The Health Ministry has been told to lift its game to lead the sector better at a time of belt-tightening and other challenges.
The formal review by the State Services Commission, the Treasury and Prime Minister's Department was released on Monday and highlights weak policy advice by the ministry.
The Performance Improvement Framework report says the health and disability sector faces unprecedented challenges from a growing and ageing population, with complex health needs at a time of urgent fiscal constraints.
It rates the ministry highly for a good performance from the sector in meeting government health targets, saying these have provided a focus that was previously lacking.
However, it says policy advice provided by the ministry to the Government remains poor, and urges the ministry to set priorities better and provide more strategic direction to the sector.
Labour Party MP Iain Lees-Galloway says the Government is obsessed with elective surgery quotas and Monday's report shows it is pumping resources into health to meet its six narrowly-focused health targets at the expense of other things.
"There's no strategy, there's no vision and there's no planning for the future. Under (Health Minister) Tony Ryall's watch, the Ministry of Health has been focused on looking at very short-term, narrow objectives and making sure they keep health out of the news.
"What they should be focused on is meeting the future needs of New Zealand."
The report says some government ministers remarked on slowness of advice, the frequency of errors, too much detail and a lack of practical policy options from the ministry.
Mr Lees-Galloway believes that is not good enough.
"Policy is often poorly researched, not based on evidence, is often based on efficacy rather than robust analysis. And I think that's a direct reflection of just how much the policy team have been hollowed out under the National Government."
Health Minister Tony Ryall says the targets have improved services.
The Ministry of Health says information used in the report is a year old and it is making progress with the improvements called for.