Health boards could go further into the red – Treasury

Government funding cuts could see struggling district health boards (DHBs) go further into deficit, the Treasury has admitted.

In a briefing paper, officials say the boards will have find an extra $258 million over the next four years because the government no longer subsidises their Kiwisaver and pensions contributions.

“If an individual DHB is unable to fully fund this cost pressure, the level of its deficit would increase,” the paper says.

Capital and Coast Health DHB, which ran a $47.5 million deficit in 2009-10, will have to find an extra $20 million in savings as a result of the changes. It has already cut millions of dollars’ worth of services, including home help to the elderly and mental health clinics.

The DHB did not respond to APNZ’s questions at the time of going to press.

Health Minister Tony Ryall said the extra costs were a “very small” amount – less than 1% of the boards’ total budget of over $10 billion.

Their financial management had “improved significantly” since National took office, and their projected deficits had fallen $160 million to around $30 million this year, he said.

Brent Wiseman, the chief financial officer of the Auckland DHB, said staff were working more efficiently, “which mean that more services can be delivered for the same costs”.

The board hoped to run a surplus next year despite having to find an extra $40 million in the next four years.

However, Grant Robertson, Labour’s health spokesperson, said the government had made it clear that health boards would not get extra funding to make up for the subsidy being cut.

“This means it will have to come from already over-stretched budgets and will inevitably lead to cuts in services.”

Health received an extra $452 million in May’s Budget, but the CTU has estimated that that was nearly $110 million short of what was needed to keep pace with increased staffing and equipment purchasing costs.

“These are DHBs that are already suffering from underfunding,” Mr Robertson said. “The amount of money they have been given has not kept up with the cost of inflation and an ageing population for the last two years, and this is just another blow to them.”

The Treasury briefing paper also reveals that schools will have to find an extra $304 million over the next four years as a result of the changes.
Education Minister Anne Tolley said “no decisions” had been made about how the cost would be met.

However, Sue Moroney, Labour’s education spokesperson, warned that parents would have to pick up the tab.

“It’s worrying, because the only places that schools can get funding is from government, from parents via school fees, or from fundraising.

“So the picture this paints is that they will be even more pressure on parents to pay even higher school fees. Families are really struggling out there, and they just can’t cope with these continued increases in costs.”

Schools got a 2.9% increase in the operation grant funding in the Budget, but Ms Moroney said that was not enough to keep pace with inflation or growth in school rolls.

The Treasury paper also warns that the Ministry of Education payroll system may find it “challenging” to make the changes to staff’s pay by next year. But the ministry said it “considers it will be possible” to make the changes in time.