$232 million effectively cut from Health budget


MIL OSI – Source: CTU –

Headline: $232 million effectively cut from Health budget

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An analysis of the Health Vote in last month’s Budget by the Council of Trade Unions finds that the Government has effectively cut the Health budget by $232 million. It is now $232 million short of what is needed to keep up with growing costs, population pressures including the ageing population, and new services announced by the Government.

“As in previous years, we have found that despite announcements of record spending in dollar terms, the reality is that the Health budget is under continuing and severe pressure,” says CTU Economist Bill Rosenberg.

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“The Health budget is squeezed between increasing costs, population and medical needs on one hand, and announcements by the Government of new services on the other. These are inadequately funded and the result is to leave Health short. While we expect further pressure on DHBs to cut services and restrain staffing levels below what are needed, indications from Treasury are that in future years pressures will only intensify, requiring significant changes to the Health system.”

The analysis compares the 2014 Budget with the analysis the CTU carried out prior to the Budget, which found that $499 million was required to just keep operational expenditure up with rising costs, population growth, and ageing. This post-Budget analysis includes an updated CPI estimate, adjusting the required funding to $493 million. It also examines the detail of the key policy initiative to enable children under 13 to have free access to GPs and free prescriptions.

Its main findings are:

  • The Health Vote in the 2014 Budget is an estimated $232 million behind what is needed to cover announced new services, increasing costs, population growth and the effects of an ageing population.
  • While the Budget listed services that will receive more funding, and new initiatives such as the move to enable children under 13 to have free access to GPs, these will be paid for by cutting funding to other services.
  • District Health Boards (DHBs) are underfunded by an estimated $94 million just to cover increased costs and demographic changes. When the costs of new services which the DHBs are expected to provide are taken into account, the shortfall is likely to be well over $100 million.
  • Centrally managed national services such as National Disability Support Services, National Elective Services, National Emergency Services, National Mental Health Services and Public Health services received $89 million below what they needed to cover cost increases and demographic changes, and $134 million below needs when the costs of additional services are included.
  • The Ministry of Health itself was underfunded by $3.4 million.
  • The cost of the policy initiative to enable children under 13 to have free access to GPs and free prescriptions from 1 July 2015 could cost closer to $40 million per year rather than the $30 million in the Budget estimates.
  • For the year to June 2015 Treasury is forecasting health to have a real growth of negative 2.3 percent, which on their figures we calculate represents a shortfall of $360 million. Greater cuts are forecast for the following three years. It warned in the preparation of the 2013 Budget that such cuts would require major changes to our health services. This could include “more targeted services and funding” which implies dropping services, making some available only to certain groups, or introducing user charges.

A working paper and spreadsheet providing details of the analysis are available at the following locations:

Previous Vote Health Budget analyses are available at:

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