In today’s extract from The Bulletin by Stewart Sowman-Lund: is Te Whatu Ora overspending or just underfunded?
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‘The strongest ministerial intervention available’
Christopher Luxon likes to talk about turnaround jobs, and this week he’s promised another one. At his post-cabinet press conference last night, the prime minister and health minister Shane Reti announced the board of Health NZ would be sacked and replaced with a commissioner, as The Post reported here. That role will go to professor Lester Levy, who was recently appointed as the agency’s chair. “This is the strongest ministerial intervention available under the Pae Ora Act and not a decision I have taken lightly, however the magnitude of the issue requires such action,” said Reti. The health minister laid the blame squarely at the feet of the former government’s decision to consolidate the country’s district health boards back in 2022, saying this resulted in “an overly centralised operating model, limited oversight of financial and non-financial performance, and fragmented administrative data systems which were unable to identify risks until it was too late”. But how much blame can fairly be levelled at Labour?
How did we end up here?
It’s not a huge surprise the government has taken action to shake up Health NZ. National has been consistently critical of Labour’s moves to overhaul the health system, though much of this furore was targeted at the (now-scrapped) Māori Health Authority. Those working in the health system haven’t been hugely positive, either, as this RNZ report from last year illustrates.
The signs of a major shake-up have been visible for some time. Back in 2022, Luxon, then opposition leader, claimed the creation of Health NZ would lead to a “mega bureaucracy” and not improve the state of our country’s health, views that he reiterated yesterday. Act’s David Seymour hinted at yesterday’s announcement before the weekend while serving as acting prime minister, reported the Herald’s Adam Pearse. In April, Health NZ’s chair Karen Poutasi resigned after less than a year in the role (her tenure had followed that of Rob Campbell, who was sacked by the last government). Lester Levy was soon brought in to replace Poutasi. Ian Powell argued for Newsroom that Levy was “made for” Luxon’s style of business politics, claiming he was backed by Treasury (a suggestion the department disputed).
In recent weeks, the number of sitting board members at the agency had dwindled down to just two. Some, like former National MP Amy Adams, had opted not to seek reappointment at the end of their term. But others, like Wellington GP Jeff Lowe, left the board more than a year early.
The new commissioner’s challenge
In the months since last year’s election, the government has made a point of tightening its belt across the public sector. Despite this, Reti, at yesterday’s press conference, said Health NZ was heading for a $1.4bn deficit if things didn’t change. As Stuff’s Bridie Witton reported, the health minister claimed the situation at the agency had worsened in recent months, and Health NZ was now “overspending at the rate of approximately $130m a month.” But, questioned Rachel Thomas for The Post, has the agency been overspending or is it just underfunded? Either way, it illustrates the size of the challenge the new commissioner will face, especially given the tight fiscal environment the government has already forecast ahead of the 2025 budget. David Seymour said last week that work was already under way for next year, and it’s fair to assume yesterday’s announcement will have factored heavily into that – as will the recent (high cost) Pharmac boost unveiled at the start of the month. Politik’s Richard Harman, writing after budget day, predicted the next round of spending cuts could be deeper than what we’ve seen already. Perhaps this is just the beginning.
Against the backdrop of all of this has been growing concern over Health NZ’s ability to deliver on its core function: health. Before the weekend, as RNZ reported, the government was accused of shortchanging GPs, while The Press reported on staff shortages leading to patients being turned away. There were also disputed reports over a frontline hiring freeze. Luxon and Reti made it clear this week their concerns were strictly with Health NZ as an agency, but nevertheless, frontline services could feasibly suffer as a result of cost cutting measures.
How has Labour responded?
Considering the last government was blamed for the current mess, it’s worth hearing how Labour has responded. RNZ reported that former health minister Ayesha Verrall said the government’s claims were untrue. “A blowout in the financial year that they are responsible for is their responsibility,” she said. That’s part of the story. As Newsroom Pro’s Marc Daalder (paywalled) argued, both governments can fairly share some of the blame. Health NZ should have had proper financial monitoring systems in place and Labour should have made sure of this while in government. But, says Daalder, Health NZ was running a surplus when Labour was in charge and now it’s not. “It is critical for the government to begin to acknowledge when it has erred, rather than reflexively point the finger elsewhere, or it will rapidly lose the trust of the public that elected it,” he writes.
