Sean Barrett (Independent)

I move amendment No. 1:

In page 5, to delete line 15, and substitute the following:

"the Central Bank of Ireland, require the Central Bank of Ireland to prepare any report".

I thank the Minister of State. I dislike the extension for a year and I have discussed it with four or five Ministers, and in a much more heated way than this morning. We have had plenty of notice of when we were to have competition in health insurance and the way we did it drove out a potential competitor.

I will refer to a point of commonality between the Milliman report and the Minister and myself. Milliman looked at commercially available evidence-based medical necessity criteria and in its report, stated:

We believe that a previous attempt to introduce evidence-based criteria was abandoned late in 2009 because of push back from Consultants.

That is a flaw that is built into the system. If there were competing health insurance companies, not turning down the elderly which they did not and not turning down the sick which they did not, but getting a person a better price whether he or she was old or young, this kind of abuse would have been eliminated by competition. That was the mistake that, in addition to its protectionism of VHI, the Department and successive Ministers made. They failed to realise that their programme for change would have been facilitated by competing health insurance companies within the criteria that we all support - community rating, open enrolments and life-time cover.

Milliman shows so many examples of where having a monopoly health company increases costs. In the 67 page version I got, there were 32 with redactions. Even ploughing through the rest, one can see all sorts of examples of where having a monopoly health insurance company suits the consultants, the hospital managers and those from whom we all are trying to get costs extracted. There is a phrase that bread does not appear in the shops because a bunch of philanthropists got together; it appears because of competition between different bakers.

I note how Milliman removes many of the foundations on which we believe this policy is based. Its report states that ageing is "not the most important factor" driving cost increases. There is much evidence for that by new epidemiologists latterly.

Milliman states, "we note that VHI has redesigned its products with a view to segmenting the market and in effect quasi risk-rating its products." VHI is doing what we were asked to bring in legislation to stop other companies doing. It states that utilisation management can reduce bed days by 30%, and that it is "important to understand the drivers of claims costs .... We have not seen any evidence that this is being done". One makes a monopoly, one protects it. We had it in the past with Aer Lingus, CIE, etc., and VHI is one of those. It is not performing as the Minister of State wishes and I support her in that regard.

Milliman states: "We found little evidence of any attempt by VHI to control hospital utilisation effectively", and on the same page, a "hospital had been admitting relatively young patients for diagnostic work-ups with no real demonstrated need for acute inpatient hospital care". By any standards, the VHI monitoring of all of that is what one would expect from a monopolist. It is not monitoring it and it is leading to the problems that the Minister is trying to address with the support of this House. In fact, the report states that VHI is so obsessed with the treatment of the number of old people with which it is lumbered that, effectively, it took its eye off the ball in looking at these kind of cost control issues. By the way, VHI's average age of membership was found by Milliman to be 38, which was the same as Bupa when it withdrew. I wonder at this edifice, this house of cards, that we built up to prevent competition.

The Department was undoubtedly, to use the Minister for Public Expenditure and Reform, Deputy Howlin's, words, "captured" by VHI, and so, I believe, was the Health Insurance Authority. That is why I am trying to move this. As the European Court of Justice indicated in its judgment of 29 September, it should be moved to the Financial Regulator. What we have been doing heretofore has increased costs - I support the Minister of State in her efforts to reduce costs - provided a gravy train for one company and, as Senator Colm Burke noted, prevented competition. Instead of having competing insurance companies which sought to reduce hospital stays and develop group GP practices, our health insurance system was so dependent on the incumbent medical profession that it ended up re-financing inefficiency.

It is a pity we did not provide for a fully competitive health insurance market in 1994. Nobody disputed the three criteria but the problems arose when one company was required to subsidise the others. The epistemological basis of the claims about an ageing client profile has been exaggerated. The evidence has to go away from the Health Insurance Authority to an independent regulator capable of adjudicating on these matters. I doubt the State has ever managed to produce witnesses who were refused cover. A study presented by Alastair Gray at an Office of Health Economics conference in November 2002 indicated that age is, in part, a red herring in respect of health expenditure. A paper published in the Journal of Economic Literature in September 2008 stated that increases in life expectancy during the 21st century will have a modest effect on health care in the US. The major expenditure occurs in the last six months of life but this period can be delayed by keeping healthy. The crude model set out in the legislation is wrong in that regard. Another article states that recent health economics literature challenges the conventional wisdom of increasing health expenditures as a function of age distribution of the population. A German study concludes that western societies should not worry about the effects of ageing.

We have no evidence that BUPA refused to recruit old people. I have produced evidence that it was actively recruiting old people until it had to leave the market because the amount by which it was required to subsidise the VHI exceeded its profits. The current system has resulted in considerable inefficiencies. I support the Minister of State in her efforts to address the issues arising but cobbling the system together for another year through a technical Bill will not solve the basic problem. A Government in its first year in office should be radical in introducing the reforms which I am convinced will reduce the cost of medical care in Ireland.

The lack of competition in health insurance is serious and it has resulted from the Department's decision to back its in-house health insurance company. The consumer is not being well served. One of the competing firms had a high consumer rating and won all sorts of prizes at EU level for its employment practices. Protectionism in economics is not part of the EU. It was time to act in this area 17 years ago. The system will continue to present cost problems because that is inevitable among monopolies. I presume that most of the €275 million to which the Minister of State referred goes to the VHI. Senator Cullinane pointed out that other companies were prohibited from discriminating on grounds of age and were required to have lifetime enrolment and community rating policies. People could have saved money by dealing with one of the lower cost companies. This was not solely because they were believed by the Department to be cheating by only recruiting young people.

Customers did not change because the VHI always held out the possibility that the Government would intervene. They got the benefit of competition by staying with the monopolist. A survey found that 21% of customers felt it was too much hassle to change, 13% did not see significant cost savings and 13% stayed because they had been with the company for a long time. Approximately 50% of respondents did not want to change but they could have saved substantial amounts of money if they had done so. When BUPA was in the market savings were possible. I did what the policy claimed was impossible by moving from the VHI to one of the new companies, thereby saving money even though I was in the age group which was supposedly being refused cover.

We need competition in this area. The existing regulatory framework has resulted in the State losing cases in the Supreme Court and the European Court of Justice. The question of damages will arise at the end of January. It is time to introduce radical change rather than keep the system going for yet another year.