Mr. Colm Desmond:

I welcome this opportunity to address the select committee on the issue of budgetary control and oversight of health expenditure. The committee has noted concerns raised by the European Commission, the Irish Fiscal Advisory Council and the Parliamentary Budget Office in this regard.

For 2019, the Government approved gross expenditure of €17.107 billion for the health sector comprising €16.365 billion for current funding and €742 million for capital funding, representing a 11.6% increase on the original Vote budget for 2018. This represents an increase of €901 million or 5.8% on the 2018, post-supplementary current expenditure budget and €229 million on capital expenditure, showing the Government's commitment to providing a health service that seeks to improve the health and well-being of the people.

The issue of health funding is, however, a major policy challenge internationally. Despite welcome increases over recent years, the need for effective financial management remains crucial as the health service deals 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 associated with these service pressures will increasingly need to be managed through improved efficiencies, productivity and value from within the funding base in 2019 and beyond, as well as increased annual Exchequer allocations.

The Sláintecare implementation strategy was published in August 2018. Budget 2019 included €206 million for specific new initiatives associated with the Sláintecare implementation strategy, including negotiating a new GP contract, development of mental health services, increased access to hospital services, further roll-out of national strategies in the areas of maternity, trauma and cancer services and drugs and a €20 million Sláintecare integration fund. The purpose of the integration fund is to test, learn from and support the implementation of new models of care within the health system. The European Commission in its recommendations for Ireland highlighted that major reforms in the health system, including the redesign of models of care, were central to the successful delivery of a more sustainable and cost-effective health system. The Sláintecare programme aims to deliver on this in the next ten years.

On budget management and health sector planning, extensive planning and performance management processes are in place. A new HSE board governance structure was established on 28 June, with strong competencies across key areas, to strengthen the oversight and performance of the HSE, pending its further reorganisation. The new CEO of the HSE took up the post in mid-May and has committed it to having a strong focus on financial performance. The HSE publishes performance profiles on a quarterly basis and separate management data reports for each month. There is a monthly performance management cycle within the HSE under its performance accountability framework and between the Department of Health and the HSE. The 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, the primary care reimbursement service, PCRS, and other national services to assess performance against the national service plan.

In addition, in recognition of the risks arising in health expenditure in recent years, a new health budget oversight group was established this year, incorporating members from the Department of Health and the HSE and chaired by the Department of Public Expenditure and Reform. The purpose of the group is to monitor health spending and staffing against the current budget allocation and act as an early warning mechanism for any deviation.

The HSE’s latest income and expenditure position at 30 April shows a revenue deficit of €116.2 million, which represents 2.3% of the available budget. The main drivers of the deficit are acute hospitals, the PCRS, demand-led schemes, disability services and overseas treatments. Gross voted expenditure in the health sector to June is 6.8% higher than in the same period in 2018, compared with a 5.8% increase in budget. However, it is 4% below profile. Significant savings are profiled later in the year in line with the targets set out in the national service plan. Any risk of a significant deficit at the end of 2019 is a matter of concern for the Government. However, in general, it is important that the service levels set out within the HSE’s national service plan be delivered within the allocation notified by the Minister. It is acknowledged that certain issues can arise in-year owing to costs associated with decisions outside the HSE such as increases associated with pay agreements or Labour Court rulings, or policy decisions such as the establishment by the Government of anex gratiascheme in respect of CervicalCheck. The Department is working with the HSE to gain further clarity on the projected year-end position and to mitigate any deficit insofar as possible in co-operation with the Department of Public Expenditure and Reform.

The Minister emphasised for the HSE the need to address urgently health spending by taking steps to ensure compliance with the staffing limits for 2019; implementing a reporting and monitoring structure for agreed savings targets in the national service plan, with responsible managers providing a monthly report from quarter 1; and reviewing the Health Service Executive's performance in adhering to savings and staffing limits, with further interventions, as necessary. Despite welcome increases in the health budget in 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 cost of payments under the State Claims Agency is also rising, adding to the overall cost of health services above the operational costs funded to meet the health demands of a growing and ageing 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.