Health NZ has extended its cost-cutting drive by another year, saying it was not realistic to hit its initial target in 2026. 

The centralised health organisation confirmed a deficit of $722 million for the 2023/24 year today, compared to a target surplus of $54m. It is also projecting a $1.1 billion loss for the 2024/24 year. 

Health Minister Shane Reti appointed a commissioner, Professor Lester Levy, to Health NZ in July out of concern about its governance and over-spending. At the time, it was running monthly deficits of $130m. 

Levy and chief executive Margie Apa planned a two-year “reset” of the organisation, aiming to be spending within budget by mid-2026. That has now been pushed out to mid-2027. 

The reset of Health NZ involved bringing spending under control and devolving some responsibilities to a regional level. 

A financial update in October said Health NZ was on track for a $1.76b deficit in the 2024/25 year. That was revised in its annual report to $1.1b. 

“Some of the significant changes made in recent months are having the desired effect, but it is clear further change is needed to live within budget,” Apa said. 

“That is why we are also signalling today a more realistic timeframe to do that within. 

“We have revised our reset timeline and will be implementing our cost reduction plan over three years, to get us back to budget by the end of the 2026/27 financial year. 

“By making cost reductions over a longer timeframe, we can implement change without compromising our focus on delivery of health targets and mental health and addictions targets.” 

The revised deficit was a central issue as Health Minister Dr Shane Reti and Labour’s health spokeswoman Dr Ayesha Verrall locked horns during Reti’s appearance before the Health Select Committee during Parliament’s scrutiny week. 

The pair this morning accused each other of manufacturing crises within the health system - Verrall alleging Reti and Levy had exaggerated projected financial deficits to justify its workforce cuts in what she deemed to be “reckless” management. 

Reti responded, claiming Health NZ had had no internal monitoring infrastructure, which had led to ballooning costs earlier this year. 

Reti later told journalists Verrall’s claim was “absolute rubbish” and reiterated his comments about Health NZ’s insufficient monitoring. 

On the revised budget target, Reti said the decision to push it back was made after Health NZ found its consultation process with staff amid proposed workforce cuts had taken longer than expected. 

Verrall said the new target was a “silver lining” as it could ease the pressure on Health NZ to cut further into the health system to find savings. However, she refused to credit Reti and Levy for being “slightly less austere” with their financial management. 

Apa said there were two key differences between the October update and today’s result. 

“Those factors were anticipated redundancy payments and costs allocated for estimated Holidays Act payment remediation.” 

The deficit for the previous year was caused by recruiting more people than Health NZ had budgeted for, and hiring these staff at a higher salary rate than budgets - mainly because of pay equity and collective employment settlements. 

To get within its budget, Health NZ has sought redundancy from non-clinical workers, with 564 taking up that option so far. 

It plans to cut another 1500 roles, with up to 700 of those jobs believed to be vacant. Most of those roles are within units that are focused on data and digital and public health. 

Isaac Davison is an Auckland-based reporter who covers health issues. He joined the Herald in 2008 and has previously covered the environment, politics and social issues. He has covered assisted dying issues since the End of Life Choice Act was first drafted.