ACT leader David Seymour has called for a fundamental change in how New Zealand funds healthcare, urging the adoption of compulsory health savings accounts (HSAs) for all citizens.
Speaking at the Financial Services Council conference in Auckland on Wednesday, Seymour argued the current tax-funded system was no longer sustainable. “There has to be change,” he said. He said that if New Zealand wants to avoid running into the iceberg of rising health and pension costs, it has to look at how other countries pay for healthcare.
The proposal draws inspiration from Singapore’s Medisave scheme, in which every working citizen contributes to a personal medical savings account, The Post reported. The government then tops up the accounts of the poor and chronically ill, while catastrophic costs are covered through insurance.
Seymour said the philosophy was simple: “When people control their own accounts, they are more likely to look after themselves.” He claimed the model would drive personal responsibility and reduce waste in the health system.
Under ACT’s vision, HSAs would be funded through tax cuts, with the government acting as an insurer of last resort. Employers could also contribute as part of remuneration packages. Seymour compared the system to KiwiSaver, saying it could create a vibrant market for health products.
Former ACT leader Sir Roger Douglas and University of Auckland professor Robert MacCulloch earlier outlined a similar concept, proposing the first $60,000 of income be tax free, with compulsory savings directed into health and pension accounts. They estimated potential annual savings of more than $12 billion.
However, tax expert Terry Baucher cautioned that such changes would be “quite a radical proposal which would be quite a shock to the system.” Critics argue it could also require a significant expansion of private healthcare.
Seymour said his proposed system would be phased in gradually and stressed that alternatives such as the German or Dutch social insurance models could also be considered.
“It’s becoming increasingly clear that major reform is what’s needed,” he told the conference.
Research on Singapore’s medical savings accounts suggests both opportunities and risks. A 2025 study published in the Journal of Economic Behavior & Organization found that top-ups to Singaporean accounts led to a 13% rise in monthly medical spending, with a marginal propensity to consume estimated at 0.6.
The study noted that while accounts increased access to care – particularly for people with low balances – they also encouraged higher immediate spending, raising concerns of “moral hazard.” According to researchers, individuals often prioritised present healthcare consumption over long-term savings, potentially undermining the accounts’ self-insurance purpose.
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