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The Myth of Unsustainable Health Funding

Friday 22 August 2014

The Myth of Unsustainable Health Funding

"The idea that New Zealand spends too much on public health care and cannot sustain the current level of funding is both wrong and damaging," says Ian Powell, Executive Director of the Association of Salaried Medical Specialists (ASMS).

"The prevailing thinking would have us believe New Zealand's health system is an insatiable beast draining the Government's coffers dry, but the evidence shows something quite different. Health funding has actually been falling as a proportion of GDP over recent years."
The ASMS has examined public health funding in New Zealand over the years, along with the assumptions about affordability and comparison which underpin the Government's decisions about health funding.

An ASMS report published today, The myth of unsustainable health funding and what Treasury figures actually show, looks at the case for each of these assumptions and challenges the distorted thinking they are based on.

"The Government needs to act on the facts, rather than the various assertions that are made about health care funding," says Mr Powell.

"Public hospitals are trying to do more with less in an environment based on the erroneous belief that New Zealand's current level of health funding cannot continue, let alone increase. That has real consequences for people who need treatment but can't get it because the health sector isn't resourced properly, both in terms of funding of services and funding for the workforce delivering those services.

"A good starting point would be to invest more in the hospital specialist workforce."

The main claims made about health funding in this country are:

. Spending on public health has been increasing faster than the national income for most of the last 60 years.

. Health is the second-largest item of government spending and is growing as a proportion of both government and the economy.

The reality check:

Health funding has actually been falling as a proportion of GDP over recent years, from 6.56% in the 2009/10 year to an estimated 5.99% in this year's Budget.
. Between 2009/10 and 2014/15, health operational funding increased by $1.8 billion, while over the same period nominal GDP will have increased by about $48 billion.
. Treasury has forecast further real falls in health funding of almost half a billion dollars per year, cumulative, between now and 2018.
. International evidence suggests that spending less on health can be a false economy, resulting in substantial hidden costs to the health system as the need for health care does not go away but the cost is transferred either to other parts of the health system or to patients themselves.

The full report is available from the ASMS website.
Its conclusions are supported by Council of Trade Unions economist Dr Bill Rosenberg, who has also analysed New Zealand's health spend following the Government's Budget announcements this year:

"Treasury forecasts are for government spending on health under this government to contract significantly in real terms over the next four years," says Dr Rosenberg.

"Falling government spending does not reduce health needs: it just shifts the personal and financial cost to individuals who may not be able to afford it. It's time we discussed the issues of health funding from a New Zealand-wide social and economic viewpoint, not just as a fiscal problem."

Ian Powell says health decision-makers need to rely on evidence, rather than claims, when deciding the level of funding for New Zealand's public health system.
"This is too important to get wrong," he says.

Professor Martin McKee from the London School of Hygiene & Tropical Medicine will present the argument for investment in health systems during a special ASMS conference in Wellington next Tuesday. Media are welcome to attend the conference.
Ian Powell


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