The British Chancellor, Gordon Brown, recently announced a huge increase in the health budget, and tax increases to pay for it. After five years of extra health funding, Tony Blair's ministers are grumbling that health seems to be a bottomless pit. Britain doesn't have that problem by itself. France, Germany, Canada, Australia and New Zealand are all grappling with soaring demand. Late last year Michael Cullen foreshadowed a further $3 billion for health.


Demand for expensive health services has always risen more rapidly than the revenue growth needed to pay for them. Extra tax money never lasts long: minutes after Gordon Brown's announcement, nurses demanded fresh pay rises. Moreover, human nature being what it is, services provided cheaply at the point of consumption are often wasted. Nowhere have governments found it easy to meet such challenges. Preventing bureaucratic capture, and producing a pricing formula that meets with political acceptance, are core health problems in all advanced countries.


When the state first became involved, the population's health improved markedly. But a tussle between providers and political needs soon developed. In modern times general practitioners have been the point of entry to the health system. They always wanted to retain their professional freedom although they happily helped themselves to subsidies after 1941. As demand for services rose, they minted money. Soon there weren't enough doctors; bright kids fought to enter medical school. Pharmacists were advantaged too. Doctors sent patients down the road with a prescription for which the state also paid. New medicines poured on to the market as manufacturers and scientists cashed in on the state's beneficence. Other health professionals like physiotherapists, practice nurses and midwives later joined the happy health providers' club, the state paying some or all of their costs. When I became Minister of Health in 1984 there were more than 100 organisations dependent on the Health Department.


Yet, despite ministers' best intentions, it has never been easy to ensure equitable access to public health services. In areas where there is a high concentration of Pacific Islanders, for example, sick people bypass GPs and present at hospitals, sometimes in an advanced state of illness. This causes unnecessary cost. Efforts to persuade them to use GP services usually don't succeed. Immunisation projects and Plunket's programmes have always found it hardest to penetrate low income areas. Trying to angle hospital services their way proved impossible, usually because of inadequate data. In my time public hospitals couldn't even work out the average cost of a standard operation.


Much attention has always focused on access to GPs. While we needed to slow rising costs overall, how could we ensure that the poor, whose needs are often greater, could afford to see a doctor? I encouraged doctors to accept larger subsidies in return for lower direct fees for children, and also established union-based health clinics. Later ministers pushed further. Yet, as we know from the free-to-under-six programme, middle income parents use it more than the poor. Not surprisingly, GPs have increasingly located in middle and high income areas; only missionaries go to Otara or Waitangirua. Cost restraints and the rise of a beneficiary culture caused GPs' incomes to decline in poorer areas. This, too, is a trend we share with Britain.


How to match adequate service coverage with reasonable provider remuneration and lifestyles is a modern social engineer's nightmare. Over twenty years, experiments were tried here and overseas. The state paid practices based on lists of patients. Incentives were aligned to encourage doctors not only to treat illness, but prevent it as well. Group practices where nurses and Maori and Pacific Island specialists supplement GPs can help reduce pressures on doctors, thereby preventing early burnout. Evidence gathered has been reasonably encouraging.


Building on this, Health Minister Annette King recently announced her intention to establish Primary Health Organisations (PHOs), starting in areas of greatest need like Northland, Gisborne, South Auckland and Porirua. Doctors will individually contract with not-for-profit organisations that offer various forms of remuneration. Patients will be identified from a central register of those in greatest need. But will the poor grasp these opportunities? Some will, and there will be improvements in their health. But don't expect miracles. Many won't bother until they are obliged to take greater responsibility for their lives. If I were a potential PHO doctor in a poorer area, I'd choose a salary rather than a fee for service to those patients who present. PHOs, of course, will always need doctors' good will. They are bound to find the bureaucracy annoying, although the current sufficiency of doctors, many from South Africa, will encourage some to join. But two things are predictable: poor health in low-income areas will remain, and Mrs King's costs will run ahead of her PHO budget.


Whatever happens, Gordon Brown's tax increases must be avoided. They always frighten the goose whose golden eggs we need to sustain the welfare state.


Michael Bassett was Minister of Health 1984-87.