Treasury warns there is a 'significant risk' that further DHB deficits will be higher than expected

Health Minister David Clark said Treasury's forecasts differ from the Ministry of Health's because Treasury factored in DHBs' historic underperformance against their approved annual plans. Photo / Mark Mitchel

There is a $200 million shortfall between the total District Health Board (DHB) deficit and how much money the Government is spending on funding DHB deficit support.

The Treasury is also warning the Government that there is a "significant risk" that future DHB deficits will be higher than had previously been expected.

Details in last week's Budget also revealed that the 2018/19 year's deficit for the DHB is forecast to be almost $50 million higher than Health Minister David Clark had anticipated.

In February, when he put DHBs "on notice" to improve their financial performance, Clark said the potential budgeted year-end deficit for all DHBs was roughly $346 million.

But Treasury expects that figure to be $390 million.

In the Budget, a one-off capital injection of $190 million was allocated to DHBs to manage their deficits. A spokesperson for the Ministry of Health said it was too early to say how the funding would be spread across the 17 DHBs in deficit.

Treasury also warned that based on past results, there was a "significant risk" that DHBs' deficits may continue to be higher than expected over the coming years.

It said this would "adversely impact" the Government's future surpluses.

"If the deficits that are included in the fiscal forecast were to eventuate, additional funding support may be required to ensure the sustainability of the sector."

Copies of the 2019 Budget, the Wellbeing Budget. Photo / Mark Mitchell

In fact, according to Budget documents, the higher than expected DHB deficit was already one of the major factors behind next year's lower than had been expected surplus.

The Government's surplus is expected to be $3.5 billion this year but is forecast to fall to $1.5 billion in 2020.

In a statement to The Herald, Health Minister David Clark said Treasury's forecast of DHBs' figures differ from the Ministry of Health's because Treasury factored in DHBs' historic underperformance against their approved annual plans.

"The risk identified by Treasury that DHBs may report even higher deficits for the current financial year largely relates to the potential treatment of legacy issues that the previous Government failed to address.

"We have a clear plan to bring the DHBs back to a sustainable position," he said and added the Government's plan included greater accountability and monitoring, targeted recovery plans and, if necessary, changes.

"We have demonstrated our willingness to intervene already at Counties Manukau and more recently at Waikato DHB."

DHBs' "sustainability" was listed as a new specific fiscal risk to the Government in this year's Budget.

Data from the Ministry of Health's December 2018 financial performance report shows 17 of the 20 DHBs are forecasting a deficit in the year to June financial year.

At $98 million, Canterbury DHB had the highest projected deficit, followed by Waikato with $56 million and Counties Manukau at $53 million.

Auckland DHB is forecast to break even, and Nelson and South Canterbury are expected to have a very small surplus.

Beehive sources say it's up to the individual DHBs to manage the rest of the shortfall.

A spokesperson for the Ministry of Health said DHBs were working with the Ministry to finalise their annual plans for 2019/20 which will confirm their budget.

"A key focus of these plans is ensuring that DHBs improve their financial position and they continue to provide sustainable high-quality services to improve New Zealanders' health and wellbeing."

The Government allocated almost $14 billion to the 20 DHBs for operational services to meet the needs of the districts' populations in this year's Budget.

Last year, DHB's were given $13.2 billion.

National MP Michael Woodhouse: "I expect DHBs will carry enormous deficits as they are being so tightly funded." Photo / Mark Mitchell

Association of Salaried Medical Specialists (ASMS) director of policy and research Lyndon Keene said the DHB funding falls short by $300 million.

"I expect DHBs will carry enormous deficits as they are being so tightly funded."

National health spokesman Michael Woodhouse said the public should be concerned about the forecast deficits for District Health Boards in Budget.

"While there is a clear need for enhanced mental health funding, the Government has raided other areas of the health budget to pay for it.

He said leaving DHBs struggling under ever-increasing deficits makes a mockery of the Government's wellbeing focus.

"The sea of red ink we've seen DHBs sink deeper into won't be fixed by this Budget."