CTU
10:29 AM (4 minutes ago)

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Vote Health needs an extra $1.3 billion just to stand still, research reveals

Source: CTU

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Bill Rosenberg, Economist and Policy Director for the New Zealand Council of Trade Unions (CTU) and Lyndon Keene, Director of Policy and Research, for the Association of Salaried Medical Specialists (ASMS) have conducted a detailed analysis of what the government needs to allocate to health spending in the 2019 budget. This is the 10th year such analysis has been completed in the lead up to Budget Day.

"Vote Health’s operational expenses would need to rise by an estimated $1,303 million, or 7.7%, from $16,972 million in the 2018 Budget to $18,274 million in 2019/20, to maintain the current levels of service. The $1,303 million is simply to keep up with population and cost increases including pay settlements," Rosenberg said.

"Kiwis need a health system which is capable of meeting their needs. This Government has some initiatives which could make a meaningful difference. It has made better mental health services an objective of its Budget. There is abundant evidence that our mental health services have been run down, so this is particularly welcome. It will require an additional several hundred million dollars of funding per year."

"But there are other areas of our health services that need restoration of funding. We calculate that to restore funding to the level it was at in 2010 in real terms, taking account of rising costs, population growth and the aging population, would require the Government to allocate at least $20.2 billion - an additional $3.2 billion. So on Budget Day we will be wanting to see how the Government has prioritised its spending to make sure all Kiwis are getting the healthcare they need," Rosenberg said.

Key points from the analysis are below. Here is the full report and accompanying spreadsheet.

Key points

- The Health vote’s operational expenses would need to rise by an estimated $1,303 million or 7.7 percent, from $16,972 million in the 2018 Budget (the base used for all these increases) to $18,274 million in 2019/20, to maintain the current levels of service. The $1,303 million is simply to keep up with population and cost increases including the various pay settlements (but note the proviso below regarding certain other pay increases). However this is likely to understate the need depending on how costs rise in the current financial year as a result of the impact of collective employment agreement settlements and increased staffing that will take spending above the 2018 Budget.

- For the Health vote to regain the spending power of the 2009/10 Health vote and pay for the initiatives and additional costs announced over that time, it would need to increase by $3.2 billion in the 2019 Budget to $20.2 billion.

- The District Health Boards’ (DHBs’) combined budget needs to rise from $13,236 million to $14,282 million, requiring an increase of $1,046 million, or 7.9 percent, to maintain the current level of DHB services and cover population and cost increases. Any new or expanded services or costs would be in addition to that. Note that this does not include Care and Support Workers’ nor Mental Health and Addiction Support Workers’ pay equity funding which are accounted for separately.

- The appropriations for national health services such as National Child Health Services, Disability Support Services and Mental Health Services (which are funded directly by the Ministry) will need to rise in total by $250 million, or 7.1 percent, to maintain service levels. Any new or expanded services or costs would be in addition to that. Note that this includes pay equity funding for Care and Support Workers’ as approved in 2017 and Mental Health and Addiction Support Workers’ as approved last year, before distribution to DHBs.

- Funding for the Ministry of Health will need to rise from $207 million to $213 million to meet increased costs.

- Additional to this are expectations of the Budget. For example, one of the objectives of the Budget is "Supporting mental wellbeing for all New Zealanders, with a special focus on under 24-year-olds" which almost certainly will include a response to the Mental Health Inquiry, called as a result of the high public concern at the state of mental health services.

- We estimate that $515 million will be needed for pay settlements such as those for nurses, midwives, allied staff and doctors, and it does not include any pay increases for management, for which we could not obtain data. Some of the claims are not yet settled. We have included estimates for those we are able to calculate, but we are not able to estimate the value of a number of pay equity claims such as the New Zealand Nurses Organisation nurses and midwives claim which the DHBs have agreed to progress.

- Population pressures are projected to increase costs by 2.33 percent for the year to June 2020. This takes into account health costs of different age groups.

ENDS

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