New Zealand Budget

Analysis

Shift the fundamentals to work smarter in the health system

2017 New Zealand Budget

By Thorsten Engel

Health has done comparatively well and continues the trend of receiving net new funding on top of a substantial baseline. Budget 2017 includes an extra $3.9 billion over four years, taking the total health investment to $16.8 billion, including extra spending of $879 million in 2017/18 – the biggest increase in eleven years.

Specific initiatives announced by the Government include the following:

  • $60 million more over four years to Pharmac. Pharmac’s budget for 2017/18 will be a record $870 million, an increase of $220 million since 2008. The majority of New Zealanders access only a small portion of this budget – and we benefit from relatively universal coverage. However, if overseas experience is anything to go by, more and more high cost and extensive treatments will be consuming the lion's share of this investment with a correspondingly smaller number of people requiring a larger share of the funds. This situation is unlikely to reverse soon.
  • $224 million over four years for mental health services. This includes $100 million for a mental health social investment fund as part of the Social Investment Package. Interestingly, a sizeable portion of this funding is coming from the allocation for social investment. Our recent State of the State New Zealand 2017 report (www.deloitte.com/nz/stateofthestate) shows how ensuring household resilience preserves New Zealand’s wellbeing in the face of uncertainty and shocks. Good mental health is a key factor in household resilience. Unfortunately, half of our population can expect to experience some form of mental health issue throughout their lifetime. Comparatively, we have appalling youth suicide statistics, a high incidence of domestic violence and our students fare poorly on the PISA Student Well-being league table, to name just a few. Addressing mental health issues through a social investment approach that is wellness-based and not just disease focused, has the potential to provide a material increases in resilience.
  • $205 million for disability support services, which mirrors the increased investment in mental health and the government’s commitment to social investment. Too often we ask parents and whānau to bear the full brunt of raising and looking after family members with disability. Respite care has been in the news a number of times and the sector can certainly do with sorely needed additional investment and resources.
  • $1.54 billion for wage increases for 55,000 care and disability support workings as part of the TerraNova pay equity settlement. Our most significant cost pressure in New Zealand will continue to be salaries and wages. The pay equity settlement covers only 55,000 healthcare workers, while the total health workforce comprises at least 160,000 and the total health and social workforce is pegged at over 250,000. According to the OECD[1] league tables, with 55 care givers per 1,000 of population, we are right in the middle of the workforce range; slightly below the UK and United States. By contrast, Mediterranean countries such as Italy and Greece run on half that workforce ratio, while Scandinavian countries, with a higher tax take, have twice these numbers.

The bulk of our additional funding for healthcare is due to rising demand and cost pressures – and will ultimately be invested in the workforce. There is no doubt that our health and social workforce is working extremely hard and that its size reflects our ability to fund it based on the tax take; however, could it work smarter?

The Ministry of Health launched its New Zealand Health Strategy last year but how will the implementation and execution of this strategy be funded? Based on the last Treasury update[2], only one of the health projects under the monitoring regime was “in the green”. What resources will be required to deliver the current projects and any new projects successfully? How will these projects advance the Health Strategy and what are the opportunities to bend our cost curve? These questions remain mostly unanswered and this Budget is still about working harder and increasing workforce levels, rather than getting more value for money out of every hour spent.

[1] Latest (2014) figures available from http://stats.oecd.org/

[2] November 2016 Major Projects Performance report

 

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