Futurelearning

Breaking down the Government’s health spend

Health was seen as one of the biggest winners in Budget 2018, but how does that win break down and where is the money going to be spent? It’s instructive to go through the figures.

Of course, the health sector is always a major focus of New Zealand Budgets. It represents around 20 percent of government expenditure and is of significant importance to voters, most of whom make regular use of publicly-funded health services

Added to that this year is that, although nominal expenditure on health has been rising over the past eight years, real per capita expenditure barely grew between the 2010 and 2017 Budgets.

Health played a prominent part in the 2017 election campaign and has continued to dominate headlines since, with the announcement this week of an extensive public review of the sector and concerns raised over mental health services, pay for nurses and midwives, access to primary health care services and the state of hospital buildings.

In the run-up to Budget 2018, the Government suggested there is much to do to rebuild services and buildings and that the Budget would not be able to fulfil all expectations.

Nonetheless, health gained $3.2 billion (or 28 percent) of the $11.4 billion in total new operating spending over four years and $850 million (or 22 percent) of the $3.8 billion in total new capital expenditure over four years. Thus, in 2018/19, $16.972 billion will be spent by the Government on operating expenditure on health, with a further $1.253 billion on capital expenditure. This total of $18.225 billion is an increase of around 8.7 percent on the 2017/18 Budget.

The largest proportion of spending (and of the new initiatives announced in Budget 2018) goes to district health boards (DHBs) to pay for the services they deliver – with $549 million in new money for operating costs for DHBs in 2018/19, a further $750 million for capital expenditure (including to maintain buildings) and $100 million for deficit support. DHB deficits have been forecast at $189 million for 2017/18 so this additional funding will support DHBs to reduce them. The new funding should alleviate overall pressure on DHB services, but exactly how the funding will be allocated will be detailed in individual DHB plans and is therefore more difficult to track.

Sitting within the new funding for DHBs is $114.2 million for pharmaceutical management agency PHARMAC, bringing its budget to a total of $985 million in 2018/19. PHARMAC will now be responsible for purchasing all publicly-funded medicines, and, as well as the extra funding to support more medicines, the budget includes expected savings of $29.3 million in 2018/19, rising to $65.3 million in 2020/21, as a result of its expanded responsibility.

The next largest amount of new money for 2018/19 goes to primary health care. Both the National and Labour parties had promised new funding during the 2017 election campaign, with concerns that in a recent New Zealand Health Survey around 547,000 people were missing out on primary health care visits. Both parties promised to reduce the fees people pay when they use such services, with Labour going further than National in its promises. Labour has not been able to fully implement those promises in Budget 2018, with the sector wanting a funding review before major new funding is allocated. However, the Government has provided a further $58.6 million for 2018/19 (rising to $100 million in future years) to extend access to the community services card to more New Zealanders and to extend funding so all those with the card are funded at a higher level. The Government expects primary health care visits will be $20 to $30 cheaper for more than 500,000 people, while it is also extending free visits and prescriptions to 13-year-olds.

The next biggest winner are national disability support services, which receive new funding of $58.4 million in 2018/19, but again the detail on how this is to be spent is lacking in budget documents.

Additional funding will also support further elective services (an extra $31.5 million in 2018/19); community midwifery services ($25.9 million, including catch-up fees for midwives); an extension of the national bowel screening programme to a further five districts ($13.4 million); national air ambulance services ($14.7 million); and improving mental health services for children in Canterbury and Kaikōura ($7.3 million). Nursing services in secondary schools will extend out to decile 4 schools ($4.25 million), while a pilot of integrated therapies will be established for 18- to 25-year-olds ($1.4 million in 2018/19, rising to $4 million in 2020/21). An annual health check for those with SuperGold cards is also planned, with $1 million included in the Budget for development of the policy.

With a $3.7 billion surplus projected for 2018/19 (potentially reducing down to $2.7 billion as a result of the work needing to be done to eradicate Mycoplasma bovis), the Government has clearly left itself room for further funding decisions later in the year or in Budget 2019. With the mental health inquiry under way, we can expect significant work on how mental health services might be improved over the next few years, likely to be accompanied by new funding. Nurses have yet to settle their pay claims, and this too is likely to require new funding. As has been pointed out, whānau ora has missed out on funding this year – again, a review is under way of the programme – and although there is no doubt Māori do benefit from new spending there is also a need to extend effective whānau ora services to a wider range of whānau. Pacific peoples also continue to have lower health status than other New Zealanders, but no new funding specifically targeted at them has been made available in this Budget.

It is worth noting that many other programmes introduced by the Government, both in its 100 Day Plan released in December 2017 and in Budget 2018, will benefit health. Of particular note is the Families Package, which not only provides higher incomes for some families, but also includes a Winter Energy Payment that will hopefully lead to warmer homes over winter, reducing illness. Housing is a major determinant of health, and if new policies are successful they will lead to warmer, drier, more easily maintained homes for more people in the future. Policies to reduce family violence and child poverty will also be important in improving health, while regional development, education and employment policies should all assist in supporting higher incomes in the future. What will be crucial is that those currently missing out benefit most from these policies.

And on that note it is heartening to see that the Government plans in Budget 2019 to emphasise wellbeing, measuring and reporting on a wider range of indicators than currently occurs. This will build on the Treasury’s Living Standards Framework, with a Four Capitals approach, emphasising human, social, natural and physical/financial capital. Such a wider emphasis on wellbeing is to be welcomed, and it is to be hoped that the framework pays attention to inequities, as these continue to be of major concern in New Zealand.

With flat real per capita funding over the past seven years, and major concerns over the sector’s ability to recruit and retain key staff, deliver services and maintain buildings, Budget 2018 was always going to have to provide significant new funding to keep services running. The range of services supported with new funding generally make sense, but the biggest gaps are around whānau ora and Pacific health, where more needs to be done to reduce inequities in health, and in primary health care.

The emphasis on primary health care in the New Zealand Health Strategy – aiming to deliver more services closer to home – would seem to have suggested significant new funding would be made available for primary health care; that this did not happen may well be due to a planned primary health care funding review. But with this week’s announcement of a review of the entire sector, primary health care may find it has to wait for that to be completed before new funding is provided.

Given investment in primary health care now could well improve health and reduce demands on hospitals in the future, the limited funding being allocated to it in Budget 2018 seems like a missed opportunity indeed.

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