Impossible to cut health spending without affecting frontline services - union

Friday, 23 August 2024

Junior doctors from the NZ Resident Doctors' Association picket outside Wellington Regional Hospital in May 2024.

New Zealand invests less money in health services than some comparable countries but still outperforms them in healthcare productivity, which makes it unlikely that $1.4 billion can be slashed from healthcare spending without affecting frontline services.

Meanwhile, a “significant” 6.2% increase in the health budget is mostly capital spending and the actual operational budget has only increased by 0.4%.

This is according to policy specialists from the Association of Salaried Medical Specialists (ASMS), in an editorial published in the New Zealand Medical Journal on Friday.

The authors called for an independent inquiry into how New Zealand’s health system is funded, saying as the country with the sixth lowest net debt out of 14 comparable OECD countries, New Zealand was able to “invest intelligently” in the health of its population.

The editorial, written by ASMS’s Virginia Mills, Lyndon Keene, James Roberts and Harriet Wild, scrutinises New Zealand’s under-investment in health in light of the recent appointment of Professor Lester Levy as commissioner to curb alleged overspending at Health New Zealand.

Professor Lester Levy has been tasked with finding $1.4 billion in savings and coming up with a “turnaround plan” for Te Whatu Ora - Health New Zealand. (File photo)

Levy was appointed as commissioner in July to replace the board of Health NZ, and tasked with finding $1.4b in savings in the current financial year.

In announcing the decision, Health Minister Dr Shane Reti said there were serious concerns “around oversight, overspend and a significant deterioration in financial outlook” at the health agency.

However, Mills and her co-authors say it is unlikely that cost overruns are solely due to financial mismanagement and pointed out New Zealand’s health system has been underfunded for years.

They said while each year politicians claim “a record investment” in health, the cost of providing health services naturally increases every year due to population growth, ageing, inflation and wage growth - so it goes without saying the budget should increase too.

Health NZ’s Lester Levy, who has been appointed as commissioner of the agency on a 12-month basis, says he's committed to finding savings and improving outcomes.

The authors said on the surface, the 2024-25 health budget received a large increase of 6.2%, or $1.739b, compared to actual spending in 2023-24. However, most of this increase ($1.647b) was in capital spending and, of that, $1.369b was allocated to remediate historical claims under the Holidays Act.

“This meant [funding package] Vote Health’s operational budget for day-to-day running of the health system increased by just $93 million (or 0.4%) from estimated actual spending in 2023-24,” read the editorial.

In March, the Government announced five key health targets which came into effect on July 1 and includes 95% of patients waiting less than four months for a first specialist assessment and 95% of patients waiting less than four months for elective treatment.

Documents that ASMS obtained under the Official Information Act show the minister sought advice from Health NZ on how much it would cost to have no patient waiting longer than 15 months for a first specialist assessment, and no patient waiting longer than a year for treatment.

Officials estimated additional funding of $723m would be needed between 2024-25 and 2026-27 to achieve this. Mills said this funding was not visible in Vote Health’s Estimates of Appropriations (a detailed statement of how the Government proposes a budget will be spent) suggesting the planned care delivery targets announced in March are expected to be met from already stretched baseline funding.

Independent inquiry ‘absolutely needed’

Meanwhile, New Zealand’s health system seems to already be doing more with less.

Association of Salaried Medical Specialists’ executive director Sarah Dalton says cutting $1.4 billion in healthcare spending without affecting frontline services will be impossible to do. (File photo)

According to the editorial, the total public and private health expenditure in 2021 was 10% of the country’s gross domestic product (GDP), compared with an average of 11.7% for 14 OECD countries, where it ranged from 9% to 17%. New Zealand’s total health expenditure would have needed to be $5.8b higher in 2021 to match the average proportion of GDP of those 14 countries.

Recent research ranks New Zealand ninth out of 28 high-income countries for healthcare productivity, and it performs well in international comparisons for administrative efficiency.

“The commissioner has indicated confidence in finding $1.4b in savings from efficiencies. However, with comparatively low investment and relatively high productivity, it is difficult to see how a further $1.4b of savings will be found without impacting frontline services,” the editorial reads.

Disability support workers strike action outside Nelson Hospital in 2022 saying they are not paid enough and deserve to be treated better.

Mills said the editorial’s authors believed an independent inquiry was needed into how the health system is funded. She said underfunding has been going on for years and has been a problem for successive governments, and therefore an in-depth analysis was needed of what the gaps in the system were, what resources were needed, and what the social and economic benefits of adequate health investment would be.

Sarah Dalton, executive director of the ASMS, said in response to the editorial that an independent inquiry into how New Zealand funds healthcare services was “absolutely needed”.

The inquiry should be “a national conversation” to determine what can reasonably be expected from the healthcare system, and then establish objective measures and metrics to determine what adequate base-funding for the delivery of healthcare is, she said.

Dalton said the Government needed to view the funding of adequate and equitable health services as an investment in our economy.

“But they aren’t looking at it in that way. Certainly currently we have this ridiculous notion that we’re going to have improvements in health productivity and wait times without addressing the resourcing. It’s magical thinking […] and it is going to create harm.”

Cutting $1.4b in healthcare spending without affecting frontline services would be impossible to achieve, said Dalton.

She referred to a recent internal Health NZ presentation which suggested a total reduction of 4492 staff, including 470 doctors and 1491 nurses, could save more than $700m.

While Levy has dismissed the presentation, saying clinical frontline staff will not be reduced, Dalton said it was indicative of what would be required to meet the level of savings Levy was aiming for.

“Obviously someone was tasked with going through the process of looking at staffing levels and how you could cut clinical staffing to achieve those savings … So we're getting a lot of misinformation out of Health … and I think we urgently need evidence-based conversations and decision-making.”

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