National keeps Labour’s multi-year health funding system - but how much?
Finance Minister Nicola Willis has decided to stick with the multi-year way of funding the health system introduced by the last Labour Government.
In an interview with the Herald in January, Willis said she was considering scrapping the idea and moving to a more conventional annual way of funding health.
On Friday, the Herald asked whether she had made up her mind whether to stick with or scrap this system. Her office replied with a single “yes”. Asked whether her decision was to stick with the existing model, the reply was repeated, “yes”, it would be continued.
In 2022, Labour, to coincide with the merger of District Health Boards into HealthNZ, introduced a new way of funding healthcare.
Instead of health bidding for annual funding increases each year, theHealth system would bid for multiple years of funding at once. This would give the system certainty, particularly when it comes to hiring, because Health bosses would know they have guaranteed funding increases across successive budgets.
This is meant to give the system the certainty it needs to hire and keep its large workforce, free of the fear that it can continue to afford staff in subsequent years. The thinking was that if you have a workforce as large as the health system (which numbers more than 100,000 currently), you need secure funding to know how many people to hire and what your long-term wage bill might be.
The first three-year funding plan was announced by Labour in 2023 and matched by National, which implemented it in the 2024 Budget.
Those three years of funding increases come to an end at the end of the current year’s Budget in June 2027. The coalition had not indicated what it will do to replace it, but a decision must be made by the next Budget, which puts pressure on parties to work out what health cost-pressure funding they can afford to campaign on.
Speaking to the Herald in an interview published in January Willis said she accepted the model when she became a minister, but grew disappointed with it.
“Quite famously, Health NZ had a bit of a disaster … It didn’t stick to its budgets at all, which undermined what we were trying to achieve with its forward funding approach,” she said.
“I am considering that together with the Health Minister quite carefully,” Willis said.
Willis said she was also dissatisfied with the relatively blunt and untargeted way health was currently funded.
The way the system currently works in most cases is that ministers hand over large sums of money to delivery agencies, which then have a great degree of discretion on where it goes (the Government sometimes funds explicit things outside of this bulk funding, like vaccination programmes, which often have their own appropriation).
The Pre-election Economic and Fiscal Update will be published next Tuesday.