Sean Barrett (Independent) | Oireachtas source

I move amendment No. 6:

In page 6, between lines 18 and 19, to insert the following:“(4) In prescribing the maximum payments in subsection (1) the Minister shall have regard to average length of stay in hospitals, utilisation management, medically unnecessary admissions, and other excessive costs unrelated to ageing as noted in the Milliman Report (2010).”.

I welcome the Minister back to the House and thank him for being here.
There are a number of important things happening in the health insurance sector. We have seen massive price rises, estimated by the Oireachtas Library and Research Service to be in the region of 58% since 2008 and more than 300,000 people have given up their private health insurance. The Minister's predecessor tried strenuously to tackle costs. The figure given by the current Minister is -2% in that regard. That is on top of an incredible performance in a period when there were no real increases in incomes because of the economic crisis. We are making progress but I wish we could have done so earlier. We have moved our approach to the health insurance market from one where the State's health insurance company, VHI, was protected at all times from competition. Given that the policing of efficiencies in the health service is difficult for the Department, as the main employer, why not use competing health insurance companies as the mechanism through which this is done? That is the emphasis that has been missing to date.
I welcome the Minister's announcement that the regulation sector for financial purposes will be moving to the Central Bank in February. That should have been done years ago. Indeed, a normal feature in December has been the postponement of that decision, which confers a substantial advantage on VHI over others in the market. The main concern in the Milliman report, referred to in my amendment, is that VHI devotes a vast amount of its energy, at managerial level, to proving that it has more older customers than the other insurers. We had an interesting discussion on that point recently and debated whether that fact warrants the kinds of price increases we have seen in recent years. The Milliman report argues that if a fraction of the energy devoted by VHI to proving its customers are older and petitioning the Department of Health and the Health Insurance Authority to rig the market was devoted to examining issues like "average length of stay in hospitals, utilisation management, medically unnecessary admissions, and other excessive costs unrelated to ageing" we would see real progress on costs.
I want to see a market in which insurers can charge customers less, not because they have cheated by refusing to insure older people but because they have secured better deals from hospitals, reduced the average length of stay, agreed lower prices for procedures and negotiated better deals with the drugs companies. In that context, insurers should be able to confirm to the Minister that people, both young and old, can be treated at a lower cost and that any savings made will be passed on to consumers. That would be a very welcome development. None of that happened in the period during which health insurance costs rose by 58%.
The average length of stay in hospital, according to the Milliman report, is ten days but best international practice is 3.7 days. Since 2010, when the report was published, some of the efforts of the former Minister for Health, Deputy Reilly, to focus on cost control have had an impact, albeit only to the tune of 2%. The Milliman report suggested that there was huge scope for improvement in utilisation management and also pointed to a high volume of medically unnecessary admissions, with young people in the full of their health admitted overnight for tests and so forth. Such overnight stays are costly to the insurers. The report argues that issues such as poor administration, poor management and a lack of attention to issues such as the average length of stay are more important than the ageing factor. Such issues are independent of age and improvements in this regard could make a big difference. The former Minister for Health appointed Mr. Pat McLoughlin to try to administer change. The potential savings identified in the Milliman report were far greater than the 2% we have seen thus far.
The version of the Milliman report supplied to Members of this House was redacted in over 55 places. However, reading between the lines and between the redactions, one can see that the system is inefficient. The get-out clause for VHI was that it was insuring all of the older people and therefore must continue to receive a State subsidy.
The Minister made reference earlier to his previous role as Minister for Transport, Tourism and Sport when he appointed the boards of the NTA and of CIE. In the case of health, the Minister appoints the boards of the Health Insurance Authority and of the VHI. In both cases, I think the relationships are too close. While there is a social role for our transport system, the cheque goes overwhelmingly to one company which happens to be owned by the State. That said, I know that the former Minister intervened on a number of occasions where there were lower cost providers in areas like Portlaoise and let them tender for contracts.
Do we have any evidence that the new entrants to the private health insurance market refused to insure older people? I do not think there is any such evidence. In fact, none was produced in any of the many court cases related to this issue. A subsidy is provided, as illustrated in table No. 2, for older people without any assurance that the Department of Health is getting the best value for that money.

There must be some mechanism to extract the productivity gains that were so strongly - I cannot emphasise the word "strongly" enough - pointed to in the Milliman report as being necessary to achieve. As I said, we know the new entrants did not refuse to insure older people. It would have been illegal to do so in any case because we have open enrolment, community rating and lifetime cover. No witnesses were produced in the court cases to give evidence of such practice.

On the other hand, we do have evidence that there are people who will not change provider because they do not mind higher prices, just as some people will opt to use a more costly airline. In addition, some people consider it too much hassle to change provider or feel there are not significant savings to be made by so doing. There is literature setting out the reasons people do not change their provider as they get older. As such, it is difficult to say that being older should be the basis for a subsidy. There are lower-cost options and a stimulatory effect from cutting costs. For example, if person A goes to a lower-cost company, VHI will respond just as Aer Lingus had to respond when it was faced with competition. To give out a subsidy without having a strong productivity basis for so doing, as advised in the Milliman report, seems unlikely to give an efficient result. I would like to see insurance companies competing on the basis of getting better deals from hospitals. Perhaps when hospitals achieve their independence, they will begin to compete in this way and the benefits of that will be passed on to customers. However, simply deciding that because company A has lots of older customers, those older people should be subsidised and there is no need to pursue much in the way of analysis after that is not the way to get an efficient result.

The premia that are attached to older people go up to €3,275, as set out in the table on pages 6 to 9, inclusive, of the Bill. I am proposing in amendment No. 7 that these premia shall be reviewed annually by the head of financial regulation of the Central Bank. The Minister has indicated that will be done in February. I am anxious to ensure it is done before the new rates are charged on 1 May, because it has been postponed so many times. Why, for instance, should the last category of persons in the table, at line 30 on page 9, get a subsidy of €2,475? Is there a danger in putting these figures into law and having them there forever? Will any provider reduce costs if there is a guaranteed, upfront subsidy? Surely these amounts should be subject to some review? Are the proposals in line with the recommendations in the Milliman report as to what these courses of care should cost or are we looking at an old-fashioned subsidy that is not subject to appraisal? Is what is proposed here actuarially sound and does it reflect efficient costs of treatment?

At the moment, the major insurer of older people - this is one of the complaints about it - submits its costings to the Health Insurance Authority, but one has to wonder whether it is really the old Ryanair system of charging £208 to get to London because the Department has been persuaded and there is regulatory capture going on. May we, as servants of the taxpayer interest, shop around to see whether we can achieve better value? Health insurance is essentially a financial service. As such, can we ask the Central Bank to take a broader view on what these alternative companies could and should charge? We must have some public debate on these issues rather than putting specific sums onto the Statute Book forever.

I have tabled amendments Nos. 6 and 7 in the context of a health insurance industry in which we have seen an increase in costs out of all proportion to any other increases people have had to bear in recent years. We have a report which shows the potential for substantial savings in the sector. In terms of the incentive structure, the question arises as to whether older people are seen as a guaranteed source of income by hospitals, as referred to in the Milliman report. We might look at VHI as an insurer against risk, but to medical sector providers it is a guaranteed source of income. Is that why the average length of stay was found by Milliman to be so long in comparison with best international practice? Are these incentives the wrong ones in a system where we are trying to reduce health service costs? Are they actuarially sound as well as based on what hospital costs should be? The Oireachtas should discuss why this sector had such a massive cost increase and assist the Minister in any way we can in making sure that issue is addressed. If there are more large cost increases, we will lose another 300,000 people out of the sector. I support the Minister in his attempts to address these costs. Assuming it could never happen that an insurance company would be able to treat both older people and younger people at a lower cost and pass on savings to both groups, maybe that is the wrong assumption on which to proceed. Has the heavy degree of protection of VHI by the State caused it to become, until very recently, less than cost conscious? It is in this context that I tabled amendments Nos. 6 and 7.

I will conclude by referring briefly to my amendment No. 8, which seeks to put it into law that we would have a level playing field among insurance providers. That is the approach I am putting forward because it would be valuable to society to tackle the costs this sector has imposed upon us in recent years and push forward the implementation of the Milliman report. I hope these proposals and our consideration of them will be helpful to the Minister as he attempts to tackle the problem of such a rapid rise in voluntary health insurance costs and the loss of so many members. We must ask ourselves whether we acted enthusiastically enough to implement a report which showed us how we could get a lot of those costs down by more than 2%. As always when the Minister, Deputy Varadkar, comes to the House, we have interesting discussions. I do not intend to press these amendments, but it is important that we discuss the issues they raise, which also were raised in the Milliman report.