Treasury concerns over health cut plans ignored

Treasury concerns about Health Minister Tony Ryall's reallocation of $12.5 million from primary healthcare services were disregarded by the Cabinet, papers released last week show.

In late March Mr Ryall asked the Cabinet to approve his plan to cut $10.1 million from the Primary Healthcare Organisation Performance Programme and $2.4 million from Care Plus. The PHO Performance Programme provides financial incentives to PHOs to improve patient health while the Care Plus programme supports improved care for people with high health needs due to chronic conditions, acute medical or mental health needs or terminal illness.

The $12.5 million savings which Mr Ryall said had been agreed to by PHOs and District Health Boards were to be partly allocated to a "flexible funding pool" to support his "Better Sooner, More Convenient Primary Health Care" initiative. Most of it - $7.7 million - was to be set aside within the health budget's "risk reserve" - a pool of funds set aside "to manage risks in the health sector".

Mr Ryall acknowledged he had undertaken no consultation. The details of the proposal were among Budget papers released by the Treasury last week. In an April briefing to the Cabinet, the Treasury noted the lack of consultation during the preparation of Mr Ryall's "late" paper "despite the paper having significant implications" for the health budget and the overall Budget 2010.

Treasury health analysts said the paper did not address the implications of the funding cuts on PHOs' participation in the PHO Performance Programme. They also recommended the Cabinet seek assurance from Mr Ryall that the savings from the Care Plus programme were "low risk and will not result in adverse outcomes".

The Treasury was also concerned with a lack of detail on how the $4.8 million going to the Better Sooner initiative would be used and said it was unaware of any increased risks to the health budget that would justify setting aside the extra $7.7 million.

While the Treasury recommended the Cabinet approve the savings if it received assurances from Mr Ryall that they were low risk, it did not support the allocation of the money into Better Sooner or the risk reserve. However, a subsequent paper shows the Cabinet approved Mr Ryall's proposal just three days after receiving the Treasury advice.

Labour health spokeswoman Ruth Dyson said Mr Ryall's savings were not in "low value services" as he had promised but "critical and high-performing health services".

Mr Ryall said the extra $7.7 million had not been put aside for a specific risk, "but within the $13 billion-plus health budget things always happen during the year and we need money available to help manage those unexpected things".

He defended his record on primary healthcare, saying the Budget put "a net estimated $144 million extra" into that area over the next four years.