As of today, New Zealand’s public health system – the biggest government agency in New Zealand’s history, which goes by the name of Health New Zealand Te Whatu Ora – is being run by just one reforming bureaucrat – Prof Lester Levy, after the Government sacked the recently installed board.
I have always enjoyed reading Bryce's articles and his ability to cut through issues and get to the nub of them. But not this time it seems.
The discussion about whether Health NZ (HNZ) is underfunded doesn't answer the question: underfunded relative to what? Health systems worldwide face an almost infinite demand for services; if any Government doubled health funding in New Zealand, there would still be groups/parts of the sector who (probably rightly) claim "unmet need" and request further funding injections. This issue gets worse with new (and usually more expensive) drugs and health technologies that offer real life chances for the people who would benefit from them - which puts ever increasing pressure on health system budgets. There is really no right answer to the "right" level of the health budget, and thus no-one can quantify the level of "underfunding" that apparently results.
Countries that we like to compare ourselves to spend more on health care as a percentage of GDP, and more per capita, than NZ does. But there is a relationship between economic prosperity and the amount spent on health - generally, the richer a country is, the more they spend on health as a proportion of GDP and per capita. Increasingly NZ is not a rich country - or as rich as we like to think that we are - and this is one of the consequences. This is why the discussion about growing NZ's economy and productivity is so important - but generally neglected - because it opens up the possibility for NZ to buy things that it otherwise can't afford.
In this context, the job of health administrators to to maximise health outcomes for the budget they have been given. We all have budgets that we need to manage to; HNZ is no different. And yet the outgoing Board and current management team seem to have failed against this basic management task.
Today's press commentary has overlooked that the stated overspend of $130 million per month (not $1.3 million/month) is against the Budget set for Health NZ by the Labour Government in its 2023 Budget. For Labour to claim this is solely a problem with the Budget 2024 funding levels for HNZ is breath-taking bravado on their part - and they have not been called to account for it.
It is impossible to tell if a single Commissioner do any better than the outgoing Board. But it is unlikely that Dr Levy could do any worse in meeting on of the basics of management - to live within your budget.
As the article outlines, National modeled their budget based on PREFU assumptions and never bothered to update it. And on a per dollar level, National's health funding is lower than ever this century.
While this Government likes to blame Labour for all of their actions, there comes a time when the electorate will demand they grow up and own up.
As an example, if Willis didn't choose to borronw an additional $12b for tax cuts, where could have some of that money gone?
Thank you for your feedback, I have always enjoyed reading your articles when they are listed in Bryce's posts.
You are right that the incoming Government could have chosen to put more than the $26 billion that is going to the health sector in Budget 2024. I'm not sure that negates the points I was trying to make:
1. Whatever the level of the health budget is, the job of health administrators is then to provide the best health outcomes for the funding they have been given. That's their job. The HNZ Board and management clearly failed to do this part of their job - and a job they accepted (if they had felt the health budget was "insufficient", they should have resigned).
2. For journalists and commentators to say (as they have done) that the health system is underfunded, they should be able to say what the "right" level of funding is, and thus what the level of "underfunding" is. Otherwise its a meaningless claim - because no matter how much you put in, there will be someone who misses out. Let's say that the Government put in (say) another $5 billion a year into the sector, would anyone then be able to say that "yes - that's the 'right' level of funding"? Because even with another $5 billion a year, there would be some therapy/drug/patient need that would not be able to be funded and met. If someone is missing out, based on some of the commentary I have seen, doesn't that mean the sector is "underfunded"?
3. It is still the case that richer countries spend more on health than poorer ones. We are not as rich as we think we are. Even if the incoming Government had spent the tax cut money on the health sector instead, as a society we need to face up to this at some point. Addressing NZ's poor economic and productivity performance is the only way, over time, to ensure that NZers get the level of health care that they crave.
My understanding is the discrepancy is largely related to a successful nursing drive, driving up nurse pay. Then additional items such as backdated holiday pay, and pay equity, an increase in operations post-Covid etc.
The government's response, as I understand it, has been to stop local graduate nurse intakes, freeze hiring, stop hospital infrastructure builds, cut investment technology upgrades, keep GP funding models low, and ask hospitals to cut over a hundred million dollars from their operations.
There are two interesting facets I'll mention here:
1/ As outlined in the article above, the comments of Peter Huskinson who notes:
"As the dust settles on the budget announcements, there are some positive sounding headlines like “Health gets $16bn over six years”. The prime minister talked up health spending ahead of time with comments such as “You're going to see a lot more money being spent on healthcare in general”. By contrast, “barely enough to keep the lights on” is the verdict of the association that represents hospital doctors. So which is right? Is the coalition fiscally speeding up or slowing down progress on health in the next four years? We can see for ourselves if we examine the data.
If we look at day to day healthcare spending, on the face of it the size of the 2024-25 budget (royal blue) and the estimates for future years (blue striped) looks like a continued increase – hence the favourable headlines.
But to understand the impact we need to look more closely. To maintain the nation’s healthcare means keeping up with three things: rising prices and wages, the growing population, and the higher healthcare needs that result as we get older. Like almost every country around the world, New Zealand aspires to
do more than just tread water. In line with international norms, as the economy has grown, so has the share of our national income devoted to publicly funded healthcare – this translates to real terms increase in spend per person over time. Is all that about to change?
The data shows an 4.7% annual increase in the government health spending per person on average, after accounting for inflation up to 2007-8 under Helen Clark. Growth reduced by two thirds to a more modest 1.3% over National’s last period in government under John Key and Bill English, but nonetheless growth continued.
From 2017 the chart tracks the change in day-to-day health spending reported by Treasury to exclude the effect of one-off spend on COVID. By the end of the Ardern-Hipkins government, spending had grown an average 4.6% per person each year after inflation. In the year to June 2024 this amounted to $4,829 per person at current prices (around $90 per week each).
If we project using Stats NZ population figures and the reserve bank's May inflation forecast, the recent budget sees the amount of day to day spend per person on health next year at current prices reduce by 3% to $4,686 per person; $143 per person less in real terms. The new government’s reduction in real terms spend per person in the next twelve months, and the treasury's current forecast to remain below 2023-24 levels in real terms per person for the next 4 years, is well below anything achieved this century in New Zealand or comparable countries.
Life expectancy at birth for Kiwis in 2021 was 82.3 years, a full year lower than our neighbours over the ditch. The mission for the incoming chair of Health New Zealand, along with health leaders, will be to navigate a squeeze in the available resource per person not seen in over 25 years, whilst protecting the gains in life expectancy achieved in the last twenty years, and not falling further behind our Australian neighbours.
Beyond the size of the budget, there are of course many other important issues – how to tackle the major differences in life expectancy between regions, by ethnicity, for communities with low socioeconomic status, and for people with disabilities and enduring mental illness. It matters not just how much is spent but how well. But the objective yardstick to judge funding announcements is what they do to real-terms healthcare spend per person."
2/ Dr Levy was once a full throated advocate of Little's reforms, saying
"In my view, the health reforms proposed by Minister Little and his colleagues are the type of change that have all the potential to result in unparalleled progress for healthcare in New Zealand. There are three crucial elements that give me confidence that these reforms can make a transformational difference. Firstly and most critically, they firmly address the underlying root problems rather than the symptoms; secondly, they are bold and comprehensive rather than the more customary tinkering; and thirdly, the disposition of the minister and his colleagues is calm, thoughtful, compassionate but unquestionably resolute."
3/ Finally I'd say of course health care costs will increase, and that becomes a matter of investments in technology, clinical and management skill, as well as allocations of budget.
The conversations about productivity are great and they necessitate a two-pronged approach for the purposes of sustainability, economic management, and quality of care and life for New Zealanders.
Of note, only 2 of the Health Board were left by the time the Board was "sacked" - most had already resigned and left, with one former National MP saying it was clear Health NZ wouldn't get the changes she felt it needed under this Government.
Totally due to underfunding & incompetence IMHO. As a mere voter who pays attention, even I understand that funding needs to at least match inflation or it is in effect a funding cut. Add to that the long discussed effects (decades) of both an aging population & more expensive treatments coming into play, & it was never anything other than either incompetence by the finance minister OR a deliberate funding reduction to give this govt the excuse to put a crony in charge who has demonstrated he is not competent in lesser roles - I remember the Christchurch/Canterbury debacle well. Possibly worse is the dishonesty in ţrying to shift the blame ... Why would anyone trust them if we have another pandemic for example?
Lester Levy created his Superhero narrative at Tauranga way back in the days of the purchaser provider split and Crown Health Enterprises but Lester was only the front man for the work done by David Clark in the background. Lester’s subsequent career is proof of that.
Andrew Little’s crazy idea to create an NHS in NZ was never going to work. He was told by Heather Simpson to take the reforms forward by taking a digestible step of merging the 22 DHBs into a smaller number. But as usual with the Jacinda Ardern approach, Little didn’t listen.
The scale of HNZ is beyond the capabilities of any modern manager. In these days of generalised incompetence, betting on a DEI hire as CEO was always going to be risky and so it has turned out.
It is becoming very apparent that this government's long term plan is privatise everything so that its donors can profit and we all pay way more than we would under a properly funded public system for our universal basic services.
The last time Lester Levy had such a high-profile health management role I remember him being interviewed by the late Sir Paul Holmes - how time passes.
I have always enjoyed reading Bryce's articles and his ability to cut through issues and get to the nub of them. But not this time it seems.
The discussion about whether Health NZ (HNZ) is underfunded doesn't answer the question: underfunded relative to what? Health systems worldwide face an almost infinite demand for services; if any Government doubled health funding in New Zealand, there would still be groups/parts of the sector who (probably rightly) claim "unmet need" and request further funding injections. This issue gets worse with new (and usually more expensive) drugs and health technologies that offer real life chances for the people who would benefit from them - which puts ever increasing pressure on health system budgets. There is really no right answer to the "right" level of the health budget, and thus no-one can quantify the level of "underfunding" that apparently results.
Countries that we like to compare ourselves to spend more on health care as a percentage of GDP, and more per capita, than NZ does. But there is a relationship between economic prosperity and the amount spent on health - generally, the richer a country is, the more they spend on health as a proportion of GDP and per capita. Increasingly NZ is not a rich country - or as rich as we like to think that we are - and this is one of the consequences. This is why the discussion about growing NZ's economy and productivity is so important - but generally neglected - because it opens up the possibility for NZ to buy things that it otherwise can't afford.
In this context, the job of health administrators to to maximise health outcomes for the budget they have been given. We all have budgets that we need to manage to; HNZ is no different. And yet the outgoing Board and current management team seem to have failed against this basic management task.
Today's press commentary has overlooked that the stated overspend of $130 million per month (not $1.3 million/month) is against the Budget set for Health NZ by the Labour Government in its 2023 Budget. For Labour to claim this is solely a problem with the Budget 2024 funding levels for HNZ is breath-taking bravado on their part - and they have not been called to account for it.
It is impossible to tell if a single Commissioner do any better than the outgoing Board. But it is unlikely that Dr Levy could do any worse in meeting on of the basics of management - to live within your budget.
As the article outlines, National modeled their budget based on PREFU assumptions and never bothered to update it. And on a per dollar level, National's health funding is lower than ever this century.
While this Government likes to blame Labour for all of their actions, there comes a time when the electorate will demand they grow up and own up.
As an example, if Willis didn't choose to borronw an additional $12b for tax cuts, where could have some of that money gone?
Thank you for your feedback, I have always enjoyed reading your articles when they are listed in Bryce's posts.
You are right that the incoming Government could have chosen to put more than the $26 billion that is going to the health sector in Budget 2024. I'm not sure that negates the points I was trying to make:
1. Whatever the level of the health budget is, the job of health administrators is then to provide the best health outcomes for the funding they have been given. That's their job. The HNZ Board and management clearly failed to do this part of their job - and a job they accepted (if they had felt the health budget was "insufficient", they should have resigned).
2. For journalists and commentators to say (as they have done) that the health system is underfunded, they should be able to say what the "right" level of funding is, and thus what the level of "underfunding" is. Otherwise its a meaningless claim - because no matter how much you put in, there will be someone who misses out. Let's say that the Government put in (say) another $5 billion a year into the sector, would anyone then be able to say that "yes - that's the 'right' level of funding"? Because even with another $5 billion a year, there would be some therapy/drug/patient need that would not be able to be funded and met. If someone is missing out, based on some of the commentary I have seen, doesn't that mean the sector is "underfunded"?
3. It is still the case that richer countries spend more on health than poorer ones. We are not as rich as we think we are. Even if the incoming Government had spent the tax cut money on the health sector instead, as a society we need to face up to this at some point. Addressing NZ's poor economic and productivity performance is the only way, over time, to ensure that NZers get the level of health care that they crave.
My understanding is the discrepancy is largely related to a successful nursing drive, driving up nurse pay. Then additional items such as backdated holiday pay, and pay equity, an increase in operations post-Covid etc.
The government's response, as I understand it, has been to stop local graduate nurse intakes, freeze hiring, stop hospital infrastructure builds, cut investment technology upgrades, keep GP funding models low, and ask hospitals to cut over a hundred million dollars from their operations.
There are two interesting facets I'll mention here:
1/ As outlined in the article above, the comments of Peter Huskinson who notes:
"As the dust settles on the budget announcements, there are some positive sounding headlines like “Health gets $16bn over six years”. The prime minister talked up health spending ahead of time with comments such as “You're going to see a lot more money being spent on healthcare in general”. By contrast, “barely enough to keep the lights on” is the verdict of the association that represents hospital doctors. So which is right? Is the coalition fiscally speeding up or slowing down progress on health in the next four years? We can see for ourselves if we examine the data.
If we look at day to day healthcare spending, on the face of it the size of the 2024-25 budget (royal blue) and the estimates for future years (blue striped) looks like a continued increase – hence the favourable headlines.
But to understand the impact we need to look more closely. To maintain the nation’s healthcare means keeping up with three things: rising prices and wages, the growing population, and the higher healthcare needs that result as we get older. Like almost every country around the world, New Zealand aspires to
1/3
do more than just tread water. In line with international norms, as the economy has grown, so has the share of our national income devoted to publicly funded healthcare – this translates to real terms increase in spend per person over time. Is all that about to change?
The data shows an 4.7% annual increase in the government health spending per person on average, after accounting for inflation up to 2007-8 under Helen Clark. Growth reduced by two thirds to a more modest 1.3% over National’s last period in government under John Key and Bill English, but nonetheless growth continued.
From 2017 the chart tracks the change in day-to-day health spending reported by Treasury to exclude the effect of one-off spend on COVID. By the end of the Ardern-Hipkins government, spending had grown an average 4.6% per person each year after inflation. In the year to June 2024 this amounted to $4,829 per person at current prices (around $90 per week each).
If we project using Stats NZ population figures and the reserve bank's May inflation forecast, the recent budget sees the amount of day to day spend per person on health next year at current prices reduce by 3% to $4,686 per person; $143 per person less in real terms. The new government’s reduction in real terms spend per person in the next twelve months, and the treasury's current forecast to remain below 2023-24 levels in real terms per person for the next 4 years, is well below anything achieved this century in New Zealand or comparable countries.
Life expectancy at birth for Kiwis in 2021 was 82.3 years, a full year lower than our neighbours over the ditch. The mission for the incoming chair of Health New Zealand, along with health leaders, will be to navigate a squeeze in the available resource per person not seen in over 25 years, whilst protecting the gains in life expectancy achieved in the last twenty years, and not falling further behind our Australian neighbours.
Beyond the size of the budget, there are of course many other important issues – how to tackle the major differences in life expectancy between regions, by ethnicity, for communities with low socioeconomic status, and for people with disabilities and enduring mental illness. It matters not just how much is spent but how well. But the objective yardstick to judge funding announcements is what they do to real-terms healthcare spend per person."
2/ Dr Levy was once a full throated advocate of Little's reforms, saying
"In my view, the health reforms proposed by Minister Little and his colleagues are the type of change that have all the potential to result in unparalleled progress for healthcare in New Zealand. There are three crucial elements that give me confidence that these reforms can make a transformational difference. Firstly and most critically, they firmly address the underlying root problems rather than the symptoms; secondly, they are bold and comprehensive rather than the more customary tinkering; and thirdly, the disposition of the minister and his colleagues is calm, thoughtful, compassionate but unquestionably resolute."
3/ Finally I'd say of course health care costs will increase, and that becomes a matter of investments in technology, clinical and management skill, as well as allocations of budget.
The conversations about productivity are great and they necessitate a two-pronged approach for the purposes of sustainability, economic management, and quality of care and life for New Zealanders.
A great article.
Of note, only 2 of the Health Board were left by the time the Board was "sacked" - most had already resigned and left, with one former National MP saying it was clear Health NZ wouldn't get the changes she felt it needed under this Government.
Totally due to underfunding & incompetence IMHO. As a mere voter who pays attention, even I understand that funding needs to at least match inflation or it is in effect a funding cut. Add to that the long discussed effects (decades) of both an aging population & more expensive treatments coming into play, & it was never anything other than either incompetence by the finance minister OR a deliberate funding reduction to give this govt the excuse to put a crony in charge who has demonstrated he is not competent in lesser roles - I remember the Christchurch/Canterbury debacle well. Possibly worse is the dishonesty in ţrying to shift the blame ... Why would anyone trust them if we have another pandemic for example?
Lester Levy created his Superhero narrative at Tauranga way back in the days of the purchaser provider split and Crown Health Enterprises but Lester was only the front man for the work done by David Clark in the background. Lester’s subsequent career is proof of that.
Andrew Little’s crazy idea to create an NHS in NZ was never going to work. He was told by Heather Simpson to take the reforms forward by taking a digestible step of merging the 22 DHBs into a smaller number. But as usual with the Jacinda Ardern approach, Little didn’t listen.
The scale of HNZ is beyond the capabilities of any modern manager. In these days of generalised incompetence, betting on a DEI hire as CEO was always going to be risky and so it has turned out.
It is becoming very apparent that this government's long term plan is privatise everything so that its donors can profit and we all pay way more than we would under a properly funded public system for our universal basic services.
The last time Lester Levy had such a high-profile health management role I remember him being interviewed by the late Sir Paul Holmes - how time passes.