News Colm McCarthy

Wednesday 17 September 2014

White paper on health ignores key issue of cost

For all the money the State spends on this vital system, its inefficiencies are inexcusable.

Published 13/04/2014 | 02:30

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STATE OF CRISIS: The bloated health system in this country delivers little value to the taxpayer compared with its huge cost

The Irish health service employs around 10 per cent of the working population. Most, including HSE employees, are paid directly out of the State budget. For the rest, their incomes come in large part from the State through indirect channels such as the general medical service payments to GPs and State subvention of pharmacy costs. Health is, by far, Ireland's largest nationalised industry.

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The recent white paper on health insurance draws attention to some important features of Irish health expenditure, of which two are particularly striking. Health spending per capita in Ireland is high by reference to the peer group of OECD countries, while the population age structure would point in the opposite direction: Ireland does not have a preponderance of elderly people, who make the greatest demands on the system.

Average expenditure per capita in Ireland, for any given standard of health care, should be lower, not higher, than the OECD average. There are unique difficulties in controlling health expenditure, including the unavoidable feature that, in a system of largely free provision, the level of demand is not under State control.

Health service professionals are, in many cases, incentivised to over-provide, the phenomenon of supplier-induced demand. This is a feature of health care systems in many countries. Notwithstanding the enormous increase in the State budget for health during the Irish bubble years there is widespread dissatisfaction, justifiable or not, with the quality of service and delays in the provision of treatment.

There are many reasons why health spending in Ireland delivers poor value, but the principal difficulty is that the Irish State, in all its areas of activity and not just in health, is not proficient in extracting value for the taxpayer's dollar. Interest groups on the producer side of the industry, including trade unions, trade associations of medical professionals, pharmacists and others have more clout than consumer/taxpayers and have succeeded in bending the political system in their interests.

The inefficiencies in the Health Service Executive have been well-publicised over the last few years but the pace of reform is glacial. Politicians have reacted to the public finance crisis through the imposition of spending ceilings which they seem powerless to enforce, while simultaneously promising yet further extensions of free universal service, most recently in the form of free GP care to all under the age of six.

The principal concern of the Department of Health appears to be the location of new sources of finance adequate to keep the current system unreformed, rather than the reduction of cost to normal European levels.

A friend who requires anti-depression medication discovered, on a recent trip to Spain, that a supply of tablets cost €22 in the local pharmacy. The identical packet costs €62 at retail pharmacies in Ireland. Whether the excess cost is borne by the State through taxation, picked up by a medical insurer who must recover the cost in premiums, or paid directly out of pocket by the patient is a secondary matter. Why does a standard, branded product cost so much more in Ireland?

This is not an isolated example. Some people suffer a condition called haemochromatosis, loosely referred to as 'iron in the blood'. This requires a regular but routine treatment consisting essentially of removing some blood. In Ireland this is elevated into an elaborate rigmarole requiring consultations and an out-patient trip to hospital and costs up to €300.

Another friend suffers from this ailment but fortunately has a holiday home in Portugal, where a quick trip to the nurse at a local clinic gets the job done for less than one-third of the cost in Ireland. He reports regular queues of Irish people stocking up on various medications at the local pharmacy in the Algarve before they catch their flights back to the tender mercies of the Irish healthcare system.

There are almost 80 hospitals, public and private, in Ireland for a population of around 4.5 million. The Government, in its recent proposals for a new health insurance system, has cited the Netherlands as a desirable model.

It is the policy of the Dutch government to operate around 40 hospitals for the entire country, which has a population of 17 million. That is to say, the Dutch reckon they need half as many hospitals as Ireland provides for a population almost four times larger.

There have been extensive campaigns in several towns around the country to retain a wide range of specialisms in small hospitals located within, in some cases, 30 minutes' driving time from a larger, better equipped and better staffed regional facility. Every attempt to rationalise the hospital system is resisted by local politicians unconcerned about excessive cost or the risk to standards of care in sub-scale units.

The Hanly report, released over a decade ago, concluded that the pattern of acute hospital provision was not appropriate, and that a smaller number of larger hospitals would help to deliver improved patient care, and to enable more effective rostering of specialist staff. Hanly was not the first report to make recommendations along these lines and the failure to implement is based on political rather than medical considerations.

There has never been to my knowledge a thorough review of earnings in the various medical professions in Ireland relative to what is available in the United Kingdom and in other European countries. The health sector is not alone in this – public service pay rates in Ireland have been reduced in recent years in response to the public finance crisis but not on the basis of a proper pay benchmarking exercise.

A useful task for the Department of Health would be the conduct of a simple study along the following lines: what would be the annual cost of the Irish health service if all staff, including pharmacists and private practitioners ultimately paid from the public purse, were remunerated at current UK pay rates?

The medical interests will argue that remuneration levels in Ireland are not exceptional and are currently in dispute over the poorly timed introduction of 'free' GP care for the under-sixes. Perhaps the Irish system would cost less at UK remuneration rates, perhaps not, but it would be nice to know the figures.

One potent source of excess earnings in any profession is restriction on entry, through limiting the number of training places. In Ireland, the extraordinary Leaving Cert point totals required for entry to medical and veterinary colleges represents a priori evidence that access to these professions is being artificially restricted.

One result is that young Irish people with excellent Leaving Cert results are forced to pursue undergraduate studies in UK and other overseas universities.

Since medical training takes so long, and is so costly, the subsidy to those students who manage to gain entry to the Irish colleges is far larger than the subsidy to other student categories. It has been estimated that an Arts or Social Science student, in college for three (sometimes four) years, costs less than€10,000 per annum. Medical students cost the State up to €30,000 per annum and study a few years longer as well.

The extraordinary excess demand for the restricted number of training places has one obvious explanation: the expectation of excess lifetime earnings. This is exacerbated through the high per-capita subsidies offered to medical (and veterinary) students.

The Government has summarised its plans for universal health insurance (UHI) in the recent white paper in the following terms: "Under UHI, health insurance will be mandatory and every individual will have equal access to a standard basket [package] of primary and acute hospital services, including acute mental health services. The system will be founded on principles of social solidarity, including financial protection, open enrolment, lifetime cover and Community Rating. Everyone will have a choice between competing insurers, who will not be allowed to sell insurance that provides faster access to services covered by the UHI standard package. They will be obliged to offer the same package of services to all."

The document is replete with lofty objectives but cost control is barely mentioned. There are two key issues to be addressed in Irish health policy. The first is controlling costs, which rose at quite extraordinary rates during the bubble. The second is deciding how those costs are to be distributed. The policy debate is focused on the second of these concerns, the better to avoid the distasteful task of facing the music on the first.

Sunday Independent

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