Is the Health Sector Underfunded?

The Ministry of Health funding blunders have once again shone a spotlight on health sector funding. Labour is now claiming that National has underfunded the sector by $2.3b. The size of that number is very debatable, and has been made to look as scary as possible, but Labour seems to have a good case for their claim of underfunding. Regardless of the quibbling over health funding, the real issue is that none of the establishment parties are dealing with the long-term issues faced by the health sector.

Funding Claims

Labour commissioned Infometrics to have a look at health funding compared with the pressures from inflation and population changes. That study found that health was underfunded by $2.3b – but note that total is over the 8 years that the National Government has been in power. The actual annual funding gap is closer to $218m, or $497m if you don’t count the recent claim over equal pay for care and support workers. So a funding gap exists, but Labour is guilty of National’s disease of adding up funding over many years to make a number seem bigger than it really is.

On the other hand, Labour could argue the numbers Infometrics used were conservative. There is an argument that the inflation rate for the health sector is higher than the rest of the economy. In other words, the health sector needs more money each year just to keep doing what it always does. That is why government health spending has grown from 3c in every dollar we earn in 1950 to 6c now, and is expected to hit 10c by 2060.

National to their credit have been trying to improve the efficiency of the health sector. There is evidence that the health sector can be more efficient and productive by improving their processes, but this takes time to do. However, given the cuts that are taking place in some services it seems that these efficiency savings aren’t enough to cope with the funding gap.

No one is dealing with the long-term issues

So National is trying to keep a lid on spending, while Labour screams for funding increases. Neither party is dealing with the issue that if we want to keep our public health system we have to start doing healthcare differently.

In its current form the health sector is unsustainable. Even if we keep throwing money at the sector they won’t have the staff to meet demand. While The Opportunities Party’s (TOP) Health policy hasn’t been released yet, there are three long-term issues it will cover off that establishment parties are ignoring. Some DHBs are trying to do these things already, but they could do with government support:

1. Invest more in prevention to stop people getting ill. We can’t keep putting the ambulance at the bottom of the cliff, we have to put a fence at the top. A dollar invested in prevention and primary health care has four times the return on investment than a dollar spent on hospital treatment.

2. We have to face up to the fact that demand for treatment outstrips what the health system can deliver. There are a number of ways we can deal with this, but in some cases we know the system treats people more than they would choose if fully informed. We have to inform people of the downsides of treatment, and give them more freedom to make their own choices. We also need to fund alternatives, like quality care to give people a real choice. Studies have shown that when this is done well, many people choose not to receive treatment.

3. The health system has to keep getting more efficient. Some of the changes needed may be difficult. Healthcare is getting more specialised so that will mean that if people want the best quality care they will have to go to larger hospitals in the big cities.

These are large challenges, but if we start acting now we can make our health system sustainable before the problems of increased demand, the ageing population, and chronic diseases (like diabetes) really hit.