Editorial: Health vote lacks fiscal fortitude

This year the Government is spending about $8 billion, 20 per cent of its Budget, on health. That is slightly more than it spends on education (18 per cent) or national superannuation (14 per cent) and not much less than it spends on all other welfare benefits (22 per cent). Together, those commitments leave only a quarter of the Budget for everything else. It is hard to argue that health is "underfunded".

Yet the Government has just announced a three-year programme to raise its stake by $1.2 billion in the third year. The increments will begin in next year's Budget. The amounts might not be much out of the ordinary. The National Party is quick to point out that it raised the health allocation by $1.26 billion between 1996 and 1999, 20 per cent ahead of inflation. And taxpayers might reasonably ask, what good did that do?

The Health Minister, Annette King, makes no claim that the latest tranche will finally satisfy the sector. Her boast is rather that for the first time it will give health administrators a clearer three-year horizon. Her hope is that they will use it to plan their spending with more foresight and more value in the long run.

They will be obliged to spend a good deal of the new money on primary healthcare as well as hospitals. In fact, National believes hospitals could be worse off once district health boards have to channel an as-yet unspecified proportion of their grants to general practices serving people who tend not to use the private sector.

The potential savings, as well as the benefits to those people, are certainly attractive in theory. If Maori, Pacific Island and low-income groups can be induced to use primary services they may be reached by prevention programmes and receive early attention for complaints that might otherwise develop to a point requiring hospital treatment. It is a theory worth the public investment but it is unlikely to solve the growing dilemma of public finance everywhere - how to check the burgeoning demand for "free" healthcare.

In part, the rising demand can be blamed on an ageing population. Government health spending already rises automatically year by year to cover the growing proportion of the population in older age brackets. But ever more sophisticated technology for diagnoses and treatment, and higher standards of care, also add their inexorable increases to the public bill.

Ultimately, the only check in rising costs is the Government's capacity to withstand the pressure. The latest funding announcement, a foretaste of a Budget still six months away, does not speak highly of the Coalition's fiscal fortitude. The announcement follows the first sustained pressure brought by the health sector since the change of Government. Newly elected health boards have faced strikes by nurses and cancer therapists as well as deepening deficits in their district accounts.

In presenting them with a three-year commitment, Mrs King warns that the allocation "will not be increased during the life of the funding package, unless agreed by cabinet". The proviso rather undermines the message. The $400 million extra to be allocated to health next year is more than half the amount the Government has allowed itself for all new spending in election year.

With an uncertain outlook for the world economy and prices of New Zealand's export commodities, the Government is leaving itself little room to move. It will not want to lose its claim to fiscal responsibility and, with that, its ability to maintain payments to its new superannuation fund as it heads to the election.

The minister expects the financial boost to be sufficient to eliminate district health board deficits over three years and she expects boards to manage their costs, "including wage pressures", to keep within it. Those with larger deficits must not allow their costs to rise more than 2 per cent next year, she says, but hardly helps them in that quest by adding that "there is room for some upward movement in the salaries of nurses and other health professionals during the three year period".

Perhaps they will be good enough not to ask for it in election year. Sooner or later health costs simply have to be contained. Plainly it is not going to happen soon.