The health sector picked up the biggest spending increase in this year's Budget but doctors say it is not enough to combat increasing cost pressures.

The Government says an extra $405 million will be spent on health this year but $47 million is coming from savings in the sector and $358 million from elsewhere in the Budget.

Health Minister Tony Ryall said the Government would spend $14.2 billion on health in the coming year - the largest health budget to date - despite tight financial times.

But the overall increase in health spending is lower than last year's Budget, when $585m of extra funding was pumped into the sector.


Angela Belich, assistant executive director of the senior doctors' union, said the small increase in health spending would not compensate for increasing cost pressures and the expectations of district health boards (DHBs).

"The effect will be increased workload pressures on senior hospital doctors, increasing difficulties in providing accessible high quality services to patients, and serious risks of burn-out,'' she said.

"There are no longer resources that can be shuffled around in DHBs without serious consequences to both patients and hospital staff.''

But Medical Association deputy chair Mark Peterson praised the extra spending, which would go into important areas such as maternity services and free after-hours doctors' visits for under-sixes.

"We recognise that the Government is operating under financial constraints so it is particularly pleasing to see that health has received the largest increase in government spending,'' he said.

"We are encouraged to see initiatives that focus on preventive health.''

Some $20m in health savings would come from a previously signalled increase in prescription charges from $3 to $5 per item, with a cap on charges on 20 items per year.

Mr Ryall said no family would pay more than $40 extra a year under the change, which comes into effect on January 1 next year.


The change has been praised by the local pharmaceutical industry and medical insurer Southern Cross, but has drawn criticism from some poverty and health advocates.

Another $88.1m will come from the Government's plans to partially sell state-owned energy companies, with most of the funding going towards hospital redevelopments.

A further $3.4m will come from changes to the eligibility for aged residential care entitlements.

The current asset threshold of $210,000 increases by $10,000 each July, but would now be pegged to a yearly inflation adjustment.

The amount of revenue generated from the change would increase in coming years.

Aged Care Association chief executive Martin Taylor said the change was "a small but significant step'' in addressing the issue of caring for an ageing population.

"Based on our costing model, over the next four years the amount saved by taxpayers is $47 million, but the real benefit will be in 10 years when the grey tsunami really starts impacting the health budget,'' he said.

"The next step for the Government is to reinvest this saving into the aged-care subsidy to address a serious under-funding gap.''

New health spending over four years will include $33m to improve cancer treatment, $16m to speed up diagnostic testing and scans, $48m for faster elective surgery, $133m for disability services and $20.5m for maternity services.

The funding includes $16m in IT systems to provide faster access to test results.

Another $4m would be spent on a national register of patients treated for heart conditions, which was a key recommendation of the New Zealand Cardiac Network.

Associate Health Minister Tariana Turia said $6m would go towards a fund to improve Pacific people's health, which she described as whanau ora for Pacific people.