But it is hard for a labour-intensive sector such as health to match the productivity gains of the economy as a whole. So if remuneration in the sector has to at least match what is happening elsewhere in the economy, relative prices (costs) for health services will rise, from that effect alone.

Economic growth, in short, does not get us off the hook.

Then there is the demographic problem. Average lifespans have increased but remain finite and we tend to cost the health system most in our final year.

Statistics NZ projects the annual number of deaths to roughly double by 2050 and there is not much that can be done about that as most of the people concerned are already around.

A focus on prevention may make all kinds of sense in terms of health outcomes, but from the narrow perspective of custodians of the public purse it does not help much.

"People living longer generally develop other ailments which increase lifetime health care costs," the Treasury says, which sounds a bit like "we go to all the trouble and expense of saving lives but people just die of something else anyway. What's the point?"

To be fair, it is a little less callous than that. The plea is rather for more rigorous cost-benefit analysis of preventive measures, as against other possible interventions.

Meanwhile, technological progress is a two-edged sword. Medical advances provide benefits for patients, the Treasury concedes, but often at a high cost. Each breakthrough creates a new source of demand.

"Treatments for heart disease have evolved from bed rest and aspirin in the 1950s to a range of treatments which includes coronary bypass surgery and angioplasty now."

But de Raad points out that technology can deliver productivity gains, citing the move from open heart to keyhole surgery. Overall, the average length of stay in hospitals halved over the 1990s.

The ministerial review pointed to productivity gains to be had from improving the way hospitals, and the system more generally, do things.

"There is much to be gained by reducing the substantial gap between the best and worst performers within and between hospitals," it said.

Measures to improve patient safety can save bed-days as well as reducing preventable harm.

"More efficient national procurement of hospital supplies and management of back-office and support services will also help," the review said.

It also seemed to favour increasing concentration of specialised services in regional hubs.

And it called for "a Pharmac-like process for assessing the cost-effectiveness of medical devices and assessing them for public funding."

No doubt there are worthwhile savings to be made in these areas.

Intuitively they seem likely to provide only a limited or one-off offset to the big, intractable drivers of health costs: demographics, innovation, the dynamics of the labour market and the link between rising incomes and rising demand.

But the Treasury contends that between 2002 and 2008 at least half of the increase in health spending arose from discretionary policy initiatives by the Government.

They may have in mind things like moves to subsidise doctors' visits and raising the income- and asset-testing thresholds for long-term care.

"Dealing with future demand pressures will ... require the Government to manage public expectations as to what the publicly funded health system can do for people."

The clear implication is an expectation that people will have to fund more of their own health care.

Doesn't that mean rationing access to health care by income?

"Well," says de Raad, "at the moment we ration by waiting lists."