THE Department of Finance is warning that Health Minister James Reilly's reform plans could result in spending cuts in other departments or "the introduction of specific tax increases".
Dr Reilly's plans to bring in universal health insurance (UHI) are increasingly being viewed as "dead in the water" in the wake of what was being described as "a pincer movement" by the Finance and Public Expenditure departments.
Brendan Howlin's Department of Public Expenditure has already argued the proposals are unaffordable and will cost around €1,600 per person.
But correspondence seen by the Sunday Independent reveals Michael Noonan's Department of Finance has also raised grave concerns over the "fiscal risk" in the plans.
Dr Reilly's white paper on the rollout of UHI is due to be discussed at a Cabinet sub-committee meeting tomorrow.
But the Department of Finance warns the absence of detail in the draft document means they have concerns the plan fails to protect the interests of the taxpayer.
It also warns the UHI proposals may have to be funded by increased taxes or cutbacks across all other government departments.
In a letter, a senior official argues the existence of such "a significant expenditure risk'' in the proposals means the Government would struggle to balance its books.
It warns the current white paper could have a knock-on effect on the performance of the domestic economy and could have "labour market and tax wedge implications".
The critique of the minister's White Paper means the embattled Dr Reilly is now at odds with the two most powerful departments.
The Department of Health has already rejected claims from the Department of Public Expenditure that the system could pose "a threat to financial stability".
However, in its response, the Department of Finance is particularly scathing about the absence of fiscal detail in the white paper.
"With regard to the fiscal risk, our job in this regard is difficult to the extent that there are no monetary values given for the changes to government expenditure as a result of the introduction of UHI," the letter stated.
The absence of specific figures contradicts the "explicit statement" in the White Paper that it "will set out details of the UHI model in addition to the estimated costs and financing mechanisms associated with the introduction of UHI".
The Department of Finance says the absence of "a clear articulation of a budgetary cap on expenditure" makes a proper assessment of the fiscal sustainability of UHI "very difficult".
And in a claim that will secure the attention of the Cabinet ahead of the local and European elections, it also notes the current proposals could "necessitate reduced spending in other departments or the introduction of specific tax increases to pay for the increases, the economic consequences of which would be far from clear".
Significantly, the Department of Finance also warned any failure to control costs could damage Ireland's fragile economic recovery via "a transference of the spending risk under UHI to other sectoral spending or the tax system/wider economy".
The letter also warned that: "Given the potential public finance risk from the implementation of UHI, the department would strongly advise that the white paper should set out a framework for cost control."
A senior health source said the letter from the Department of Finance has a concern there needs to be a budgetary cap on health expenditure.
"Minister Reilly is already on the public record as being in agreement. He has said the following: 'I believe it makes sense to have a cap on public healthcare expenditure so it doesn't rise above a certain level of national income'. The UHI white paper will reflect that proposition," the source said.
But the political response, particularly from the Labour Party wing of the Coalition was universally scathing.
"James and universal health insurance are dead in the water, the only thing we can do now is either give this thing, or the minister himself a decent Christian burial," a senior source said.
"Typical James, tactically brilliant, coming in before the election with costs of €1,600 a man, woman and child on top of the water charges and the property tax – that will see us back in all right."
Another senior Coalition source warned: "This proposal is the utter antithesis of the interests of the coping classes we are trying to protect, those who will be most impacted is the 20 per cent who don't qualify for medical cards but can't afford health insurance."
"How are we going to force people to purchase health insurance, he may be excited about his little document but the only reason this will be let out is to kill it."
JOHN DRENNAN, Political Editor