Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I move: "That the Bill be now read a Second Time."

I welcome the opportunity to address the House on the Second Stage of the Health Insurance (Amendment) Bill 2015. For many decades health insurance has operated alongside our public health service and has grown and developed. Health insurance in Ireland is based on a core principle of community rating. All policy holders are charged the same premium for a particular plan which is adjusted to reflect any loadings applicable under lifetime community rating, irrespective of their age, gender or health status.

This system of health insurance requires intergenerational solidarity whereby younger and healthier people effectively subsidise older and less healthy people. The understanding is that these younger people will themselves be subsidised by later generations when they reach old age or suffer ill health. The risk equalisation scheme is essential to the operation of community rated health insurance. Its purpose, and the purpose of this annual update to the scheme, is to ensure that health insurance is affordable for older people and those with a chronic disease and not just for the young and the healthy.

Risk equalisation is a process that aims to neutralise in an equitable manner differences in health insurers’ costs that arise due to variations in the health status of their members. The risk equalisation scheme is designed to protect community rating and make it easier for older and less well people to afford health insurance. The scheme operates by compensating insurers for some of the additional costs of insuring older and less healthy members. Insurers receive risk equalisation credits for insured members funded by a levy payable by health insurers on all contracts written.

Amending legislation is required each year to revise the support provided under the scheme. The last 12 months saw a number of changes to health insurance. In July this year, VHI Healthcare was regulated as an authorised company by the Central Bank of Ireland in line with the regulatory position of the three other health insurers. This is a significant achievement by VHI and it is a vote of confidence in the health insurance sector and the improved economy in which it operates.

To be able to continue to offer affordable health insurance to older and sicker people, health insurers require a steady influx of younger healthy people. It is clear that the economic downturn had a significant negative impact on the number and age profile of the insured population. The number of policyholders fell from just under 2.3 million at the end of 2008 to just more than 2 million in 2014. In response to the decline, the Government introduced two important initiatives from May of this year. These are lifetime community rating and young adult discounts. These measures work to secure the future viability of community rating and protect access to affordable health insurance.

Encouraging more people to take out health insurance at younger ages helps to spread costs across all policyholders and ensures affordable premiums for all insured people. Without these necessary measures, there would be a continued deterioration in the age profile of the insured population which in turn would contribute to claims inflation and higher insurance premiums. Under lifetime community rating, late entry loadings apply for those aged 35 and over who buy health insurance for the first time. This is applied at a rate of 2% per year. Some 74,000 people avoided loadings by taking out health insurance before the deadline of 1 May 2015.

Young adult discounts are based on a sliding scale of maximum chargeable rates up to the age of 26. This new approach helps to ensure the smooth phasing in of full adult rates and eases the effect of dramatic price increases experienced when student rates no longer apply. The vast majority of policies now held by consumers aged 21 to 26 years offer young adult rates. These rates range from 51% of the full adult rate at age 21 to a 100% rate at age 26.

These two measures aim to increase the number of younger people with health insurance as well as retaining those who already have policies. I welcome the significant growth in the number of people with health insurance over the past 12 months, which saw an increase in membership of 100,000. I want to keep health insurance remains affordable for all those who wish to avail of it.

As a necessary support to community rating, I am committed to making risk equalisation schemes as effective as possible in a way that promotes fair and open competition. The risk equalisation scheme has operated in Ireland since 1 January 2013. The scheme is funded by stamp duties levied on health insurance policies payable by open market insurers for each policy written. The money generated is used to pay risk equalisation credits to take account of the higher costs of insuring older and sicker people. Currently the scheme provides credits based on age and gender and a utilisation credit based on an overnight stay in hospital of €90.

From 1 March 2016, the credits payable in respect of age and gender for those aged 65 and over on policies written from that date will be increased. However, I propose to set credits for the 60 to 64 age group at zero, which will also come into effect from 1 March 2016. It is not only older people who have high claims so I remain committed to developing a refined health status measure in the risk equalisation scheme using data based on diagnosis related groups, DRGs. This will require the collection and coding of all hospital activity data for both public and private hospitals under the system overseen by the Healthcare Pricing Office. Structural and legal changes will be required over time.

The immediate priority for the Healthcare Pricing Office is to provide the main technical support for implementation of activity based funding, ABF, in public hospitals. The conversion year for the new funding system is 2016, which will see hospital budgets translated into ABF allocations for the first time. In the meantime I want to improve the health status measure that we do have. In addition to the overnight credit of €90 I propose to expand the setting in which utilisation credits will be payable to include day case admissions. These will be paid at a lower rate of €30. This enhancement to the scheme will increase the support provided for less healthy people of all ages. Providing a utilisation credit reflects the fact that 30% of hospital inpatient activity for insured members is now carried out on a day case basis. It will also incentivise clinically appropriate treatment on a day case basis, freeing up overnight accommodation for those who need it.

Under the scheme, health insurers receive risk equalisation credits from the risk equalisation fund to compensate for the additional cost of insuring older and less healthy members. The credits are funded by stamp duty levies payable by open market insurers for each policy written. The stamp duty levies are collected by the Revenue Commissioners and transferred to the fund which is administered by the Health Insurance Authority.

In previous years, it has been necessary to increase significantly the stamp duty on all policies in order to fund the rising costs of an older and less healthy population of insured people. Last year, in order to make health insurance more affordable, I took the decision to reduce the stamp duty rates for non- advanced products by €50 per adult and €20 per child to 60% of the rate for advanced products. At the same time there was no increase to the rates for advanced products. I am pleased to confirm that the levy on the lower-level products will be reduced again in 2016 to 50% of the rate for advanced products, down by €38 per adult to €202 and down by €13 per child to €67. There will be a slight increase of €4 per adult to €403 for advanced products and a reduction of €1 to €134 in the case of children.

The decision to set credits at zero for those aged under 65 was taken primarily on the basis that retention of credits for this age group would have led to an increase in stamp duty by approximately €34 for everyone holding health insurance. I believe the credits and levy rates proposed for 2016 strike a fair balance between the need to sustain community rating and the need to ensure that younger people continue to avail of health insurance. The credits proposed by the Health Insurance Authority do not fully compensate for the cost of insuring older and less healthy people. The risk equalisation scheme benefits all consumers by encouraging insurers to compete on the basis of value for money, customer service and product design, rather than competing on the basis of risk segmentation. This approach supports a fair and open competition, giving those who wish to avail of health insurance access to a range of affordable policies from which to choose regardless of their age or health status.

I turn now to the Bill. The main purpose of this Bill is to specify the amount of premium to be paid from the risk equalisation fund in respect of age, gender and level of cover from 1 March 2016 and revise the stamp duty levy required to fund the risk equalisation credits for 2016. The Bill provides for consequential amendments to the Stamp Duties Consolidation Act 1999. A technical amendment to the Health Insurance Acts is also included. I will now outline the specific sections of the Bill.

Section 1defines the principal Act as the Health Insurance Act 1994. Section 2 amends section 6A(1) of the principal Act by the proposed amendment of three definitions. In section 2(1)(a), the proposed amendment replaces the current definition of hospital bed utilisation credit or HBUC with a definition of "hospital utilisation credit". The scheme provides for a HBUC as a proxy for health status. Currently, health insurers receive a retrospective payment of €90 per night for an overnight stay in hospital by one of its members. The proposed amendment will expand this credit to include day case inpatient admissions. The HBUC payment will be replaced with a hospital utilisation credit. Under this, credit insurers will receive a payment from the fund for day case inpatient admissions and for inpatient admissions on an overnight basis on all policies written on or after 1 March 2016.

Section 2(1)(b) proposes a technical amendment to the definition of private hospital accommodation. The amendment reflects the enactment of section 55 of the Health Act 1970, as amended by the Health (Amendment) Act 2013, where private patients incur a hospital charge in respect of inpatient services provided in a public hospital. Section (2)(1)(c) amends the definition of "relevant amount" to include day case inpatient admissions in the calculation of the hospital utilisation credit.

Section 3 amends section 11C of the principal Act. It provides for 1 March 2016 as the effective date for revised risk equalisation credits to be payable from the risk equalisation fund.

Section 4 amends Schedule 3 of the principal Act. It provides for the amounts payable from the risk equalisation fund for the hospital utilisation credit in respect of health insurance contracts renewed or effected from 1 March 2016. Schedule 3 will now contain two amounts, one for the provision of inpatient services on an overnight basis and one for the provision of inpatient services on a day case basis.

Section 5 replaces Table 2 in Schedule 4 of the principal Act with effect from 1 March 2016. The applicable risk equalisation credits payable from the risk equalisation fund for certain classes of insured persons are revised. Section 6 amends section 125A of the Stamp Duties Consolidation Act 1999. It specifies the applicable stamp duty rates from 1 January to 29 February 2016 and from 1 March 2016 on. Section 7provides for the Short Title, collective citation and construction of the Bill.

Given the other events of the week, it would be remiss of me not to comment on the broader issue of health reform and the move towards universal health care. I reiterate the Government's commitment to introducing a system of universal health care in the State. That means access to affordable, quality and effective health care for everybody in a timely manner and in a way they can afford. Our preferred funding model is to use a system of health insurance whereby everybody will be insured. We must look at different models, including single-payer and multi-payer models, to assess how that can be done best in the years ahead. However, it is clear that if we are genuine about achieving universal health care we must put the building blocks in place first. If a new service is to work, it must be built on sound foundations. This will require four foundation stones - Healthy Ireland and the public health agenda; sufficient capacity to satisfy unmet demand; the expansion and development of primary and social care; and reformed structures, ICT and financial systems.

When considering vision and policy for the future we should always start with Healthy Ireland, the Government-led programme to improve our personal and public health. It is the best way to ensure that we all live longer and healthier lives and the best way to tackle rising health costs in the long term. We have made great progress on smoking and now we must have a similar focus on alcohol misuse, obesity and physical inactivity. Last week I launched our sexual health strategy and I look forward to publishing our first public health legislation on alcohol in the next few weeks. It will go to the Cabinet next month.

For too long health and wellness programmes have been seen as important but not critical and have, therefore, often been overlooked when additional resources were being allocated. We must change that by making a commitment to increase the total budget for Healthy Ireland and the HSE health and well-being programme every year by more than the average increase in health spending. Important evidence-based initiatives, including the extension of screening and the childhood vaccination programmes, cannot wait until some point in the future when every immediate issue has first been dealt with. The same applies to programmes such as smoking cessation and other public health campaigns and programmes. The required additional funding could be sourced by ring-fencing the proceeds of a tax on sugar-sweetened drinks or excise on cigarettes.

With the current staffing levels of specialist doctors, general practitioners, GPs, midwives, specialist nurses, allied health care professionals, critical care beds and other capacity, no system of universal health care introduced immediately or in the near future will be able to deal with unmet demand. We must get a clear fix on the workforce requirements across the health service now and into the future. I have initiated a process to prepare a clear plan within 12 months. We must then work to fund it and implement it over a number of years. We must also reassess the number of acute hospital beds we require. The Organisation for Economic Co-operation and Development, OECD, statistics indicate that the number of hospital beds we have is low relative to other countries but this does not take into account private hospitals to which half of the population have access. OECD numbers also indicate that we use our public hospital beds relatively efficiently, with a short average length of stay.

No matter how much one reforms the service, unless the necessary resources and capacity are in place, there will always be long waiting times and potential overcrowding. An under-resourced system of universal health care which puts everyone on a lengthy waiting list, albeit everyone waiting for the same length of time, does not have much appeal. At the same time, no matter how much money one has, it will never be enough if one does not spend it well and efficiently, hence the need for the organisational and financial reforms which we are undertaking. On a positive note, in 2015 we secured the first budget increase in seven years for the health service. We anticipate that the service will spend €700 million more this year than it did last year. A further increase was secured in the recent budget for next year. The increases have allowed the health service to take on or regularise 4,000 more staff and to fund new treatment programmes. None the less, it is still operating with approximately 10,000 fewer staff than was the case at the peak, and since then our population has grown and aged further. Based on a clear vision and a solid commitment to adequate resources, we can put in place the foundation stones of a reformed service.

The key challenge for the Government is to find a way to deliver universal health care at a cost that is affordable and sustainable. This cannot be achieved without refocusing our health service from a hospital-led model of care to one that is more preventative, a less acute model that is grounded in more comprehensive and developed primary and social care. We must continue to strengthen and enhance primary care provision in Ireland through the ongoing development of comprehensive chronic disease management programmes. We are already showing form in this regard, with better asthma care written into the new contract for children under six years of age and a new diabetes contract for GPs, alongside better access to ultrasound and a GP minor surgery pilot. Nearly 14,000 children have registered for the asthma cycle of care since the middle of this year and 37,000 patients have registered for the diabetes cycle of care.

I look forward to concluding discussions with the Irish Medical Organisation, IMO, on further extending the scope of, and access to, general practice in the new year. As part of the new contract, I hope to see more GPs encouraged to provide expanded services such as chronic disease management, minor procedures and first-line investigations like 24-hour blood pressure and cardiac monitoring. However, I have no wish to see GPs becoming de factopublic servants, entirely dependent on the State for their income. Their autonomy and business-orientated approach are among the factors that make general practice work. As part of the negotiation with GPs, the State will seek to continue the implementation of GP care without fees on a phased basis, with the next phase bringing in all children up to 12 years of age and thereafter children up to 18 years of age.

In July this year, we took the first step in realising timely access to safe and quality health care for everyone with the extension of GP services without fees to 270,000 children under the age of six and an enhanced and better funded service for 150,000 children under six who already have a medical or doctor visit card. The second step came in August with the inclusion of another 36,000 people aged 70 or older. Of course, we should never make the mistake of thinking that primary care is just about GPs. Dentists, therapists, nurses, community midwives and psychologists play an increasingly important role. For example, we identified in the recent budget the importance of prioritising resources for speech and language therapy.

Community pharmacists are enthusiastic to do more and to manage patients as well as dispense prescriptions, and we should aid them to do more, for example, to manage minor ailments, administer more vaccines and do more medicine management and monitoring. We need to develop social care provision so that people, especially our elderly, can stay in their homes or supported housing with care for longer rather than in nursing homes. Modern technology will allow more people to stay at home for longer and nursing homes should enhance the level of nursing and medical care they provide to avoid unnecessary admissions to hospital.

To deliver reform it is necessary to be clear about the architecture one is seeking to build. The HSE is far too large and far too remote from the front line. It has been successful in some of its national functions, such as models of care, national clinical programmes and the national ambulance service. However, the centralised command and control model is not conducive to good management of hospitals or community services. It makes accountability almost impossible and will have to be dismantled over time and replaced with new structures that will devolve more decision-making to the level of the hospital or community and ensure greater accountability.

International evidence demonstrates that well-designed commissioning approaches and payment systems may have the potential to increase transparency, drive efficiency and encourage the provision of quality integrated care at the lowest level of cost. A new health commission could be established based upon a re-shaping of the existing responsibilities and expertise in the HSE and the National Treatment Purchase Fund, but also, crucially, with the input of new people who bring additional skills. The commission would purchase services from hospital groups and community health organisations.

The development of commissioning will require the establishment of the health care pricing office on a statutory footing, although it already exists on a non-statutory basis. It will be independent of commissioners and service providers in order to develop objective pricing mechanisms and determine standard national prices. It will also require the extension of coding and costing beyond the hospital walls to allow, where appropriate, more to be done in primary and social care settings. Most important of all, it will be necessary to drive the introduction of activity-based funding, ABF, for public patients in public hospitals, while also developing a complementary system of case-based charging for private patients in public hospitals. The conversation year for ABF is 2016 and hospital budgets for the first time will be based on this principle. It means money will follow the patient or service user, and hospitals and other health care providers will be funded for the work they do and the outcomes they deliver, rather than being funded on the basis of historic budgets. It will mean that hospitals and community health care organisations are incentivised and paid more to do more work, whether that involves more hip operations, more home help hours or more dermatology clinics.

In my view, linking spending to activity is the biggest single reform that will make the most difference for the better in our health service from the point of view of patients and taxpayers. Much work has already been undertaken and more can and will be done over the next five years on this crucial initiative. However, the commissioning approach will only work if the new health service is capable of responding to the introduction of stronger incentives. Therefore, a major reorganisation of health care delivery structures is underway, with the aim of strengthening local responsibility, accountability and responsiveness. This involves the transformation of all HSE and voluntary hospitals into seven major hospital groups, each of which will develop a strategic plan describing how they will operate as a cohesive entity which delivers safe, high quality and cost effective health care. I am strongly of the view that hospital groups should be truly autonomous to the extent that any body or organisation funded mainly by public money can be. The hospital groups, or trusts if one prefers, should also have the authority and freedom to make collective agreements, manage their own assets and payroll and negotiate independent contracts to recruit managers and specialists outside of the constraints of public sector rules, which in many ways are tying the hands of the health service when it comes to recruiting the right people.

Voluntary hospitals have made a valuable contribution to the development of health services in Ireland down the years. I value their ethos and history and, where their financial affairs are in order, it is our intention to retain their boards and governance. Where earned, their autonomy will be expanded, provided they fulfil contracts or service level agreements with their hospital group or trust. Voluntary hospitals may come together to lead their hospital groups. In others, new governance arrangements will be required at group level and in some they exist already. The groups are now in place and the CEOs, chairs and management teams are appointed. However, we will need to put this on a legislative basis by 2018.

Service delivery reform also involves the restructuring of all health services outside the acute hospitals, that is, primary care, social care, mental care and health and well-being, into nine community health care organisations, CHOs, with the aim of providing the maximum proportion of care to people in the most appropriate settings in the communities where they live. These CHOs have been established and their chief officers appointed and their development now needs to be driven forward.

A crucial element in the reform programme must be investment in information and communications technology. Partially as a result of past failures, but also because of competing demands, investment in ICT in Irish health care has fallen behind international standards and developments in the private sector, including general practice, pharmacy and private hospitals. The recently announced capital plan will allow us to start catching up on ICT modernisation, including a new financial management system, facilitating the provision of important and timely information. I look forward to a close collaboration with the private sector in the development and full utilisation of this technology in the period ahead. I commend the Bill to the House.

See this speech in context