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Government responds to increasing health needs with spin

“The Government’s media spin on the Health budget is hiding some inconvenient truths about what’s happening with our public health services,” says Council of Trade Unions economist Bill Rosenberg.

A post-Budget analysis of government health expenditure prepared by the CTU and the Association of Salaried Medical Specialists (ASMS), released today, shows a continuing trend of funding cuts in real terms since 2009/10, when the first such analysis was done. Key points are attached to this release.

“We estimate that the 2017 Health budget was $215 million short of what was required to pay for the increased costs of providing existing services, the growing and aging population since last year’s Budget, plus the initiatives announced for the next year,” says Bill Rosenberg.

“But that is just the shortfall compared to last year. Funding shortfalls such as this each year since we started doing these analyses mean that the 2017 Health budget shortfall is $1.4 billion compared to 2010.

“The effects on people’s health and access to health care are largely hidden but, on the limited information available, New Zealand ranks poorly against other comparable countries on access measures such as barriers to primary care, and waiting times for elective surgery, for first specialist appointments, and for treatment after diagnosis.”

“Nowhere is unmet health need more apparent than for those requiring mental health care, as has been well documented in various reports. It is especially shameful that the Government’s response to New Zealand’s mental health crisis has been to cynically manufacture a ’$224 million boost’ when most of the money is not going into mental health services funded from the Health budget which are so desperately needing more resources. Nor do many people realise that it is to be spread over four years.”

He says the post-Budget analysis shows mental health services will receive just 1.2 percent more: an estimated $18 million additional funding from the Health budget in 2017/18. This is a cut in real terms because an estimated 7.3% increase was needed just to maintain an already under-resourced mental health service.

ASMS Director of Policy and Research Lyndon Keene says: “The Health Minister’s acknowledgement that 60 percent of the people who die by suicide in New Zealand each year have not interacted with a mental health or addiction service in the previous 12 months speaks volumes about the state of our mental health services.[1]

“The Government’s spin-doctor response suggests either the Minister’s Cabinet colleagues are in denial, or that he and his colleagues simply don’t care enough.”

Government media releases on other health budget items, such as Pharmac, Disability Support Services and health targets also give a misleading impression of ‘progress’ being made while resources are trending backwards.

The full analysis of the Vote Health budget is available at:

A detailed spreadsheet showing the calculations is available at:

An analysis of the announced $224 million ‘boost’ for mental health is available at:


Key points

This analysis compares the 2017 Budget with the analysis of the Health Vote which the CTU/ASMS carried out prior to the Budget. It estimated the additional funding required to maintain current levels of services and pay for new initiatives announced by the Government prior to the Budget.

  • The Health Vote in the 2017 Budget is an estimated $215 million behind what is needed to cover announced new services, the pay equity settlement for care and support workers, increasing costs, population growth and the effects of an ageing population, compared to the 2016 Budget.
  • While the 2017 Budget listed services that will receive more funding, and new initiatives costing a net $269 million, most of these will need to be paid for by reductions in other services.
  • We estimate that $2.3 billion was needed to restore funding for 2017/18 to 2009/10 levels. Only $0.8 billion was provided so the shortfall compared to 2010 is $1.4 billion. This shortfall has steadily grown over those years. It means that the next Government will need to find well over $2 billion for 2018/19 if it wishes to restore the value of funding.
  • The Health Vote is forecast to rise slightly as a proportion of Gross Domestic Product (GDP), but only because of the pay equity settlement for care and support workers. If it had maintained the proportion of GDP it had in 2009/10, it would be $1.6 billion higher in 2017/18.
  • District Health Boards (DHBs) are underfunded by an estimated $107 million below what they need to cover increased costs and demographic changes.
  • In 2017/18, mental health services funded by the Health budget will receive just $18 million extra funding compared to what they spent in 2016/17 – an increase of approximately 1.2 percent, which is a cut in real terms.
  • Centrally managed national services such as National Disability Support Services, National Elective Services, and Public Health services received $101 million below what they needed to cover cost increases and demographic changes and to fund $22 million in new services, offset by $15 million being shifted to DHBs.
  • The pay equity settlement for care and support workers was funded $279 million, being a cost of $303 million offset by pay rises that would have occurred in any case. At Budget time, it had not yet been distributed to DHBs and National Disability Support Services.
  • The Ministry of Health itself was underfunded by $5.1 million and has had significant reductions in staff numbers since 2010.
  • Our estimates in previous years have been conservative compared to estimates made by the Ministry of Health and Treasury prior to Budget-setting and with findings on DHBs by Treasury.


Government media ‘spin’ Reality check
Mental health

“Budget 2017 will invest an extra $224m over four years in mental health services, including $124 million in new innovative approaches…”

Media release 25 May 2017

In 2017/18, mental health services funded from the Health budget will receive an estimated $18 million extra funding – an increase of approximately 1.2%, which is a cut in real terms. A 7.3% increase was needed in 2017/18 just to maintain current mental health services. Ministry of Health figures show the growing need for mental health services is far exceeding the growth in resources.

“Budget 2017 invests an extra $60 million over four years to enable Pharmac to provide more New Zealanders with access to medicines.”

Media release 7 May 2017

The package includes $20 million increase for 2017/18 (2.4% on Pharmac’s 2016/17 budget), which covers the increase in population growth and ageing – so the expected increase in volume/need. This suggests any increases in pharmaceutical unit costs must be offset by ‘savings’. Pharmac data indicate that over recent years the mix of medicines they purchase has moved to less expensive types of pharmaceuticals. This year’s Budget suggests a likely continuation of this trend, and funding for medicines over the next four years indicates the pressure to find more savings will increase further. It is unclear what impact this may have on the quality and access to medicines in New Zealand.
National Disability Support Services

Budget 2017 will invest an extra $205.4 million over four years to maintain and improve disability support services…”

Media release 25 May 2017

The last two disability support budgets have blown out because of the move to individualised funding. Funding pressures will mount further in 2017/18. Despite a $42.5 million increase, it is an estimated $17.1 million short on what is needed.
Health targets: ‘Healthy Kids’

“Nationally, DHBs lifted their performance to almost 86 percent of identified obese children being referred to a professional for clinical assessment…”

Media release 23 May 2017

The ‘healthy kids’ target is confined to referring obese children to a health professional. National Child Health Services budgets were cut by $2.4 million in real terms in the 2017 Budget. The budget for Public Health Service Purchasing, which includes services for addressing increasing obesity and other child health issues, was $26 million short on what was needed for rising costs and population.

In 2015/16 nearly a quarter of children (24%) experienced one or more types of unmet need for primary health care at some point in the past 12 months, up from 20% in 2011/12.

Health targets: Elective surgery

Nationally the improved access to elective surgery target of 100 percent was again achieved, surpassed by four percent.”

Media release 23 May 2017

The National Elective Services budget for 2017/18 has been cut by $26.1 million in real terms compared to 2016/17. Increasing elective surgery volumes will depend on more funding being siphoned from DHB baseline budgets.

[1] See