OTHER AGENCIES: APPROPRIATE CORPORATE FORM AND FUNCTIONS OF: NZ BLOOD SERVICE; PHARMAC; HEALTH BENEFITS LTD; NATIONAL HEALTH COMMITTEE; RESIDUAL HEALTH MANAGEMENT UNIT

RESIDUAL HEALTH MANAGEMENT UNIT (RHMU)

Objectives of RHMU
42. RHMU was established as a Crown Entity (Statutory Corporation) in 1993 to manage assets and liabilities of former Area Health Boards that for various reasons were not, at the time, assigned to Crown Health Enterprises. When established, it was considered that the RHMU functions would all be of relatively short duration. In fact, the sues involved were more complicated than anticipated and RHMU continues to discharge some of its original functions as well as some additional functions.

    Current role of RHMU

43. Statutory and non-statutory functions currently undertaken by the RHMU are:
    1. residual asset management (management of long term property leases);
    2. contingent liabilities (covers legal liabilities of former area health boards);
    3. historical debt (managing the debt of the former area health boards);
    4. transitional banking (transitional lending facility for HHSs - lender of last resort for HHSs unable to secure private sector finance);
    5. bankability (facilitating and promoting provision of private sector debt financing);
    6. disposal of surplus HHS property.

44. Some of the statutory functions of the RHMU have ceased or diminished. The severance recovery function (review of cases where severance was paid to individuals as a result of the 1993 reforms, who then re-engaged in the sector) and patient frozen funds has expired, whilst the activity around residual area health board (AHB) management, contingent liabilities and AHB debt management has diminished, but still needs to be managed. The demand for transitional banking facility has also declined.

    Inter-Agency Relationships

45. RHMU operates under the direction of a three-member board appointed by the Minister of Health. RHMU uses contractors and outsourcing arrangements rather than establishing a more permanent presence. Its performance monitoring relationships are with the Ministry of Health and Treasury. It has relationships with HHSs over bankability and disposal of surplus property issues.

    Contractual and Funding Arrangements

46. Funding is through a separate Non-Departmental Output Class appropriation within Vote Health and lending as a capital contribution through Vote Health Service Providers. Appropriation is to some extent offset by residual rental income and surpluses on the provision of HHS debt.

    Monitoring and Audit Arrangements

47. Primary accountability rests with the Minister of Health and, for HHS debt issues, the Minister of Finance.

48. Performance Agreements are set within the framework of the Public Finance Act 1989. The Ministry of Health monitors RHMU's Management Agreement and Treasury monitors debt issues.

    Future Function of RHMU

49. Current RHMU functions required in the short term:
    1. Managing AHB residual assets.
    2. Managing AHB historical debt.

50. Current RHMU functions likely to be required in the medium/long term:
    1. Managing AHB residual liabilities.
    2. Disposal of surplus HHS property.
    3. Transitional banking and bankability.

51. RHMU undertook an internal review of roles and functions prior to RHMU being given the role of disposing of surplus HHS property and the Government's announcements regarding the establishment of DHBs. Their review concluded that it was appropriate to begin planning for the dissolution of RHMU, or at least the significant revision of its roles and responsibilities.

52. However, Officials consider that there is little benefit in considering disestablishing RHMU at a time when Government is likely to require the facility to manage residual issues arising from the establishment of DHBs. Officials consider that it is beneficial for RHMU to continue to undertake the functions outlined above. A review of RHMU's role and function will be necessary once DHBs are established and the full extent of RHMU's ongoing role is clear. Officials therefore propose that a review of RHMU roles and responsibilities be undertaken before 30th April 2001.

53. The management of contingent liabilities from the HFA and any residual HHS asset and liability issues need further legal advice, along with other policy decisions before a final decision is reached.

54. Officials recommend that:
    1. The location of specific HHS liabilities are considered as part of the 30th June report back on the process for establishing DHBs. (NB The process for establishing DHBs is not yet finalised.)
    2. HFA's contingent liabilities are considered as part of the Ministry of Health and HFA change management process.
    3. Consideration should be given to whether there should be a time limited severance recovery function, to recover severance paid to those affected by changes in the sector, who then re-engage in the sector, as there was following the last round of sector changes. Officials propose that this issue is also considered as part of the 30 June report back.

    Governance Options

55. It is proposed that RHMU remain a Crown Entity at this time because:
    1. the management of contingent liabilities must be seen to be carried out free of political interference;
    2. the management of assets and property leasing is an activity that is readily "contractable", therefore it does not need to be undertaken by a Government department;
    3. of the need for separation of legal risk from the Crown;
    4. there is merit in signaling independence of the Crown in terms of the bankability function so that the private banking sector maintains confidence with investing in DHBs;
    5. RHMU has an established track record as a high performing organisation that has competently managed down residual activities and fiscal risk to the Crown.

56. There may be future roles that need to be picked up as a result of recommendations from the investment workstream.

    Costs of proposal

57. The proposal to continue RHMU will be fiscally neutral. Further consideration of costs will be necessary if there are any additional functions conferred on the RHMU.

    Legislative implications

58. The legislative implications of the proposals made here will depend on decisions made by Parliamentary Counsel further down the track. The Health Reforms (Transitional Provisions) Act 1993 may remain, with any new functions in the new legislation. The current legislation does not prevent the RHMU from taking on new functions that are conferred by the Minister.

    NATIONAL HEALTH COMMITTEE (NHC)

    Background

59. The Core Service Committee was established as part of the health reforms in 1993 and tasked with getting better definition around what services should be publicly funded and under what circumstances. The Minister of the day wanted to ensure that there was a vehicle for consultation with the public on issues that were essentially about rationing publicly funded health services. The legislative mandate reflected the Minister's view that it was an important role. The consultation role of the Committee also addressed criticism that there had been minimal consultation on the health reforms.

60. Originally, the Committee was commonly known as the "Core Health Committee". This reflected the original idea that the Committee would come up with the "core list" of services that would be publicly funded and anything that fell outside the core would not receive public funding. The Committee rejected the list approach fairly early on, and instead focused on building public consensus on specific services. They became known as the "National Health Committee" following a 1996 amendment to the Health and Disability Services Act 1993. They were also given the additional function of covering public health services.

    Current role of NHC

61. The Committee's current functions as specified in the legislation are to advise the Minister on:

    "the kinds and relative priorities, of public health services, personal health services and disability services that should, in the committee's opinion, be publicly funded and other matters relating to public health including personal health matters relating to public health and regulatory matters relating to public health and such other matters as the Minister specifies by notice to the Committee".

62. The terms of reference of the NHC are as follows:
    1. provide an independent assessment to the Minister of Health of the quality and mix of services that should, in the Committee's opinion be publicly funded;

    2. advise the Minister on measures that would deliver the greatest benefit to the health of the population, and groups of the population, with particular regard to groups at risk or disadvantage, having regard to available resources. Inter-Agency Relationships

63. The following diagram and discussion outlines how NHC and other health sector agencies relate to each other:
    
    Contractual and Funding Arrangements
    64. Funding is through the Ministry of Health's budget and is not subject to any Ministry reprioritisation process.

        Monitoring and Audit Arrangements

    65. A Memorandum of Understanding between the Ministry of Health and NHC clarifies roles and establishes expectations.

    66. Budget responsibility and reporting to the Ministry of Health rests with the NHC Director; responsibility for the performance of the NHC work programme sits with the NHC Director.

    67. Legislation requires NHC to report to the Minister on its advice on matters regarding types and priorities of services.

        Future Role of NHC

    68. The current NHC functions are deemed necessary under the new health arrangements because:
        i. there will be continued debate about the appropriate mix and coverage of health and disability services. Indeed, establishing DHBs may increase the tension between providing services that are responsive to local populations and ensuring that there is some equity concerning national minimum service coverage; and

        ii. Government remains concerned over ensuring the greatest benefit within available resources to the health of the population, and particularly to groups at risk or disadvantage.

    69. The beneficiaries of NHC advice are:
        1. The Minister of Health/Parliament - source of independent advice that is credible both with the public and the sector.
        2. The Ministry of Health - assist with getting good definition of services and rationing decisions.
        3. The DHBs - provide information regarding key issues and best practice on either specific services and/or specific population groups which they will need to address.
        4. Public/consumers - information on what services they ought to receive.
        5. Health professionals - evidence based information to increase quality of clinical decision making.

    70. It is proposed that NHC functions continue and that it:
        1. provides an independent assessment to the Minister of Health on the quality and mix of services that should, in the Committee's opinion be publicly funded, within the context of the New Zealand Health Strategy;

        2. advises the Minister on measures that would deliver the greatest benefit to the health of the population, and groups of the population, with particular regard to groups at risk or disadvantage, having regard to available resources.

        Location of Current NHC Function

    71. The key question for Ministers is where the NHC's current function is best located e.g. whether the function should be carried out by NHC or whether the NHC is disestablished and its function be performed by another entity (i.e. Ministry of Health, DHBs).

    72. The advantages of the NHC continuing to provide its current functions are that:
        1. the public and providers engage in the NHC consultation processes and advice because they perceive the NHC as independent from the Ministry.
        2. the NHC have developed expertise and a successful track record in undertaking their functions.
        3. the NHC can provide advice regarding the performance of the sector which the Ministry and DHBs may find difficult to proffer because it could be inherently critical of their own performance.

    73. The disadvantages of the NHC continuing to provide its current functions are that:
        1. there is a risk that the NHC will duplicate work that is or should be undertaken by other agencies i.e. the Ministry of Health and DHBs who also have an interest in influencing the kinds and relative priorities of publicly funded services;

        2. DHBs engagement with their local populations regarding funding decisions may reduce if DHBs consider that the NHC function as a substitute for local consultation;

        3. the independence of the committee means that poor performance is not easily sanctioned; and

        4. an independent entity will publicly provide that Government may not choose to follow.

    74. It may be possible, however, to minimise these risks through clear specification of roles, responsibilities and accountabilities of the Ministry of Health, DHBs and the NHC.

        Requirement for Legislation

    75. Should Ministers agree that the NHC continue to provide its current function, the further question is whether this function needs to be included in legislation. The benefit of having the NHC function in legislation is that it clearly established the NHC as an independent, ongoing function.

        NHC Comment

    76. The NHC consider that the current legislative provisions have been flexible enough to allow their role to evolve in response to changes in the sector. The NHC consider that its statutory status has helped them get the co-operation of health providers and the public to undertake their role.

        Conclusion of Officials

    77. There are risks associated with having the NHC mentioned in legislation. These include:
        1. Legislation is always inherently constraining which means that the Minister would not have the flexibility to alter the functions of the committee.

        2. There could be a potential conflict between the role of the NHC as specified in the legislation and the evolving nature of roles and relationships within the health sector and the emerging responsibilities of DHBs.

        3. Putting the NHC into legislation could create confusion in the public's mind about the status of its advice vis a vis all the other advice to which the Minister is and should be exposed.

    78. The role of the Committee has evolved over time. It was clear that the original role of the Committee - to specify core services that should attract public funding - had a stronger need for legislative based functions. This was because their advice could potentially have been the basis for decisions on what services, under what conditions would receive public funding. The Committee's role today does not require the same legislative mandate; its role is much more of an influencer of decisions regarding publicly funded health services.