Thursday 29 September 2016

The HSE requires surgery more than it needs money

Published 17/09/2015 | 02:30

THE thing about the health service, one can't help but notice, is that it is always two billion short of being really good.

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The actual figure changes with inflation over the years, and it is probably a bit bigger than usual at present after all the cuts, but basically another 5pc would cure all ills. Or so we are led to believe.

A few thousand more beds, with accompanying staff and equipment of course, and all would be well. Or perhaps it's a few thousand more beds elsewhere, to free up hospital beds is what's needed. Or maybe more use of the GP service.

One begins to see why the experience of the boom years was so disappointing. The health service got its extra billions - for several years - but the brilliant, queue-free health service did not materialise.

If extra spending did not produce the improvements that might have been expected, spending cuts certainly made things worse. And the cuts were not even fully implemented. The HSE has consistently over-run its budget. The spending squeeze was much less than was intended, but the results appear to be worse than was promised.

Enter the Irish Fiscal Advisory Council (IFAC). The health service may be about curing people, but it is also central to the state of the public finances, and probably important for the economy's prospects as well.

IFAC's concern is with the first of these. Health accounts for a quarter of all government spending. This figure would have astonished our predecessors, including those who founded Britain's free National Health Service. They could not have envisaged the cost of modern drugs and procedures, or even the health expectations of modern citizens.

The exact proportions depend on how much a country chooses to spend on publicly-funded healthcare and how much it chooses to spend on other things, and how efficiently it does it. But even when choices are made, they may not be acted upon.

This is the great difficulty examined by IFAC in a recent analytical note. Health spending has consistently exceeded its budget. Last year, the excess spending was €650m, which was three-quarters of the total over-run in government spending.

In pre-crash days, budgets were often exceeded even when health spending was increasing, so it is hardly surprising that it was a consistent feature when they were being cut. The consequence is that health spending fell by less than did other services. If that had been the plan, well and good. But it wasn't the plan and there is no easy way of knowing if the actual outcome represented the best allocation of restricted resources. IFAC fears these failures threaten successful management of the public finances in the future.

It is going to be a challenge even if the economy continues to perform well. Quite apart from tight EU rules, pressures will increase as the population ages. Health spending will have to grow, which means it will be more important that it grows according to plan, and not by more. And the service ought also to be better than it is in many areas.

Most of us view the health service from the perspective of patients but previous reports, especially that by Prof Niamh Brennan more than a decade ago, found that a woeful absence of the less televisual skills of management explained much of the problem. IFAC finds the same.

Confidence is not improved by the revelation that much of the Exchequer spending data is measured by region, rather than on where the money is spent. This is a relic of the long abandoned Health Boards, whose financial management systems apparently were not abandoned.

As its name suggests, the Health Service Executive was formed, partly in response to Brennan, to improve management, rather than healthcare as such. It was spancelled from the beginning by trade union insistence that all existing staff retain their jobs (like Irish Water), but there seems little evidence that management methods themselves improved much under the new structure.

How things are to improve under the plan to break up the HSE and fold it back into regional outfits is not at all clear. It is hard to disagree with the report's view that, unless management control improves, the proposed new structure will make the budgetary control even worse.

The recent increase in administrative posts and promotions suggest that the HSE was not able to operate with the smaller numbers after voluntary redundancy.

IFAC's conclusion is that the promised improvements in productivity which accompanied the ban on compulsory job losses did not arrive. Half of last year's cost over-run was down to the hiring of more staff, and an underestimation of the pension costs for those who left.

Staff costs are by far the biggest item but drug costs are another major cause of budget over-runs. Although there are financial limits on the approval of new drugs, they are not linked to the overall budget limits

At the core of the analysis is the finding that health service plans are not actually married to financial allocations. Health service managers may be right when they complain that the money allocated is insufficient for the services promised. The answer to that, though, cannot be just adding a couple of billion all the time.

A bewildering array of reforms have been published. A new 'Money Follows the Patient' model (MFTP) began last year, although the EU Commission has noted that it will not work without the management reforms outlined by IFAC and others.

The Holy Grail of public administration, a medium-term expenditure framework to get away from budgets based on the previous year, is also in there. So far, governments have had no more luck than Sir Lancelot.

Where is Sir Galahad to be found? The report notes that improvements in the efficiency of health expenditure are likely to require reforms of a more structural nature than have been implemented in recent years. Structural reforms, as we know from the euro crisis, are the most difficult and unpopular of all.

The reason this matters is that health spending, at 8.7pc of GDP - 10.6pc of national income (GNP) - is well ahead of the EU average of 7.3pc, while the service ranks about average. Ireland is already paying more for its health service while facing into a more rapid increase in the proportion of elderly people than other EU states. Unless those reforms are adopted, both the healthcare system and the public finances will end up looking sickly.

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