James Reilly (Dublin North, Fine Gael) | Oireachtas source

I am very pleased to have the opportunity to address the select committee on the Revised Estimates for 2014 for my Department - Vote 38 - and the Health Service Executive - Vote 39. Copies of the Revised Estimates and briefing documents on the two Votes by subhead have been provided for Deputies. As they are aware, the annual Estimates are being reconfigured along programme lines to ensure greater transparency in Government expenditure. The Department of Health is working towards the development of programme budgeting and changing the structure of the health Votes to reflect this. This will take some time, however, as the financial systems in the HSE will have to be adapted to allow for it in the context of the financial reform programme under way. In the interim, the appendices to the Revised Estimates for the health Votes have been constructed along programme lines, based on the HSE's national service plan, to provide a high level programme breakdown of health expenditure. In addition, two programme subheads, concerning the PCRS and long-term residential care, are now included in the Revised Estimates Volume. The third programme for which information had been extracted - the children and families directorate - is now funded through the Department of Children and Youth Affairs following the establishment of the Child and Family Agency.
Before dealing with the Estimates in detail, I will make a few general observations about the overall budgetary situation facing the health sector. As members of the committee are fully aware, the Government is committed to tackling Ireland's very serious deficit problem. Current health expenditure in 2014 will account for 27% of gross current expenditure, meaning that fiscal realignment must, of necessity, affect health sector spending. The challenges facing the health system at a time of growing demand mean that the Government must press ahead with major health sector reform. I will continue to deliver the Government's programme of health reform throughout the course of the year and I am pleased that the HSE has set the advancement and implementation of the reforms at the centre of its planning for 2014, including but not limited to phased implementation of a money follows the patient funding system in hospitals; the transition to hospital groups, including appointment of new group CEOs, where required; the establishment of new community areas with associated governance and organisational arrangements; and the establishment of a patient safety agency.
In 2013 we published Healthy Ireland, the strategy for improving the health of Irish people and enhancing their health and well-being. It is an ambitious strategy that aims to embed health and well-being across public policy and services. It sets out a whole-of-government and cross-sectoral approach to address the demands placed on health and social care services from the growing incidence of chronic illnesses, together with the challenges presented by an ageing population. Chronic diseases such as cancer, cardiovascular conditions and chronic respiratory disease and diabetes are the leading causes of mortality and account for over three quarters of all deaths in Ireland. The risk factors associated with the increased prevalence of chronic diseases such as obesity, a lack of exercise, unhealthy eating patterns, the over-consumption of alcohol and the use of tobacco products are generally preventable. Healthy Ireland is critical in enabling the required shift in emphasis towards health prevention, promotion and improvement in the years ahead. The 2013 edition of Health at a Glance,published by the OECD, shows that Ireland continues to make substantial headway in improving health outcomes. Mortality due to cancer fell by 21%, ischaemic heart disease by 59% and cerebrovascular disease by 54% between 1990 and 2012 and in all three cases the rates of improvement in Ireland were above the OECD average. Life expectancy in Ireland has increased by a full four years since 2000 to reach 80.6 today, again above the OECD average.
I will now address the Estimates for health in some detail. The Revised Estimates for 2014 for the health group of Votes provides for gross expenditure of €13.164 billion for health services. Of this amount, some €12.774 billion is for current funding and €390 million for capital funding. A further €544 million, that is, €537 million in current funding and €7 million in capital funding, for child and family services is funded through the newly established Child and Family Agency under the aegis of the Minister for Children and Youth Affairs. Significant cost extraction is required, with €619 million in savings to be achieved in 2014. The primary aim in targeting savings is to cut the cost of services, not the services. This will be achieved largely through efficiencies and reconfiguration under the Croke Park and Haddington Road agreements, new charging arrangements for private patients in public hospitals and curtailing the growing cost of pharmaceuticals. The required savings have been incorporated in the HSE's service plan published on 18 December 2013 and are recognised in the Revised Estimates.
The funding for Vote 38 provides for gross expenditure of €206 million. This comprises €16 million in capital funding and €190 million for current expenditure. This represents a 6% reduction on the provisional outturn for 2013 and a 17% reduction on the 2013 budget.All health agencies funded by my Department were required to achieve further efficiency savings this year, with the Department's administrative budget being reduced in line with the moratorium on recruitment and the provision for legal costs and statutory inquiries also reduced. The provision for the National Treatment Purchase Fund has also been significantly reduced, pending consideration of its future role in the context of the structural reforms set out in Future Health.
In addition to the funding reduction, some €22 million was transferred from the Department's Vote to the HSE in the context of the drugs initiative. The funding will be used to support approximately 220 drugs task force projects, in respect of which the HSE has acted as channel of funding for a number of years. The HSE also provides funding for a significant number of the same drugs projects from its own Vote. The HSE-funded projects are subject to the standard governance and monitoring procedures of the HSE. Separate reporting, accountability and monitoring arrangements had applied to projects funded by the Department through the channel of funding arrangement. Allocations to drugs task forces will continue to be based on drugs task force recommendations and focus on tackling the drugs problem. The transfer of operational responsibility for the funding administration of drugs task force projects to the HSE is a key priority in the HSE primary care operational plan for 2014. Some €7.4 million remains in the Department of Health's Vote for 2014, €6.6 million of which is in respect of expenditure on 100 community drugs projects. The remainder funds the activities of the National Advisory Committee on Drugs and Alcohol, the Family Support Network and the citywide drugs crisis campaign which represents the community sector.
The gross provision for the HSE is €12.958 billion, comprising an Exchequer contribution of €11.553 billion, plus appropriations-in-aid of €1.405 billion. This is made up of €12.584 billion in current expenditure and €374 million for capital expenditure.
As members will be aware from discussions on the national service plan, some €537 million has been transferred from the Vote of the HSE to the Vote of the Minister for Children and Youth Affairs following the establishment of the Child and Family Agency which is now responsible for funding child and family services. In addition to this adjustment, the Revised Estimate for the HSE includes additional health funding of €47 million over and above the budget provision and €22 million for the drugs programme. The HSE is required to achieve savings worth €619 million next year to remain within the 2014 health expenditure ceiling.
As with last year, the significant cost of drugs and medicines has been targeted for savings measures. In recent years a number of changes to the pricing and reimbursement system have been successfully introduced, primarily through pricing and supply agreements with the pharmaceutical industry, and we have made good progress in addressing the cost base. With the passing of the Health (Pricing and Supply of Medical Goods) Act 2013, we now have a robust system of reference pricing and generic substitution and have already reduced the cost of atorvastatins by some 70%. More reductions will follow in 2014 and some €50 million in targeted savings is built into the budget for the PCRS. This saves patients’ and taxpayers' money, allowing us to focus on maintaining front-line services.
The 2014 Estimates provide for the full-year effect of the reductions to professional fees paid to general practitioners and pharmacists under the Financial Emergency Measures in the Public Interest Act 2009. Overall, these reductions will save in the region of €70 million in a full year, half of which was achieved in 2013.

The savings targets in relation to medical card probity and the demanding set of savings targets under the Haddington Road agreement were discussed at length with the joint committee on 14 and 16 January, and therefore I do not propose to go into any further detail on these now. Suffice to say that my Department will work closely with the HSE, and with the assistance and support of the Departments of the Taoiseach and Public Expenditure and Reform, to ensure that savings from these measures are maximised.

In setting the Estimate for the HSE tough decisions had to be taken by the Government, given the need to take corrective action on public spending. The health service must, of necessity, contribute to the expenditure reductions required in 2014, but the Government's objective has always been to ensure that these reductions are achieved in a way that secures the best possible outcomes for those in receipt of services, with a particular focus on protecting services for the most vulnerable. To protect services, we need to reduce costs and improve productivity.

Suitable and appropriate facilities are required in order to provide safe and cost-effective health care. Recent capital investment has brought about a significant improvement in the standard of facilities across all care programmes. Nevertheless, a significant proportion of the health care infrastructure is old and, therefore, generally unsuitable for contemporary health care delivery.

The HSE has submitted its draft capital plan for the multi-annual five-year period 2014-2018. This is under consideration and requires my approval with the consent of the Minister for Public Expenditure and Reform. For the multi-annual five year period 2014-2018, the major priority projects are the children's hospital, for which we were happy to announce the satellite urgent care centres today; the Central Mental Hospital; the relocation of the National Maternity Hospital; the national programme for radiation oncology; and the continued roll-out of primary care infrastructure in line with the national primary care strategy. In addition, the refurbishment programme for the community nursing homes and residential mental health facilities must be progressed.

Considerable progress is being achieved on numerous projects over all health care groups nationally. Facilities which are due to become operational in 2014 or early 2015 include 21 new primary care centres; 38 facilities in the acute sector; nine facilities with 348 beds for older people under the community nursing unit refurbishment programme; and in mental health, 16 facilities will be delivered, eight of which will provide 212 beds - associated with this programme are an additional 18 high-support residential places which will be provided for persons with disabilities who are currently resident in mental health facilities.

The health services received a large investment of taxpayers' money during the good years, but there has not been the degree of improvement that the people have a right to expect. The Government fully intends to correct this, even in these difficult economic times. Our reform agenda, while ambitious, will be delivered.

I thank the committee for its attention and I commend the Estimates for the health group of Votes to the committee. I will be glad to supply any further information or clarification that members may request.