Mr. Seamus McCarthy:

Net expenditure of €239 million was incurred on the Vote for health in 2012. A saving of €86 million was achieved on the €326 million net expenditure provided for in the Estimate. The outturn was around 74% of the net amount provided. The outturn relative to budgeted expenditure amounts included a 43% underspend in the National Treatment Purchase Fund provision, a 41% underspend on hepatitis C and HIV compensation, a 20% saving in agency funding and a 52% underspend in the provision for inquiries, legal fees and settlements. The 2012 appropriation account for the HSE indicates that its gross expenditure for the year amounted to just under €14 billion. The outturn was marginally higher than the 2011 gross expenditure level but 7% below the HSE's peak expenditure in 2009. Appropriations in aid in 2012 amounted to €1.49 billion.

The outturn for the HSE's Vote for 2012 was close to the amount provided by Dáil Éireann in the Appropriation Act, resulting in a surrender of just under €23 million. However, this was achieved after provision of an additional €360 million by way of a Supplementary Estimate in December 2012. This represented an increase of 3% on the original overall Voted Exchequer provision for the year.

Estimates of Voted expenditure presented to Dáil Éireann for approval should reasonably accurately represent the amount expected to be spent on each of the related services. In effect, the Estimates serve both as annual budget allocations by Dáil Éireann for individual services and as cash limits which Departments and offices are not permitted to exceed. In each of the last five years the HSE has sought a Supplementary Estimate as a result of emerging budget overruns. This raises concerns about the effectiveness of its budget planning and budget management. Chapter 21 examines the budget outturn in 2012 by category of expenditure and income and the main factors that gave rise to the budget overruns.

Two thirds of the supplementary provision in 2012 was for increased spending on medical card and community services. The outturn for these services was €2.76 billion, €238 million or 9.5% above the original Estimate for the year.

The original budget for hospital and community services was exceeded by €147 million and there was a shortfall of over €100 million on the receipts side owing to the delay in the enactment of legislation to amend the basis for charging private patients and the failure to achieve targeted improvements in the timeliness of collection of payments for the treatment of private patients from the health insurance companies.

The Estimates for the HSE for 2012 do not appear to have taken sufficient account of the underlying cost drivers in some key expenditure areas. Budgeting for future periods is inevitably subject to error because of inherent uncertainty and factors that may be outside the budget holders' control. Nevertheless, as a general rule, Estimates presented to Dáil Éireann for Voted services should be underpinned by an analysis of relevant trends and realistic assumptions about likely outcomes for the budget period. Key budgeting assumptions should be stated. For example, the budgeted medical card expenditure should be based on the projected number of medical card holders in each category and the projected average annual cost for such card holders. These would be used as benchmark values in monitoring the outturns which should help to improve subsequent budgeting.

Chapter 22 which deals with eligibility for medical cards was previously considered by the committee at its meeting on 14 November 2013.

At the end of 2012 the scheme was helping in providing medical support for an estimated 43% of the population. The cost of the scheme in 2012 was €1.7 billion, accounting for approximately one euro in every eight spent by the HSE.

Eligibility for a medical card is, in the main, determined by a means test based on the applicant’s income and certain relevant household outgoings. The HSE also has discretion to award a medical card if not doing so would result in undue hardship. Medical cards have a fixed period of validity, normally three or four years. Subject to continuing eligibility, medical cards are renewed on expiration.

The examination identified shortcomings in the HSE’s application of controls in 8% of a sample of medical card applications approved in 2012. In 4% of cases medical cards had been approved in circumstances where the evidence on file suggested the applicant had not, in fact, satisfied the means test eligibility criteria. In the other 4% of cases no documentation or inadequate documentation of outgoings had been provided. Additional guidance and staff training, as well as a more formal process for supervisory review of medical card approvals, should ensure specified controls are applied.

Around 5% of new medical cards in 2012 were awarded on discretionary or hardship grounds, taking account of the individual’s economic and social circumstances and the level of illness and related costs. Our review of a sample of medical cards awarded on a discretionary basis found that in a majority of cases the medical cards had been awarded on the basis of significant expenditure in relation to medical costs. The audit found that, while letters from the GP provided details of the illnesses of household members, there had generally been no attempt to quantify the medical costs involved or otherwise provide evidence that these costs would cause financial hardship for the applicant or his or her family. In 2013 the HSE introduced a new form for completion by GPs which required the GP to specify the normal number of GP visits and the type of medication required. This should provide a better basis for identifying the medical costs burden on applicants.

In 2012 the HSE issued around 366,000 renewal notices to medical card holders whose cards were due to expire. Some 70% of cases involved self-assessment, with applicants being asked only to confirm that the relevant circumstances had not changed. In the remaining cases a full review of eligibility, comparable with an initial application, was conducted. This involved the production of original or copies of documentation. Across both groups, almost 11% of medical card holders had not responded to the renewal notice by May 2013 and their medical cards lapsed as a result. A further 1.9% of medical cards were not renewed because it was established that the medical card holder had died. Of the remainder, over 94% had their eligibility confirmed as before or had their medical card upgraded to a full medical card instead of their previous GP visit card. Some 1.7% had their eligibility reduced from a full medical card to a GP visit card, while 4% were deemed not to be eligible for either form of medical card.

During 2012 the HSE also reviewed around 40,000 medical cards where the card holders had not accessed medical services for periods of 12 months or more. Eligibility was removed in just under 40% of these cases. By definition, these cases had not recently resulted in payments for prescriptions or other items but capitation payments to their GPs would have been incurred. On the other hand, the cancellation of medical cards that are effectively unused would probably not yield high savings.

Overall, the available evidence suggests there is a material level of ineligibility in the medical card system. However, the financial implications of this ineligibility have not been reliably established. The HSE has not yet developed a reliable estimate of the underlying level of excess payments in the medical card system. I have recommended, therefore, that it initiate a cyclical programme of reviews of eligibility in respect of random samples of medical card holders. This would allow a reliable baseline estimate of the scale of excess payments to be identified. Tracking changes in the levels of excess payments year on year would allow the HSE to evaluate the effectiveness of its overall control strategy and identify the key drivers of excess payments.