Right prescription


The health system has been ailing.

Labour’s prescription was to change the system and increase the budget.

National’s priority is front line services – better, sooner more convenient care, as the pre-election policy promised.

Health Minister Tony Ryall has made a good start with an announcement of changes to backroom functions which should free hundreds of millions of dollars to be spent on frontline services over the next five years.

“Cabinet has agreed to a number of proposals from the Ministerial Review Group’s report ‘Meeting the Challenge’ that will greatly improve national and regional cooperation and reduce duplication of back office functions, ” the Minister said.

As a package, the changes will move up to an estimated $700 million in savings over five years to frontline services. That would buy about 16,000 heart bypass operations or build two large city hospitals.  The changes are also expected to reduce the health system bureaucracy by up to 500 administration jobs. These would be managed as much as possible through attrition and voluntary redundancy.

“The National Government inherited a public health system that wasn’t well placed to cope with the significant financial and clinical challenges facing it. There is too much duplication that has led to poor regional and national performance and a track to financial crisis.”

 The loss of 500 jobs is not insignificant, especially if they can’t all be handled through attrition and voluntary redundancy, and backroom functions are important. But each of the 21 health boards doesn’t need to perform all of their own individually and money saved in the backroom will be available to do more for front line services.

“The Government wants better coordination between District Health Boards (DHBs) and the Ministry of Health, and we want neighbouring DHBs working better together to improve services. Clinical networks will be a big part of this cooperation.”

The major changes include setting up a new National Health Board (NHB) within the Ministry of Health. The NHB will focus on supervising the $9.7 billion of public health funding the 21 DHBs spend on hospitals and primary health care.

The new NHB will manage national planning and funding of all IT, workforce planning and capital investment. It will also take national responsibility for vulnerable health services such as paediatric oncology.

Work will also start on consolidating the 21 DHBs’ back office administrative functions such as payroll and bill payments.

The Otago and Southland DHBs are consulting the public now on a possible merger and there has been little public opposition.  

Other boards may not be ready for that yet, but co-operation and handing over of services which can be handled centrally will be a good place to start in reducing duplicate costs in 21 separate health kingdoms.

Health system’s sick


I was a director of a hospital board in 1999 and because of that was talking to people involved in almost every aspect of the health system.

They had a single message for politicians in the lead up to the election: leave the system alone and improve the services.

Labour won the election and put their efforts into expensively changing the system instead of extensively improving services.

Close Up  showed a consequence of that tonight – an 83 year-old  man who needs an urgent operation for skin cancer, was all ready for it when it was cancelled because Auckland Hopsital is short of beds. That was the third time his operation was cancelled.

Longer life spans combined with new and expensive developments in health care are putting pressure on health budgets everywhere.

There are no easy answers to the problem, but Macdoctor shows how better use of private hopsitals for public patients could be part of the solution.

He has also done a comparison of National’s and Labour’s health policy.

Child, Disability, Mental, Rural and Men’s Health



Elderly Health





And his conclusion is:

If you are a health worker and you are not ticking National/ACT for your party vote, my punishment for you is to read through the entire Labour Health policy tonight – so that you can think about what you are supporting.

I like waffles for breakfast, it’s waffles for policy that give me the pip.

Quango Hunting Season Opens


Those of us out in the real world will not be surrprised by ANZ Chief economist Cameron Bagrie’s  conclusion that Government spending is being directed into non productive areas.

His study, prompted by a rise in government spending in relation to the economy, found it impossible to assess whether spending was productive, “because no one really knows the counterfactual”.

So instead, Mr Bagrie examined the spending mix — how much was spent on front-line activities, such as welfare benefits, health and education services and police rather than on “back office” (departmental outputs).

`What we find is that back-office (departmental) expenses have exceeded our definition of front-line spending, resulting in an upward trend.”

Growth in departmental outputs has averaged close to 7 percent a year since 1997 while front-line spending increased by 5 percent.

Nominal GDP growth within the economy averaged 5.5 percent. Government spending as a proportion of GDP has fallen from 42 percent in 1995 to 39 percent in 2001 and risen back to the OECD average of 40 percent in 1997.

Mr Bagrie said if the back-office ratio had remained in line with front-line spending then there would have been an extra $1 billion free for other activities and a cumulative saving since 1997 of $3 billion.

It would not have been difficult for people at the front line of public services to find a good use for that money, or some could have been better spent on tax cuts. 

In education, back-office spending had grown annually at 12 percent since 1997, massively outstripping front-line purchases.

Similarly, benefit spending increases had averaged 3 percent while back-office spending had been 7.5 percent a year.

Meanwhile unemployment is at record lows so there are more people in a department helping fewer beneficiaries.

However, in health, the trend was the opposite.

While it was encouraging spending for tomorrow in activities such as education and infrastructure was increasing, it was puzzling relatively more money was going into departmental spending, Mr Bagrie said.

The study found spending in productive government activities (education, law and order, science, housing, defence, employment initiatives, and transport) grew at 5.2 percent compared with those in non productive (departmental outputs, heritage, culture, recreation and economic and industrial services) at 8.4 percent.

That’s a damning indictment on Labour’s priorities.

In another gauge of the spending mix, Mr Bagrie said it appeared growth in spending in “hand-up” activities (front-line education excluding student loans and employment initiatives) was outpacing “hand-out” (benefits) by 4.4 percent to 3.3

At least that is encouraging.

Mr Bagrie acknowledged shortcomings in his definitions and noted the Government may have been playing “catch-up” in departmental spending due to previous under-spending.

He said there were no benchmarks and the mix of spending was not necessarily wrong, particularly as spending priorities were the result of living in a democratic society.

“Nonetheless, we believe the trend across our gauges is sufficiently clear: more government spending is being directed at areas that are not going to the front-line and for consumption today relatively to tomorrow.”

Mr Bagrie said there needed to be measurable benchmarks introduced into the Government’s stated objectives such as the Fiscal Strategy Report.

However, he said the requirement for transparency and rigorous analysis of spending could be overdone and may be part of the problem. Many resources in education and elsewhere were tied up in approval and monitoring rather than simply getting the job done.

In other words too much time, energy and money is wasted on form filling and box ticking.

With 41 government departments, 65 crown entities, 21 District Health Boards and 9 Crown Research Institutes, Mr Bagrie said it may be time for a repeat of the 1980s “quango hunt” to slim government down.

A quango hunt what fun! Let’s start by reducing the number of DHBs.

Health needs new prescription


Remember how in 1999 Labour said if we gave them a wee bit more tax they’d fix health? Well they’ve taken a lot more tax but as the ODT editorial points out our health system is still ailing.

 … after nearly a decade in which government spending on public health services has doubled (and so, too, have wage and salary costs), the system continues to fail to meet even moderate expectations.


The Clark Government’s decision in 1999 to restructure the public health system for population-based funding led to the creation of no fewer than 21 district health boards, each with their own expensive system of directors, structure and attendant camp followers from accounts systems to “communications departments”, together with the cohort of centrally located ministry officials needed to supervise functions and subject everything to regulatory scrutiny.


Given that every board has up to 11 directors, each of whom is paid a minimum of $16,000 a year, this means a nominal 200-plus people, all assumed to have the skills needed to manage their part of a $12 billion business, are overseeing the provision of public health services to just 4 million, a third of whom also have private medical insurance.


Instead of improving services Labour extensively, and expensively changed the system.


Do we need 21 health boards and 200-plus directors for 4 million people? Has anyone asked that question recently? We know that competencies at some health boards have proved inadequate and that, as a general rule, hospital expenditures (adjusted for inflation) have increased far in excess of measured outputs. Some of this imbalance must be due to such a far-flung administrative structure absorbing a hefty quotient of that doubled health funding.


In bureaucracy less is almost always more and a reduction in the number of boards sounds like the right prescription to me.


 It is certain that 21 health boards are bound to result in wasteful duplication, a point picked up in the National Party’s 2007 health policy discussion paper: “It is inefficient and inhibiting to have 21 DHBs that duplicate planning, monitoring and funding functions.


But National’s discussion paper does not talk about reducing the number of boards; it seeks efficiencies elsewhere and greater devolution to primary health care. The party’s health policy has yet to be announced so it may yet look to see if greater efficiencies can be found in hospital governance.


I suspect National is being cautious because the health is suffering from restructuring fatigue and they want the emphasis to be on services not systems.


Recently published comment by a Wellington economist suggests as few as four regional health boards could actually look after the health needs of the whole population. Four replacing 21 might be too much at one bite, but there may be good gains to be made to free up funds for more staff and surgical services by reducing, for example, the six South Island boards to two.


And while they’re doing it why not get rid of the expensive charade of electing board members. It’s Clayton’s democracy because whether or not directors are appointed or elected they’re answerable to the Minister, so let’s stop pretending otherwise.


A public health system which of necessity has to impose the rationing of its services must at least attempt to be as efficient as its private competitors which are restrained, in effect, only by the depth of their users’ pockets.


The relationship between health spending and productivity needs to be very carefully examined, because the long-term forecasts for health spending in the public sector are gloomy indeed: one study predicts the spending needed to cope with the needs of an ageing population will be double the rate of growth in the economy, even allowing for inflation.


There will never be enough money for health. But a responsible Government could do a lot more to ensure that as much as possible of what’s available is spent wisely on the front line and as little as possible spent  in backrooms and boardrooms.

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