Mr. David Muiry:

I wish to respond to Deputy Kelleher's questions on the costs under UHI and the cost drivers. Clearly many factors will drive the costs under such a regime, but foremost of those would be the scope of benefits, which is ultimately a policy decision as to what would be covered under such a standard package. Senator Crown mentioned the good example of high cost pharmaceuticals, which is, again, a policy decision. Should such novel treatments be part of the standard package, in which case it would have an effect in driving up costs in the system as a whole? The ability of insurers to negotiate with providers and the effectiveness with which they can do that will serve to contain costs. In addition, the provision for insurers to write supplementary health insurance benefits in addition to a standard package serves to bring down the costs of operating such a UHI regime and in my view should be encouraged.

There is a very important point regarding the basis of risk equalisation for health status, which raises itself within the provisions of the draft health insurance amendment Bill. Currently that is framed in such a way that equalisation will take place on the basis of health utilisation rather than health risk. In other words it is effectively an after-the-fact health measure depending on the experience of the membership of particular insurers. In principle that serves to discourage active management of health claims in the most efficient way, which ultimately has the effect of reducing costs within the system.

We strongly advocate that, at the earliest opportunity, such an implementation of health status-based risk equalisation adjustment be based on risk and not utilisation. In other words, it should reflect the risk characteristics of the membership of the particular insurers, not the number of days they spend in hospital.

A vibrant, competitive insurance market will deliver UHI in the most efficient manner. As has been reflected in different comments, anything we can do in this interim period to ensure we have a vibrant commercial health insurance market will serve to make that transition simpler.