Mr Hague, who was chief executive of West Coast District Health Board before becoming an MP, warns that Southern District Health Board could face a tough future under the strict formula.
"Ministry officials would come and visit us on the West Coast, and they’d draw a graph on the whiteboard that basically says population-based funding works pretty fairly for DHBs in the middle of the range of sizes.
"[It] doesn’t work for tertiary DHBs, [and it] doesn’t work for the smallest.
"That was in conversation with us. They would never say that publicly.
"Within the sector, it’s well known that that’s the case," Mr Hague told the Otago Daily Times.
With a combination of top-level ‘‘tertiary’’ services and a huge rural area, Southern was not well served by the formula.
"When Southern was formed it combined one of each of the two kinds of DHB that the formula didn’t work very well for."
It was "no surprise at all that Southern ended up with a big deficit that it couldn’t control".
"Adjusters" in the formula — which are frequently cited by the Ministry of Health as making the system fair — were simply not enough to compensate Southern, Mr Hague said.
Mr Hague warned the redevelopment of Dunedin Hospital could be affected by the financial difficulties.
He said the Ministry of Health would factor in what the board could afford in capital charges on the rebuild.
Mr Hague’s view is contrary to the ministry’s stated position, which is that the South’s health needs dictate the hospital design.
"This is a real risk for Dunedin Hospital.
"The result will be that, despite the rhetoric, more people [will] have to be transferred out of the region, to Canterbury in particular," he said.
Mr Hague, who leaves Parliament next month to be chief executive of Forest and Bird, was known for a strong institutional and political knowledge of the complicated health sector.
He worked in a bipartisan fashion with National Government ministers to seek gains in areas such as ACC reform, adoption law, and cycle trails.
He was disappointed that bipartisan co-operation had not happened in health, as he believed he could have contributed towards solving some of the country’s health problems.
"I do believe that a lot of damage has been done [by the National-led Government]."
Mr Hague was greatly concerned by the mental health sector, as it was under immense strain due to underfunding, he said.
He was concerned about a lack of direction in health policy generally, and a loss of institutional knowledge and data collection at the Ministry of Health.
Ministry of Health acting director of DHB performance, John Hazeldine, responding to comments about the funding formula, cited a 2015 review which increased SDHB’s rural adjuster allocation.
"Southern DHB’s deficit position is due to long-standing financial issues, which resulted in the board being replaced by a commissioner in June last year," Mr Hazeldine’s statement did not address Mr Hague’s specific point about what ministry officials had told him.
MP Julie Anne Genter has been assigned the health portfolio in a shake-up of positions announced yesterday by the Green Party.
Mr Hague entered Parliament in 2008.
