Health Underfunded By Over $250 Million

An analysis by the CTU of the funds allocated to Health in the Budget on 24 May estimates that health was underfunded by $254 million, based on its assumption of 2.0 percent inflation in the year to June 2013. On Treasury’s forecast of 2.7 percent inflation, it is underfunded by $290 million.

“Some reductions in services and increased user charges have already been announced by the Minister, but these will not be enough to meet the shortfall”, says CTU Economist Bill Rosenberg, releasing the post-Budget analysis. “Further cuts and user charges seem inevitable. There may be some relief through genuine cost reductions and productivity gains, but it seems unlikely that these will be anywhere near sufficient to cover this kind of shortfall.”

“Our pre-Budget analysis found that $506 million would be needed ­just to keep up with rising costs, population growth, and ageing”, said Rosenberg. “Given that operational funding increased by only $337 million between Budget 2011 and Budget 2012, that is a $169 million shortfall, without any new initiatives. But the Minister announced $85 million in unfunded 'initiatives’, so the total shortfall is $254 million.”

For District Health Boards (DHBs), Rosenberg estimated the shortfall was $88 million, or $116 million on Treasury’s inflation forecast. The pressure on DHBs will also lead to some combination of service deterioration, reductions in services, new or increased user charges, or increased DHB deficits.

National services, such as Child Health Services, Emergency Services, Māori Health Services and Public Health, were $143 million short, though the effect will vary from service to service. National Disability Support Services, the national service that appeared to receive the largest share of “initiatives” the government announced, is estimated to be underfunded by $11 million.

“The Minister also announced $47 million in ‘savings’, of which about half ($23.4 million) were from the announced increase in prescription charges and the lower asset value threshold for support for people going into residential aged care. A little of the remaining $23.9 million of ‘savings’ come from identified efficiencies but we can only assume that the others, because they are not identified, come largely from reductions in service or pressures for as yet unknown additional user charges."

The analysis the CTU carried out prior to the Budget assumed that CPI would rise by 2.0 percent in the year to June 2013, wages would increase by 1.7 percent (1.6 percent in the DHBs), and an increase of 1.56 percent for the growing and ageing population. It took into account $4.7 million in savings as a result of restructuring of some Health agencies and $49 million additional costs as a result of employer Kiwisaver contributions being charged to the Health agencies instead of the State Services Commission. It is available at http://union.org.nz/health-
working-papers.

ENDS

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