(i)

Nominal GDP Estimated

- production Resident
Central Government measure CPI (mean for year Population
Expenses by Function (Year Ended ended June). (June
Year (Year Ended June) ($m) March) ($m) June 2006 = 1000 quarter)
Health sub
Total Health All Groups group
2009 66,657 13,058 189,618 1,076 1,035 4,298,000
2010 69,711 13,679 194,251 1,096 1,074 4,348,200
2011 85,381 14,195 203,434 1,138 1,139 4,383,200
2012 76,087 14,846 213,241 1,163 1,175 4,407,300
2013 76,901 15,657 217,473 1,173 1,212 4,439,000
2014 78,678 16,293 232,324 1,191 1,244 4,502,900
2015 81,060 16,785 241,927 1,198 1,267 4,587,900
2016 83,377 17,233 251,767 1,202 1,269 4,684,500

Table 1

(ii) Based on the nominal values of health expenditure from 2009 to 2016, it can be deduced
that on average, the total health expenditure has risen on average by 4.07% per year. The
nominal value of health expenditure per capita similarly has risen by 2.64% per year on
average. By looking at nominal values only, it can be concluded that both total health
expenditure and health expenditure per capita have risen from the years 2009 to 2016.
The only issue of looking at nominal values is that the price level is not consistent
through the years. The nominal values of health expenditure are observed values that
exist in time measurement and inflation would cause these values to rise despite health
expenditure being constant.

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 (iii) The following table will be used throughout the rest of the assignment.

Health
Expenditure Health Real Health
as a % of Expenditure Real Health Expenditure Real Health
total as a % of Expenditure Real Health (All Groups Expenditure
Government Nominal (All Groups Expenditure CPI) per (Health CPI)
Year Expenditure GDP CPI) (Health CPI) capita per capita
Percent Percent ($m) ($m) ($) ($)
(1) (2) (3) (4) (5) (6)
2009 19.6% 6.9% 12133 12619 2823 2936
2010 19.6% 7.0% 12481 12736 2870 2929
2011 16.6% 7.0% 12474 12463 2846 2843
2012 19.5% 7.0% 12765 12635 2896 2867
2013 20.4% 7.2% 13348 12918 3007 2910
2014 20.7% 7.0% 13680 13097 3038 2909
2015 20.7% 6.9% 14011 13248 3054 2888
2016 20.7% 6.8% 14337 13580 3061 2899

Table 2

(iv) The health expenditure as a percentage of total government expenditure can be seen
based on government spending which is how much government funding goes towards
health expenditure every year. The comparison between health expenditure and the total
gross domestic product can be seen based off health expenditure as a percentage of
nominal GDP shows how much is health expenditure compared to the total gross
domestic product.

They might differ as the total government expenditure and total GDP for health
expenditure is different. The total government expenditure only shows the expenditure of
the government sector and the GDP includes all production in New Zealand.

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(v)

Real Health Expenditure Changes

5.0%

4.0%

3.0%

2.0%

1.0%

0.0%
2009 to 2010 to 2011 to 2012 to 2013 to 2014 to 2015 to Average
-1.0%
2010 2011 2012 2013 2014 2015 2016
-2.0%

-3.0%

Adjusted to CPI Adjusted to Health

Graph 1: Real Health Expenditure Changes

The Real Health Expenditure (all groups CPI) have shown an increase of 2.4% per year
on average from the years 2009 to 2016. This would mean an adjustment to the price
level of the CPI would result in a 2.4% increase per year on average in the Real Health
Expenditure. Based on the data of the Health group CPI, the Real Health Expenditure
rose by a 1.1% per year on average, meaning that if the health expenditure was adjusted
to price levels of health related cost it would result in real health expenditure rising by
1.1% per year on average.

The increase in the real measurement of the health expenditure would mean that the
increase is adjusted to the price level. This would be due to an increased price level and
not inflation.

Adjusting the real measure to price level of health related cost would make it more
accurate. Based on the statistics given, most of the health expenditure goes towards
health related costs and the fluctuations of health related costs would most likely cause
the nominal amount of health expenditure to fluctuate in a similar manner. Fluctuations
in health related costs would most like be minimal in the price level based on the CPI,
due to the fact that health related costs does not take up much weight in the CPI basket.

There is a large difference in the measure for the year 2012 to 2013. There is a
substantial increase in real health expenditure which is 4.6% when the real values are
adjusted to the price level of the CPI. Despite this, when the real health expenditure is
adjusted to the price levels of health costs, there only is a 2.2% increase. This might be
caused by an increase in price levels of health related cost which is higher than the price
level of the CPI increase.

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(vi)

a) The use of per capita measurement gives a more precise measurement as it gives a
more accurate representation of the data compared to real measurements of the data
since the data measures ‘by the head’. Measuring in per capita is especially useful
since it shows comparatively any minor changes in the GDP or inflation rates
between groups.

b) Over the time period between 2009-2016, it can be said the health funding from these
years compared to all other groups have been decreasing as a proportion of GDP.
This can be seen in Table 1 where Nominal GDP production for the years from
March is way higher than the Real Health expenditure CPI in Table 2. The reason for
this is if GDP rises at a faster rate than health spending, health spending as a
proportion of GDP will fall even if there is no change in health spending. Based on
the data, the drop in health funding as a proportion of GDP shows significant funding
shortfalls in the governments health operational funding since 2009 as seen in
Graph 1 where it was at its lowest.

(vii) Based on the article on The New Zealand Medical Journal, the analysis of Budget
data from the year 2009 to 2010 have shown government Health allocations being
less than expected of each year to cover the stated costs of announced new
services, increasing costs and the Ministry of Health’s cost-weighted index for
population growth and ageing. (Lyndon Keene, 2016) To summarise this, the
estimated funding shortfall for the time periods for 2015 to 2016 have come up to
more than $1 billion.

Looking back on Table 1 of the data based on per capita measurements between
the all groups expenditure and the health group expenditure, it can be seen a trend
of increasing all groups expenditure and decrease in health expenditure. This gives
an expected trend of the government continuing cuts to health spending and more
towards other government expenditures. This might be due to the fact government
would try to set more funds towards other groups such as development which
could be for the reparation of damages of the Christchurch City Earthquakes. The
same article mentioned above also mentions total real government health spending
is expected to drop by approximately 4% per year. This might be caused by the
account forecast of inflation and the Ministry of Health’s cost-weighted index for
population growth and the effects of ageing.

The actual and estimated total costs of government funds towards health
expenditure can be predicted based on the population growth of New Zealand. This
is because there is an ever-growing ageing population throughout the years and it
must be taken into account that as the years go by the demand for government funds
would increase based on the population increase. A rough estimate of this can be
seen from data provided by the Ministry of Health where it can be noted that it can

4
 be seen the projected expected cost of Health expenditure would be in the years
2012 to 2032 as seen in Table 3. (Dale, 2015)

Table 3: Total Cost of Residential Aged Care at 65+ ($2013),2013,2017,2022,2032

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References:

1. https://www.nzma.org.nz/journal/read-the-journal/all-issues/2010-2019/2016/vol-129-
no-1435-27-may-2016/6891 (Lyndon Keene, 2016)
2. https://cdn.auckland.ac.nz/assets/business/about/our-research/research-institutes-and-
centres/RPRC/WorkingPaper/WP%202014-2%20LTC%20costs%20FINAL.pdf
(Dale, 2015)