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

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

“Vote Health’s operational expenses would need to rise by anestimated $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 increasesincluding pay settlements,” Rosenberg said.

“Kiwis need a health system which is capable of meetingtheir needs. This Government has some initiatives which could make a meaningfuldifference. It has made better mental health services an objective of itsBudget. There is abundant evidence that our mental health services have beenrun down, so this is particularly welcome. It will require an additionalseveral hundred million dollars of funding per year.”

“But there are other areas of our health services that needrestoration of funding. We calculate that to restore funding to the level itwas at in 2010 in real terms, taking account of rising costs, population growthand 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 wantingto see how the Government has prioritised its spending to make sure all Kiwisare 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 wouldneed to rise by an estimated $1,303 million or 7.7 percent, from $16,972million in the 2018 Budget (the base used for all these increases) to $18,274million in 2019/20, to maintain the current levels of service. The $1,303million is simply to keep up with population and cost increases including thevarious pay settlements (but note the proviso below regarding certain other payincreases). However this is likely to understate the need depending on howcosts rise in the current financial year as a result of the impact ofcollective employment agreement settlements and increased staffing that willtake spending above the 2018 Budget.
  • For the Health vote to regain the spending powerof the 2009/10 Health vote and pay for the initiatives and additional costsannounced over that time, it would need to increase by $3.2 billion in the 2019Budget to $20.2 billion.
  • The District Health Boards’ (DHBs’) combinedbudget needs to rise from $13,236 million to $14,282 million, requiring anincrease of $1,046 million, or 7.9 percent, to maintain the current level ofDHB services and cover population and cost increases. Any new or expandedservices or costs would be in addition to that. Note that this does not includeCare and Support Workers’ nor Mental Health and Addiction Support Workers’ payequity funding which are accounted for separately.
  • The appropriations for national health servicessuch as National Child Health Services, Disability Support Services and MentalHealth Services (which are funded directly by the Ministry) will need to risein total by $250 million, or 7.1 percent, to maintain service levels. Any newor expanded services or costs would be in addition to that. Note that thisincludes pay equity funding for Care and Support Workers’ as approved in 2017and Mental Health and Addiction Support Workers’ as approved last year, beforedistribution to DHBs.
  • Funding for the Ministry of Health will need torise from $207 million to $213 million to meet increased costs.
  • Additional to this are expectations of theBudget. For example, one of the objectives of the Budget is “Supporting mentalwellbeing 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 healthservices.
  • We estimate that $515 million will be needed forpay settlements such as those for nurses, midwives, allied staff and doctors,and it does not include any pay increases for management, for which we couldnot obtain data. Some of the claims are not yet settled. We have includedestimates for those we are able to calculate, but we are not able to estimatethe value of a number of pay equity claims such as the New Zealand NursesOrganisation nurses and midwives claim which the DHBs have agreed to progress.
  • Population pressures are projected to increasecosts by 2.33 percent for the year to June 2020. This takes into account healthcosts of different age groups.
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