James Reilly (Dublin North, Fine Gael)

The Government is committed to reviewing costs generally across all sectors, including the private health insurance market and scrutinising where savings can be made for the Exchequer and the consumer. I am not satisfied that any consultant should be paid €1 million in a single year. This level of remuneration is grossly out of step with most ordinary people's expectations. The individual, whom I do not know, is working hard in a system that over-rewards that. There are only so many procedures one can carry out safely in a week. If this level of remuneration is available to people who work hard and safely, the service provided is grossly overpriced. I am also dissatisfied that several other consultants also earned enormous sums from the VHI, and to a lesser extent, from other insurers in recent years.

I have overall responsibility for policy on health insurance and, in particular, governance issues relating to the VHI, including such matters as board appointments and the receipt of its annual report and accounts. While owned by the State, VHI is a not-for-profit company operating in a competitive market and negotiates directly with service providers on pricing. While it would be inappropriate for any Minister to intervene directly in matters relating to prices set, I have concerns about the claim levels and, in particular, the cost of services being provided to and paid for by the VHI. It is after all a not-for-profit company which acts on behalf of consumers. The company could and should have done more to control costs.

I met with the chairman and chief executive officer of the VHI very shortly after my appointment in March 2011. At that meeting, I expressed my concerns about the VHI's significant claims costs. Due to its size and position in the market, it has a crucial impact on costs and I made it clear this issue needed to be addressed vigorously. Many of the concerns about the company's approach to costs were outlined in a report commissioned by my Department and conducted by the Department's actuarial advisers, Milliman.

The Comptroller and Auditor General's office has no audit powers regarding the VHI and is not the appropriate regulator.

Additional information not given on the floor of the House.

I also raised the important issue of the base cost of procedures with the company. They responded to me with an outline of how their payments to consultants were calculated. I am not satisfied that these costs represent best value for the consumer. For this reason I met with the Health Insurance Authority on 10 June 2011, as the regulator of the private health insurance market, and requested them to examine the issue of provider costs in the market. The authority will revert to me within one month on how this matter might be addressed.

In April, I welcomed the VHI's announcement of its financial outturn for 2010, which shows a significant improvement over the 2009 outturn. I acknowledged that, over the past two years, the company has taken steps to contain the rising costs of meeting customers' health care needs, including a 15% reduction in consultants fees per procedure, a 6% reduction in private hospital fees per procedure and an annualised reduction in internal administration costs of €14 million. These actions have generated annualised savings of €100 million. VHI pays professional fee benefits to medical practitioners for services rendered on a fixed fee per service basis. In 2011, VHI anticipates that the total remuneration paid to hospital consultants will be over €50 million less than the total remuneration paid in 2009.

However, I intend to ensure that clients and the taxpayers alike get much better value for money into the future and this will be a clear focus of the new board and CEO to be appointed next month.

See this speech in context