The health sector awaits Thursday’s Budget with high expectations but with union economists’ calculating an extra $2.7 Billion is needed to ‘restore’ health services – excluding major pay increases – it is likely that some will be disappointed.

Labour’s election policy in 2017 promised an extra $8 Billion for health over four years but its fiscal plan was for that to start slowly with an extra $846m in 2018-19 and slowly building up to an extra $3.1 billion in 2021-22.

The pressure of expectations and growing demands for the 2018-19 Health Vote budget look likely to far exceed that funding pledge (see CTU-ASMS analysis below).

Health Minister Dr David Clark started the year trying to dampen expectations of major pay hikes for health workers because of high demands on the extra money Labour had pledged for health. Likewise Prime Minister Jacinda Ardern has spoken in recent months about the higher than anticipated capital demands and DHB deficits.  But Clark, Ardern and Finance Minister Grant Robertson meeting with a nurses’ union delegation for a photo op, just a week out from the Budget, raised hopes again, along with the better than expected Government operating bottom line.

The latest district health board fiscal update predicts that the 20 DHBs will end the financial year $189 million in deficit – $46 million worse than budgeted for.  There is also the need for greater investment in capital and maintenance spending highlighted by Middlemore Hospital.  Higher than predicted increased demand on hospital services – particularly in the Auckland region –  as well as in mental health services are also raising expectations of a substantial boost to DHB coffers.

That is before adding in frustrated health workforce expectations of fairer pay with lead maternity carer midwives and nurses particular wanting this Budget to recognise the pressures on their workforces –to prevent nurses walking off the job this winter and address the midwifery workforce crisis.  Also waiting in line are allied health, DHB clerical staff, pay equity for mental health & addiction workers, the medical workforce and workers in NGOs.  Not to forget a promised review of primary health funding, reducing GP fees, financing the Mental Health and Addictions Inquiry recommendation, an underfunded NGO  sector and sections of the residential aged care sector struggling to implement last year’s pay equity settlement.

Health sector expectations

Dr Kate Baddock, chair of the New Zealand Medical Association (NZMA) says it recognises that competing priorities in a tight fiscal environment means it was unlikely that the new Government would meet all of the health sector’s expectations in its first Budget.

She said given the Government’s signals what it was hoping to see was investment in primary care – with the proposed funding review leading to improved access to high needs patients – and also into mental health and the health workforce.

Marion Blake, chief executive of Platform that champions mental health and addiction NGOs, said with health such a major election issue it was expecting a Budget that demonstrated the government was responding to the underfunding that had eroded services.

“We hope to see  funding that will restore community health provision and provide strong base to improve access for the people who have been left behind,” said Blake.

She said Community NGOs will be wanting assurance of fair prices for the work they do and for mental health and addiction funding issues to be addressed across all Government portfolios not just health.

Georgia Wakefield, executive director of Allied Health Aotearoa New Zealand which connects 20,000 allied health professionals, said it eagerly awaited the Budget but also acknowledged there were many competing demands on this first Budget.

However, she said it was hopeful that the Budget will show a commitment to early and equitable preventative health care with “ample evidence” strongly indicting early access to allied health services results in improved health outcomes and economic benefits.

Erin Polaczuk, national secretary of the Public Service Association, called for the Government to “urgently’ relax its Budget responsibility rules to tackle the “$2.7 billion hole” estimated by CTU.  She said PSA’s health members had waited nine years for the shortfall in health funding to be addressed and “they deserve to know the Government’s committed to a better system”. Though she acknowledged it would take more than Budget to address funding issues she said the Government had to commit to fully funding pay equity settlements – with DHB clerical workers just raising their claim – and it also needed to commit to fully funding the Mental Health and Addictions Inquiry recommendations.

Lyndon Keene, policy and research director for the Association of Salaried Medical Specialists (ASMS), said senior doctors were “desparately hoping” that the coalition’s first Budget would make a “real difference to waiting lists, high levels of unmet health needs and the increasingly bare cupboards”.

He said more people were going to hospital than ever before and they were sicker while others were struggling to get the hospital care their doctors say they need. “It’s imperative the Government makes a very real commitment on Thursday to improving the situation in public health so that communities have access to high quality publicly-funded health care, and so that public hospital specialists don’t have to provide care and treatment at the expense of their own health.”

Vote Health spending requirements according to unions’ analysis

The annual Budget analysis released by the Council of Trade Unions and ASMS has calculated that Vote Health will have to rise by around $805 million (5%) to keep the status quo including an extra $594 million for the combined 20 DHBs’ budget.

Last year National invested $825 million extra in Vote Health with $439 million going to DHBs and $279 going to the care and support workers’ pay equity settlement.

Labour’s pre-election policy allowed for $846 million extra in 2018-19 and has a number of election commitments to fund – including widening pay equity to mental health and addiction support workers.

Paper authors, CTU economist Bill Rosenberg and ASMS’s Lyndon Keene, calculate these promises could add a further $216 million to the extra needed for Vote Health including the rejected two per cent pay increase offered to the New Zealand Nurses Organisation’s DHB nurses, midwives and health care assistants.  The pair calculate that any increase above two per cent for DHB nurses and a roll-on similar increased to allied health would cost an estimated further $32 million per year for DHBs.

Last year the pair estimated that $2.3 billion was needed to restore health funding to the same spending power as 2009-10 levels and that estimated has been increased to $2.7 Billion for Budget 2018.

 Health pressure points

  • The number of people discharged from public hospitals, adjusted for complexity (case-weighted), increased by 16.3% between 2009/10 and 2016/17, higher than the estimated population growth of 10.2%.1
  • The need for mental health services exceeding the growth in resources. The number of unique ‘clients seen’ by Mental Health and Addiction (MHA) services teams grew by 50% in the years 2008/09 to 2015/16, while funding increased by just 16.5 percent in real terms.3 4
  • The New Zealand Health Survey (NZHS) 2016/17 shows 1 in 7 adults (14%) reported not visiting a GP due to cost in the past year; a further 7% reported not collecting a prescription due to cost.
  • DHBs are estimated to need more than $14 billion to upgrade their facilities over the next 10 years, due in part to deferred maintenance. DHBs are required to pay the government a capital charge from their operating budgets. Last year’s capital charges cost DHBs $174 million.12 13 14

Source: The full  NZCTU-ASMS ‘Working Paper on Health’ and references can be accessed here


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