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Health budget analysis: public health services at least $1.2 billion worse off than in 2009/10

For the seventh year in a row the Government’s health budget is well short of what is needed to cover increasing costs, demographic changes and new policy initiatives. A  detailed analysis of the 2016 health budget by the Council of Trade Unions and the Association of Salaried Medical Specialists estimates an operational funding shortfall this year of $248 million. The District Health Boards (DHBs) have a $152 million shortfall.

“This follows six years of underfunding, which we estimate has accumulated to $1.2 billion in 2016/17 compared to 2009/10,” says CTU economist Bill Rosenberg.

“We firmly disagree with the recently released Ministry of Health figures released by the Minister of Health claiming health funding has more than kept pace with population and cost pressures. We have analysed their figures and our analysis explains how they are flawed and inconsistent with previous Ministry estimates that do identify shortfalls,

“Despite being poorly funded relative to comparable countries, international evidence shows our public health system is efficient and of high quality. New Zealand is lagging behind when it comes to people being able to access the health care they need however, and it is getting worse,

“Even access to the government’s priority areas such as elective surgery compare poorly internationally. Some services further down the pecking order, such as mental health care, are now in crisis mode – and we already have the worst youth suicide rates in the OECD, along with a range of other poor health statistics,

“The Government cannot continue to claim that the shortfalls are not negatively impacting on the lives of New Zealanders,” says Rosenberg.

A summary of key points of our analysis:

This analysis compares the 2016 Budget with the analysis of the Health Vote which the CTU carried out prior to the Budget. It estimated the additional funding required to maintain current levels of services.

– The Health Vote in the 2016 Budget is an estimated $248 million behind what is needed to cover announced new services, increasing costs, population growth and the effects of an ageing population. This is after $197,000 of “reprioritised savings” identified in the Budget.

– While the Budget listed services that will receive more funding, and new initiatives costing $117 million, these will need to be paid for by reductions in other services.

– We conservatively estimate the funding shortfall in core government health expenditure for 2016/17 compared to 2009/10 is $1.2 billion. This shortfall has steadily grown over those years.

– The Health Vote is forecast to fall as a proportion of Gross Domestic Product (GDP). If it had maintained the proportion of GDP it had in 2009/10, it would be $0.95 billion higher in 2016/17.

– District Health Boards are underfunded by an estimated $152 million to cover increased costs and demographic changes, and to fund $55 million worth of new initiatives and $45 million of expenses shifted from central funding.

– Centrally managed national services such as National Disability Support Services, National Elective Services, and Public Health services received $79 million below what they needed to cover cost increases and demographic changes, and are $90 million short when $56 million in additional services are included after taking account of $45 million in shifting expenses to DHBs and “reprioritisation”.

– The Ministry of Health itself was underfunded by $5.5 million.

– Our estimates are consistent with estimates made by the Ministry of Health and Treasury prior to Budget-setting in previous years. We have checked the recent release by the Minister of Health to Fairfax providing figures purporting to show that the Government’s Health Votes had “covered population growth, ageing and inflation”[1]. These figures are flawed and do not support the Minister’s claim.

[1] Stacey Kirk, “Government returns fire over health funding: figures show new funding keeping up”, 7 June 2016,


Full report: Did Budget 2016 Provide Enough for Health

Spreadsheet: Vote Health 2016-17 post budget