Public health is shaping up to be one of the key battlegrounds of the 2017 general election. And despite National's contentious claims of record new spending on health in the Budget, the bigger question remains - is it enough?

The National Government has once again proclaimed that its latest Budget increases health spending and, this time, it's the biggest rise in 11 years. The Budget committed an extra $879 million to expenditure on health - taking the health budget to a record high of $16.77 billion in 2017/18.

Yet various critics, including the Labour Party, are saying National has effectively cut health expenditure, and much more needs to be spent. They can't both be right, can they? In fact, a case can be made for both sides, and it depends on how you measure and compare the spending. And, of course, whether the Government has effectively increased or decreased the health spend, the question remains: should more be spent on health?

Is the National Government increasing or cutting health expenditure?


There is no doubt that nominal expenditure on health has been increasing each year under National. And this year they have committed an extra $879 million. This includes a 3.9 per cent boost in operational funding for district health boards.

But once other factors, such as inflation and population growth, are taken into account, is this still an increase? The case that a real increase has occurred is made most strongly by National Party blogger David Farrar, who blogs today about Labour's lies on health spending. He claims that "For some years now Labour have lied and lied and said that National has cut health spending by $1.7 billion."

Farrar puts forward the 2008 to 2017 health spend figures in three different forms, to show that spending has increased significantly under National:

• Nominal Vote Health - increased by $4.85 billion a year from $11.92 billion to $16.77 billion - a 40.7 per cent increase

• Real Vote Health - increased by $3.00 billion a year from $13.77 billion to $16.77 billion - a 21.8 per cent increase

• Real Vote Health per capita - increased by $341 a year from $3,233 to $3,574 - a 10.5 per cent increase

He therefore says it is entirely dishonest for Labour to claim spending has been cut: "You can claim it is not enough. You can claim more is needed. You can claim growing elderly population needs more funding. But you cannot claim it has been cut."

In an earlier blog post, Farrar also details increased numbers of health sector staff employed under the National Government - see: Many more doctors and nurses. He points to Government claims that "the number of doctors and nurses working in DHBs across the country has increased by over 6,900 since 2008 - an increase of over 28 per cent".

Drilling further into the growth in job numbers, Farrar suggests that this compares very favourably against population growth: "From 2008 to 2017 the NZ population grew 8 per cent. So to compare: Population growth 8 per cent; 38 per cent more doctors; 25 per cent more nurses; 45 per cent more senior doctors; 45 per cent more senior nurses".

Some argue the best way to measure Government spending is to compare it to the size of the economy, saying health funding has actually gone down in
Some argue the best way to measure Government spending is to compare it to the size of the economy, saying health funding has actually gone down in "real terms". Photo / 123RF

Is this an effective decrease in the context of GDP?

Some argue that the best way to measure Government spending is to compare it to the size of the economy. And in this sense, an argument can be made that health funding has actually gone down in "real terms".

This can be seen in the Budget analysis carried out by Victoria University's School of Government and the New Zealand Institute for Economic Research, which says "Real per capita spending in health will fall slightly the coming Budget year (-0.1 per cent), but over the forecast period is projected to fall to 7.5 per cent below current levels by 2021" - see: Budget 2017 analysis of real per person spending shows real winners and losers.

Similar information for all Budget spend areas can be found in Andy Fyers' data article, Budget 2017: Nine years of spending under National: "The charts below show spending as a per cent of GDP and actual spending figures (click on the tabs to toggle between the two). Looking at spending as a per cent of GDP accounts for population growth, economic growth and inflation in a way that the spending figures do not."

In terms of health spending, Fyers says "As a per cent of GDP it fell between 2014 and 2017, but trend this is forecast to flatten out in 2017/18 and it will remain at about 6 per cent of GDP."

Arguments for why current Budget spending on health isn't enough

Trade unions are arguing that the Government's expenditure on health isn't keeping up with what is required. One study, carried out by the Council of Trade Unions and the Association of Salaried Medical Specialists, says that "Health funding needs an extra $1.1 billion this year just to maintain current care and cover additional costs" - see Kirsty Wynn's Economist: Health needs extra $1.1billion - at least.

And even such a significant increase may not be enough: "Even with a $1.1b boost there is still essential funding needs that will not be met, said Simon Oosterman from the Public Service Association." In fact, to make up for previous underfunding, the CTU's economist Bill Rosenberg argues that "health needed a shot in the arm of $2.3b extra".

Part of the need for the additional increase is the Government's requirement to fund its recent pay equity settlement. This cost was added into the latest Budget increase, and will actually take up about half of the additional new spend.

There are claims that other staffing issues also make a bigger spend necessary. This is best outlined in Craig Hoyle's article, Frustration, disappointment over health funding in Budget 2017. In this, numerous employee representatives are quoted as expressing the need for more than the latest Budget provided. For example, "Jane MacGeorge, acting CEO for the NZ Nurses Organisation, said the Budget was a huge disappointment for nurses who already faced declining morale and job satisfaction."

Furthermore, "A survey of almost 6000 paramedics, nurses, mental health workers and support staff earlier in 2017 found 90 per cent felt the healthcare system was understaffed and under-resourced. Some said they feared burnout could be jeopardising patient safety, and 72 per cent said their workload was not reasonable. In March, a slew of new mothers came forward with horror stories about their negative birthing experiences due to staffing shortages in maternity wards."

The same article includes the case for more to be spent on medicines, despite the "extra $60m over the next four years for Pharmac" including in the latest Budget. For example, "The Breast Cancer Aotearoa Coalition welcomed the increased in funding for Pharmac, but warned it was not enough to make a real difference." And Medicines NZ, the pharmaceutical lobby group, suggested that "it would cost around $200 million to clear the backlog of drugs waiting for funding, or around $40 per person."

There's no objective answer to whether the Government is spending enough on health. The answer is largely in the ideological eye of the beholder. Photo / 123 RF
There's no objective answer to whether the Government is spending enough on health. The answer is largely in the ideological eye of the beholder. Photo / 123 RF

Should the Government be spending more on health?

There's no objective answer to whether the Government is spending enough on health. The answer is largely in the ideological eye of the beholder - it depends on a lot of subjective views about how you think society should operate - your priorities and subjective ideas of what is important. Quite simply, those on the political left will tend to want more spent by the state on healthcare, and those on the right will be less sympathetic to greater expenditure, instead preferring to see a greater concentration on efficient spending.

The spending question can therefore only be resolved politically, and normally through the ballot box. It simply depends on political parties providing alternative spending options, and showing how they will fund that.

There is no doubt that health will be a big issue for voters in the upcoming election. And a recent opinion poll shows it was the number two issue for those asked about what the Government should be prioritising in the Budget this year - see Interest's Poll suggests New Zealanders view housing and healthcare as the two key issues for Finance Minister Steven Joyce to address in this week's Budget.

Peter Vial - whose organisation, the Chartered Accountants Australia and New Zealand, commissioned the poll - suggests that the issue of health will only get bigger: "Healthcare is always up there as a political and Budget issue, but a scary combination of an ageing population, escalating healthcare costs and expectations as well as rising obesity and diabetes rates will ensure healthcare will not go away ... It will be the number one issue sooner rather than later."

Politicians will therefore be fighting hard over the health spend. And on the surface, the election rhetoric "will be a choice between upping the cash considerably, or demanding every cent is accounted for while limiting the damage to the public purse" - see Stacey Kirk's weekend column, When the money isn't enough - time for politicians to brush up their bedside manner.

On the question of whether the public health system is performing well enough, Stacey Kirk also reports on a recent Treasury study which concludes "New Zealanders have similar health outcomes to people in other countries and that our health system achieves reasonably good results" - see: DHB deficits blowing to $90m. Health sector dying 'by 1000 service cuts' - Labour.

But the same news article shows how much trouble some of the DHBs are in, particularly with the Government directive to make more efficiency savings - see, also, Shane Cowlishaw's DHBs struggle under $200m 'efficiency' plan. He asks: "are DHBs getting too close to the bone when finding fat to trim? Health services are fighting to save more than $200 million as the financial year nears an end, cutting costs through staff vacancies and service reviews." It also quotes the Health Minister, Jonathan Coleman: "This year New Zealand is forecast to spend 6.26 percent of GDP on health. Under Labour, the percentage of the economy spent on health was under six percent."

So how does that six per cent health spend compare to other countries? A very useful report last week from the New Zealand Institute for Economic Research, says that you need to add the money spent on health through ACC, which means that the health spend figure is actually 9.5 per cent of GDP, and therefore "New Zealand spends above the OECD average on health services - not as much as countries in Europe and North America, but more than Australia" - see Todd Krieble and Prince Siddharth's Is it finally time to reduce the number of district health boards?

And for an anecdotal snapshot of the level of health funding, and an explanation for why there is increased talk of increasing the spend, see John Roughan's We could easily poison this economy. He says: "As for the health services, I've seen something of them in the past six months. They appeared well staffed, well equipped and provided everything my dying father needed. State services are always 'underfunded' in the sense they could do more with more money but we started to hear about health's rations only this year, about the time the Treasury reported the Budget surplus was running a billion dollars above its forecast."

Finally, for satirical coverage of health issues, see my blog post, Cartoons about the politics of health in New Zealand.

Note: Future columns will look at other health debates, including arguments about waiting lists, problems in other health services, and mental health debates.