitive commercial edge to that.

MARIE Are you happy that there's sufficient expertise on the DHBs to be working in that environment?

PETE Well I must say that the court case of last week is a significant disappointment so let's not pretend that’s good news. Generally speaking DHBs are fairly sharp but they can get sharper if they get closer together. To go back to an Otago/Southland example, I'm sorry if I'm going on about those two boards, they are now looking at how much each of them pays for each of their consumables, this is their syringes or whatever, gosh they're finding that they're paying different prices so why don’t they between them just buy the cheapest in each case and then they can put that extra money towards patients, those sort of gains in some cases are still in front of us.

LISA Let's bring Chris Niesche into the conversation he's interested in the boards as well.

CHRIS NIESCHE – Business Editor, NZ Herald

Yeah so buying the cheapest syringes might be easy but if you look at something like the lab test decision that the Auckland boards made, are the boards actually sufficiently equipped to make what are very complex commercial judgements?

PETE Well I think what's happened is that laboratory decisions have been made up and down the country over the past two years, I can think of about eight that have not gone to court, that have worked and where the new contract's been embedded, where money has been saved and that money's gone on to patient care. This one turned nasty and I think it'll be in part because of its size. Frankly you’ve got a contract approximating half a billion dollars people are gonna reach for their Queens Counsels are they not? On the other hand it's also clear, because I've read this judgement as you might expect, I read it very closely, and I absolutely accept it in case there's any doubt about that, but the judge has raised a couple of issues one of which is about conflict of interest and his findings are very clear. The other one however about the obligation to consult he may have, I'm not sure yet, he may have raised the bar on consultation as he's entitled to and we need to be quite reflective about that and see whether or not that is in fact the case, it seems in early reading that it might be, consultation's no bad thing.

LISA Minister what you're saying there though in terms of reviewing what the consultation requirements are, that could affect ever single contract within the DHBs in the country.

PETE Well I don’t think you take a judgement and then sort of apply it retrospectively to contracts that were signed last year or last century, but I do think that going forward we need to be very mindful of that judgement and we need to reflect on it to see whether or not our consultation processes are adequate, if they're not we are vulnerable to the courts and that’s not good enough.

LISA You talk about the size of this contract encouraging everybody to bring their Queens Counsel to the table because obviously it's a lot of money, how long then do you think, how long is it going to take to resolve this issue if everybody is involving their lawyers?

PETE What's happening right now Lisa and I'm gonna be a bit mysterious about this because there are negotiations going on at the moment, there were meetings yesterday, there will be more meetings on Monday, there are people writing bids over the weekend, and I won't of course give detail I'm not myself part of those negotiations in any case but I do think we need to leave the parties alone for a few days.

LISA Alright the other thing is they were doing this to save 15 million dollars why was it that it sort of took so long to identify that there was this money to be saved, you’ve described this as a mature sector, how much more money is there out there that can be saved in the same way?

PETE Well I don’t think the community laboratory services is a mature sector, I think that the technology in community laboratory services is improving a lot all the time and that plus – you know that'll be part of the reason for the huge reduction in costs that would have been secured had the court case gone in the other direction, and that’s also happened around the country, I mean right around the country people have been taking out two million, three million, one million, seven million, up and down the country, and all of that money's going back to health and I'm delighted.

LISA Alright, thank you very much for joining us this morning Health Minister Pete Hodgson.

THE COUNTRY THAT LEE BUILT

LISA Lee Kuan Yew is the founder of modern Singapore. During his 30 years as Prime Minister he helped transform the former British colony into one of the world's wealthiest nations. Mr Lee continues to wield his influence as a Senior Minister in the Singaporean government, it's now led by his son Prime Minister Lee Hsien Loong. Lee Kuan Yew is in New Zealand for meetings with the Minister of Finance, Michael Cullen, and National leader John Key. I spoke to Lee Kuan Yew yesterday and began by asking him what we can do to maintain peace in South East Asia.

MR LEE KUAN YEW – Singaporean Mentor Minister

Well it's been peaceful because there has been overall balance of forces in the region with the United States providing a security umbrella that’s prevented major collisions, and because everybody got on to the development track, that means you want to grow that means you must maintain some stability and have good relations with major trading partners abroad with the US, Europe, Japan, now India and China, and between the Asean countries themselves. If you break that virtual cycle and there's no development and everybody thinks it's a zero sum game let's eat up the other fellow's food budget, you run into a very troublesome period, but I think we've escaped the misery of the Balkans.

LISA You would have seen this week that our Prime Minister is in Washington and there's evidence of a warmer relationship there, so what impact does that relationship have on South East Asia?

MR LEE It is important to have the United States engaged across the Pacific. We've now got abiding economic and security interests so north in Korea, South Korea, Japan, Asean, Australia, New Zealand and the Pacific Islands, I think the United States has to maintain a certain capability to ensure that the region is not disrupted to unnecessary turmoil.

LISA And do you think that connection is through the likes of New Zealand and Australia?

MR LEE Well I think ANZUS was a very important connection, I mean without that American connection anchored in ANZUS in the south and Korea – South Korea and Japan in the north and the Philippines in the middle and Thailand we might have had a different Asia Pacific.

LISA Let's talk about China, what do you think China's role ultimately will be in the region?

MR LEE Well ultimately depends on your timeframe, ultimately if you mean 20 – 10, 20 years, I think her role is to be a stakeholder a player within the rules and to grow with foreign dollar investments bringing in technology, management expertise, and markets open to them and they will grow at about 8, 9, 10% a year. I think they see that in their interests when they talk about peaceful development or peaceful rise.

LISA So by 2050 do you think China will be a dominant economic and political force in the region?

MR LEE I'm not saying they're going to be a dominant political force, I don’t think by 2050 they can overtake American technology or American capabilities, that will take them more than 30, 40 years, I mean it will take them a good part of this century.

LISA How do small countries like New Zealand and Singapore stop themselves being overshadowed by China?

MR LEE No I don’t think China wants to overshadow us, I mean China has got her preoccupations and her preoccupations are maintaining good relations with the US so that American markets are open, American investments flow in with new technology, not start of the art but upgrading theirs, good relations with Japan for similar reasons. Japan today is one of their biggest trading partners and the Japanese surplus has disappeared into a deficit with China. They want good relations with Europe, with Russia, with the Asean countries, they’ve worked out a free trade agreement with the Asean countries and they're offering one to India. So they want friends all around the perimeter, they just want to grow because that’s the way they will grow best, peacefully they hope and continuously.

LISA With our countries, with Singapore and New Zealand how's that relationship changed over the years?

MR LEE Well we have got more in depth relationship. It started with the Malayan insurgency when you sent troops to help the British to put down the communist insurgency, and you maintain your forces in the region, in Singapore right up to – I can't remember the exact date – 81, so you have a generation of New Zealanders in government and in the armed forces who are familiar with us and we've maintained those links and we are training here, we do our artillery training here because if we're fired on in Singapore we'll be over the border and that’s a comfortable relationship within people who know each other for a long time.

LISA So over that time how's New Zealand's understanding of Asia developed because in the past we have been criticised for not knowing Asia well enough?

MR LEE Asia's also changing, so the understanding is a continuing process, the Japanese that you now see are not the same Japanese at the end of the Second World War, so too the Koreans, their societies have undergone a transformation, and similarly all the countries in the region including Singapore are going through a similar change, process of change, a younger generation differently educated, differently oriented to the world, exposed to the world, and it's a continuing relationship. I mean I've not been to New Zealand now for eight years and I find significant changes, yes I meet same old friends, I can see positions have moved, attitudes have changed with the global background changing, and it will continue to change and I'm quite sure if I come back in another eight years I'll find a differentiated New Zealand. I mean I didn’t find it so open to immigrants as you are now, I was in Queenstown and I stayed in a resort which is owned by Japanese, built up by Japanese and a whole host of – it's a multi national effort.

LISA Well you speak of that multi culturalism, and Singapore is a very successful multicultural society, what is the secret to maintaining harmony in a diverse society?

MR LEE I'm not going to say that we are a successful multi national society, what I'm prepared to say is that we have done better than most in muting the differences and the frictions that are inevitable with people living close together in a city sharing not very many similar ways of life, food, religions…

LISA So how do you do that?

MR LEE Well it's taken a good part of nearly 50 years. We decided to break up the enclaves. The British used to have us located – Chinese of a certain clan in one area, Malaysians in certain Malay settlements, Indians in certain Indian centres, and we were like fish in an aquarium with different degrees of salinity and we'd meet occasionally in the workforce. As we rebuilt the city and housed everybody in high rise they all balloted for their neighbours, it's the luck of the draw. So Malays Chinese Indians Pakistanis Eurasians…

LISA Living together?

MR LEE Yes they live together, go to the same schools, same playing fields, same shops, same markets, but otherwise we have learned to live with each other.

LISA You once said the most important thing that a leader can do is to find their successor, why is that so important?

MR LEE Because if you leave it to chance then whatever you’ve done may come undone, it's important that somebody knows how it was done why it was done that way and how it can continue to be done in different sets of circumstances but sticking to primary principles.

LISA Thank you so much for your time it's been pleasant speaking to you, thank you sir.

LISA There you have it, the former Prime Minister of Singapore Lee Kuan Yew. An interesting comment there Marie at the end about one of the important things that a leader can do is find his successor.

MARIE Well you know National had an unusual form of succession planning it was fairly bloody wasn’t it? The Greens are doing very well I mean they have a very civilised and sort of transparent way of planning what they're gonna do next and we saw that democratically exercised with the vote last year. The Nats are actually despite all the strife of last year quite well placed now they’ve got quite a promising group there that could step in if things went wrong for Mr Key, but Labour's a bit difficult isn't it we sort of speak in hushed tones about what would happen to the Prime Minister who would replace her, so yeah it's a mixed bunch really.

CHRIS Yeah I thought it was interesting he said you have to pass on how it was done and how it can be done, you do wonder if Helen Clark has passed on that body of political knowledge to anyone don’t you.

LISA Yeah he was talking a lot there about also China and it's economic success and rise and said China is looking for friends.

CHRIS Well that’s a huge opportunity for New Zealand isn't it and we're seeing China and New Zealand moving towards a free trade agreement, China obviously wants a free trade agreement with a developed economy a free market economy a democracy because it will be able to hold that up to the rest of the world it'll say what it's achieved and I think there's probably more likelihood of New Zealand achieving free trade with China than with the US at this stage.

LISA And what about his comments about the US and how their presence has ensured continued peace in the area, what role does that leave us to play because we supposedly have this warmer relationship with America and also a warm relationship with China, does that give us a bit of leverage do you think?

CHRIS Perhaps a bit but it will of course obviously always be a support role and the amount of leverage New Zealand has will obviously be limited and I think as far as the US goes I think despite the warmer relationship the nuclear ships ban is always going to be an issue.

LISA I know you’ve been watching the Washington visit this week, did we really get anything out of it with the Prime Minister meeting?

CHRIS Well it looked like there was perhaps a bit of a warmer relationship but any hopes of a free trade I don’t think have been boosted any hopes of a free trade agreement, I think New Zealand's still at the bottom of the pile. When the US looks to make free trade agreements it looks at two things it looks at what the region is and the security implications whether it needs to shore up an ally and it also looks at what a free trade agreement with the country would do for the US's economy and New Zealand falls to the bottom in both of those areas.

LISA Thanks you very much.

FINAL THOUGHTS – GUEST COMMENTATORS

LISA Right turning to our panel now for their final thoughts of the day, going first to Marie McNicholas. In the health area there we heard Pete Hodgson basically admitting limited resources, we've gotta spend them the best way they can, has Labour actually captured the ground when it comes to health?

MARIE Well you know I see things as a political reporter and you know there's nothing more political than health really, and deficiencies in the health system are always gonna be with us but what is interesting about Labour is that they have locked a lot of things in and so that it's going to be very difficult if there's a change of government for National to unravel that, and they’ve done it with other polices like the Cullen Fund and Working for Families and so the issue really is going to be I think is what would National do differently, and it's not clear what they could do differently because that centre ground, well Labour's direction is quite embedded now and it's going to be difficult to unravel without causing more instability.

LISA Alright Chris business on your mind really the US visit.

CHRIS Yeah the US visit ironically I think this actually highlighted the need for New Zealand to continue to engage with Asia, any free trade deal with the US is just so far in the future that it's not really worth worrying about too much, but meanwhile in Asia there are actual concrete trade gains to be made through free trade agreements with the smaller countries which of course is where a lot of the world's growth is coming from anyway.

LISA Thank you very much to our panel this morning.

ENDS

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