Mr. Colm Desmond:

I apologise for the late submission of my opening statement which was due to work circumstances generally. I welcome this opportunity to address the committee on budgetary control and oversight of health expenditure. The committee has noted its concern at the level of persistent Supplementary Estimates in respect of the health Vote and commented on budgetary planning in this regard. In any given year, the Government has a finite amount of money for allocation in the budget and has many competing priorities. During the fiscal crisis, as with most areas of public spending, significant restrictions in health funding were experienced. Including in 2014, the budget provided for health was less than that provided in the previous years with significant targeted savings through pay reductions and efficiency.

The first modest increase in the health Vote for a number of years came in 2015 but this was insufficient given the erosion of base funding during the financial emergency. The once-off Supplementary Estimate that year was required to meet ongoing running costs in the sector, new initiatives commenced during the year and some demand-led services. Thus, while 2016 saw a further budgetary increase, the majority of the funding merely met the existing costs within the system, along with pay rate increases. In recognition of the difficulties facing the system, the Minister for Public Expenditure and Reform approved a further €500 million for health in the Revised Estimates Volume and this sum remained in the base for 2017. This allowed for services for older people to be maintained at the previous year's levels, which accounted for €30 million, met shortfalls in the State Claims Agency and PCRS in the amount of €200 million. It further provided for a winter initiative at €40 million that year. Additional funding of €450 million was provided in the 2017 budget, along with a further supplementary estimate of €195 million. Of the original funding, 39% was required for pay rate and pension costs with a further 6% supporting the State Claims Agency. In relation to the Supplementary Estimate that year, 38% or €75 million related to the acceleration of the restoration of pay under the Lansdowne Road Agreement, with a further 25% or €50 million required for the State Claims Agency.

For 2018, the Government approved gross expenditure of €15.332 billion for the health services, €14.839 billion for current funding and €493 million for capital funding, representing a 4.9% increase on the original Vote budget for 2017. For 2018, 45% of the additional funding provided in the budget was required for pay restoration, resulting in very modest increase for services and the consequent need for a further Supplementary Estimate. When account is taken of pay restoration, costs associated with the State Claims Agency and other demand-led areas, there is a reason for the level of increased expenditure year on year. Furthermore, the nature of the health services is such that the normal budget management levers available to other sectors, such as reduction of services, are simply not available to us and consequently, overruns can and do occur. External factors, such as the actions of private health insurers, can also drive the need for additional funding. In his recent presentation of the 2018 Supplementary Estimate to the Select Committee on Health, the Minister of State, Deputy Jim Daly, welcomed the significant additional funding for the health sector in 2018 of €655 million, of which €625 million is towards overspends in current expenditure in various areas of the HSE. The Minister of State acknowledged that while the amount of the Supplementary Estimate was significant, it represents less than 4.3% of overall health expenditure in 2018. The Minister of State also noted that, despite the significant increases of recent years, the issue of health funding remains a major challenge, not just in Ireland but internationally. Dealing with a growing and aging population, more acute health and social care requirements, increased demand for new and existing drugs, and the rising cost of health technology will continue to post a financial challenge into the future.

The annual health budget is set within the parameters set out by the Government in its approach to planning for the annual budget. The improving economy has enabled the health service to achieve much needed budget increases in each of the last three years. It is also clear that there are areas where further improvements are required and the Department will continue to work with the HSE to optimise service provision within the constraints of available funding. Extensive planning and performance management processes are in place in relation to budget management and health sector planning. The HSE publishes performance profiles on a quarterly basis and separate management data reports for each month. There is a monthly performance management cycle both within the HSE, under its performance accountability framework and between the Department of Health and the HSE. The HSE's performance and accountability framework operates under a national performance oversight group which has delegated authority from the Director General to scrutinise the performance of the health service provider organisations, in particular hospital groups, community healthcare organisations, the national ambulance service, primary care reimbursement service and other national services, to assess performance against the national service plan.

Despite welcome increases in the health budget over recent years, a financial challenge remains as we deal with a larger and older population with more acute health and social care requirements, increased demand for new and existing drugs and the rising costs of health technology. The costs of payments under the State Claims Agency are also rising, adding to the overall cost of health above the operational costs funded to meet the health demands of a growing and aging population. These challenges reinforce the need for good budgetary management and control, a focus on improving the way in which services are organised and delivered and on reducing costs, all of which aim to maximise the ability of the health service to respond to growing needs.