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Health Budget: Mind the $127 million gap

Health Budget: Mind the $127 million gap

A CTU report concludes that the Health Vote in the 2011 Budget was an estimated $127 million behind what is needed to stand still. While it listed services that will receive more funding, these come at the cost of cuts in other services.

The report compares the Health Vote in the Budget with the analysis the CTU carried out prior to the Budget. The pre-Budget analysis found that $564 million was required over the whole Health Vote to just keep up with rising costs, population growth, ageing and the growth in demand for health services due to the availability of new treatments.

The author of the two reports, CTU Economist Dr Bill Rosenberg, says that “Core health services provided or funded through District Health Boards (DHBs) and centrally managed programmes such as Child Health Services, Emergency Services, Māori Health Services and Public Health needed $561 million of the $564 million to stand still. But they gained only $452 million in operational funding which means they will be an estimated $108 million behind what they need.”

“It seems inescapable that the pressure on DHBs must lead to some combination of service deterioration, reductions in services, new user charges or increased DHB deficits. In the last year, media reported cuts and deterioration in services in a large number of areas including home help for the elderly and sick, residential care for the elderly, eye operations, services for mental health and addictions, community health services, public health, hospital care, cancer treatment, primary health organisations and GPs, and diabetes services. Our analysis suggests that such cuts will continue to occur out of necessity from lack of funding.”

“The Minister of Health announced in his Budget-day media statement that health initiatives were being allocated an additional $585 million, but also acknowledged that $165 million of that came from “savings” - that is, money from cuts in expenditure elsewhere in the Health system. There was no additional $585 million,” says Dr Rosenberg.

“Out of that $585 million, $350 million was not for ‘health initiatives’ at all, but a partial compensation to the DHBs for the additional costs they face which we estimate to be $461 million. The cost of the other $235 million of ‘health initiatives’ must be met by stopping or reducing other services, increasing user charges, or productivity improvements. Some of this is achieved explicitly through a $108.6 million list of ‘reprioritised savings’ in the Budget documents, which covers cuts to spending in 16 areas including elective surgery, public health, maternity services, mental health, child health, primary health, and Māori health. The rest will largely have to be met by another round of cuts by DHBs.”

“Some areas which boast ‘initiatives’ have had more funding cut than added, and others are substantially funded from cuts in their own programmes. For example, Public Health Service Purchasing has ‘new policy initiatives’ of $16.2 million but ‘reprioritised savings’ cutting more than that – $38.1 million. There are other services in a similar position.”


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