The Otago District Health Board faces cost cutting because of a budgeted deficit of $7.3 million.
At the root of this problem is the wrong assumption that Otago was over-funded.
Population-based funding is good in theory and may even work in practice when adjustments are made for factors such as age and rurality providing it is based on realistic budgets.
But when it was introduced the Minsitry of Health started by saying Otago was over funded and required it to reduce costs. Instead of working out how to bring other areas up to Otago’s standards, the bureaucrats told Otago it had to get down to the lower cost per person ratio in other areas and the board has been trying to do more with less ever since.
Over funding was simply a bureaucratic judgement based on a wrong assumption. The deficit Otago is now facing and services like the Otago Community Hopsice and Plunket complaining they haven’t got enough money to provide their services are evidence of that.