News Stephen Kinsella

Friday 22 August 2014

We've had six years of cuts and tax hikes but medical card savings may be the final straw

Stephen Kinsella

Published 27/05/2014 | 02:30

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The largest single issue voters mentioned when answering exit polls was the review of discretionary medical cards by the HSE.
The largest single issue voters mentioned when answering exit polls was the review of discretionary medical cards by the HSE.

The local and European elections were mid-term protest votes by an electorate fatigued by six years of austerity. The public is now an anti-austerity alliance, in a sense. The largest single issue voters mentioned when answering exit polls was the review of discretionary medical cards by the HSE.

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This Government has never been able to control health spending. Even as other areas of government expenditure were cut, the Department of Health's budget required supplementary budgets for each year this Government has been in office.

You can view this outcome in two ways. One way is to say, 'look, the health service is under incredible pressure to do more with less, and if it overruns its budgets then so be it'.

Another way to see it is that the management of the HSE has been incompetent. When given a budget, good managers find ways to stick to their budgets, come hell or high water. But Health is not like other departments, and the way health is produced and consumed in developed economies is fundamentally different from Education or Justice.

Quite honestly, when it comes to people's care, the budgets come a distant second. But at a national level, the budget overruns do take from other departments.

In last year's Budget, which announced an uncosted giveaway of medical services to all children under six, the HSE was also told to rein in expenditure on medical cards to the tune of €113m. Why so specific a number? No reason was given but you do get to it if you do a few sums regarding the hole in the Budget from the previous year and the troika-mandated targets.

The HSE was set a target of savings of €290m under the Haddington Road deal. It will not meet those targets, and is now only trying to save €20m on medical card costs.

The HSE allows certain users essentially free access to most services when they possess a medical card. A medical card is of benefit to anyone, but as you get sicker, the benefits to the holder increase. The potential liabilities to the State increase as well.

So it makes sense to see whether some of the expenditure on medical cards can be reduced. Right?

Wrong.

The idea was clearly to look at who is using their medical cards and who is eligible, and it has been botched in its implementation by outsourcing the review to a private company, Arvato Finance. Faced with reviewing over one million cases, all it takes is one stupid mistake, asking a family whether their child's Down syndrome has improved, for example, to cause the public to worry their cards will be taken from them next. It has been reported that more than 640,000 review notices were sent last year, and of course mistakes will be made trying to claw back at that scale.

The media storm over removing medical cards from sick children can only have hurt the Government as it went to the polls last week.

My sympathy does not extend to the Government or the HSE in this regard. Government spending on health, in particular, has a ratchet effect. You cannot easily reduce entitlements once they have been given, and the scale of the benefit is such that removal of it from the needy will cause reasonable people to react negatively.

If anything, the medical card debacle shows us one thing clearly: it is sheer insanity to extend free GP care of the under-sixes when resources are so very limited.

Most people are 'loss averse', meaning they treat a €1 gain differently to a €1 loss. When it comes to the sickest and most vulnerable in society, the loss of vital medical services from an outsourced company strikes the average voter as barbaric, and they have reacted by punishing those they put in power.

The Government has managed a combined reduction of 19pc of national output, something like €30bn of cuts and increases in taxes.

The 'straw' for the electorate may well be €20m worth of savings on medical cards, roughly 0.0006pc of the total austerity package.

The public have told the Government this is as far as they will go in terms of austerity. To save itself, the Government needs to listen. Hard.

Stephen Kinsella is a Senior Lecturer in Economics at the University of Limerick. On Friday, May 30, a conference on Austerity: Economic, Social, and Political Perspectives will be live cast from 10-2pm at http://s120.ul.ie/drupal/austerity

Irish Independent

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