KiwiSaver will eat up DHB cash

17:00, May 26 2012

District Health Boards received increased funding in last week's Budget but a big chunk of it will be spent on KiwiSaver contributions.

Figures obtained by Labour under the Official Information Act and provided exclusively to the Sunday Star-Times shows that on average DHBs will pay out 17 per cent of the extra money they will get in the 2012-13 financial year.

From July the state sector has to pay its own employer contributions to KiwiSaver, a decision announced in Budget 2011. For example, Wairarapa DHB will have to pay $278,000, or 9 per cent of its $3.12 million increase, and Canterbury DHB will have to pay $8.65m, 42 per cent of its $20.5m increase.

Economist Bill Rosenberg said DHBs were already facing a $114m shortfall. "KiwiSaver certainly didn't help."

Labour's associate health spokesman Iain Lees-Galloway said KiwiSaver costs for some DHBs were "massive". "When you combine that with increases that barely keep up with inflation, in real terms for front-line programmes, DHBs are losing money."

Programmes, particularly community-based public health initiatives, which fell outside Health Minister Tony Ryall's national health targets, would suffer, he said.


"There's $80m of public health initiatives that will be cut over the four years. These are initiatives that save money in the long term."

Greens health spokesman Kevin Hague, a former West Coast District Health Board chief executive, said DHBs faced one-off costs next financial year such as a 3 per cent senior doctors settlement.

"This change to KiwiSaver contributions is another one of those one-off factors that will have a big impact on DHB costs that is totally unfunded in this Budget. The only place that can come from is taking dollars currently used to provide health services somewhere and using them for this instead."

A spokeswoman for Ryall said the comparison was not valid.

The total extra cost for KiwiSaver was expected to be about $46.5m next year, or about 0.4 per cent of the DHBs' $11 billion annual funding.

"We are not funding DHBs extra for this, it is not part of the $350m-plus increase being made available to DHBs this year. We expect DHBs to make efficiencies ... to pay for this.

"They've had more than a year to prepare for it."

But Hague said there was a law of diminishing returns on efficiencies.

"I don't think DHBs will be able to find efficiencies to fund the sort of shortfall they are facing."

The Gisborne-based Tairawhiti district health board faces paying out 30 per cent of its increased funding in KiwiSaver payments.

Its chief executive Jim Green: "But it is not a substantial amount in relationship to the overall funding that we have and it has been well signalled."

The DHB had already built it into next year's budget.

"It does put more pressure on us to make sure we are using our funding as effectively as possible."

Green was confident services would not suffer.

Sunday Star Times