Thursday, 26 April 2007
Risk Equalisation: Motion
The changes contained in the scheme before the House primarily give effect in the risk equalisation scheme to the legislation enacted in February last amending the Health Insurance Acts in order to protect our system of community rating.
In Ireland the policy of community rating means no health insurer can price people out of being able to afford their premiums as they get older and, therefore, more likely to need medical care. This is a fair and equitable approach to take as it eliminates any possible discrimination on the basis of age and health status. Risk equalisation is a necessary feature in a community rated market.
Prior to the enactment of the Health Insurance (Amendment) Act 2007, legislation had allowed new entrants to the market, such as VIVAS Health, to avail of a three-year exemption from the obligation to make risk equalisation payments. The exemption was intended to give bona fide new entrants time to establish themselves and to build up market share. It was clearly the intention of the Oireachtas when the measure was enacted that this exemption should be confined to new entrants coming into the market seeking to build up market share from zero by normal business practices. The risk equalisation scheme reflected this exemption for new market entrants.
The Government's view was that the exemption had to be removed to protect the operation of the community rated market. This removal means related changes have to be made to the risk equalisation scheme. Most of these changes, as set out in the explanatory memorandum, are of a technical nature to reflect the changes in the legislation. As returns are made on a six-monthly basis, covering January to June and July to December each year, it is necessary to make the changes before the next returns are to be compiled and returned to the Health Insurance Authority before the end of July.
I will briefly outline some of the main changes. Having regard to the removal of the exemption, the receipt of the reports on the market and their views on the exemption, the Health Insurance Authority's report having proposed extending the phasing at the end of the three-year exemption over a further three years, and the need to ensure proportionality in the scheme, the payments that arise are being reduced to 80% of the current level. The Government is satisfied the reduction is appropriate.
The zero sum adjustment, a technical mathematical balancing of moneys within the scheme is also being amended. While it was a minor feature in recent criticisms of the scheme, the opportunity is being taken to amend the formula in order that payments by any contributors will be clearly based on their own claims costs.
The amendments in article 11(3) and related changes to the formula and data to be submitted are designed to ensure reported claims data remain consistent in circumstances where an undertaking is running down its business. Some other minor technical amendments are addressed in the explanatory memorandum.
A primary intention of the amended scheme is to balance the twin objectives of promoting competition in the health insurance market while at the same time protecting the integrity of community rating, both of which are to the benefit of the consumer. The Government is satisfied the changes being made to the scheme are in the best interests of consumers and the development of the market.
I welcome the Minister. It is not the first time she has been present to discuss the complicated matter of risk equalisation and the broader health insurance market.
With regard to the Government's proposals on risk equalisation and health insurance and its performance over the past four or five years, it has achieved the unique and perhaps unwelcome distinction of upsetting Bupa, to such an extent that it has left the market, the Quinn group, to such an extent that it has the Government before the courts, the VHI, which is crying foul, and the EU Commission, which seems far from satisfied with our health insurance market. There are challenges to be met, but they will not be met by this Government.
The Minister indicated that it is necessary to have this matter dealt with before the next official deadline at the end of July. Presumably, the new Government would have had time to reflect on the matter, and this course of action is rushed at the last minute. In February we passed legislation removing the three year exemption. That was last minute legislation. Now, this Oireachtas is at its end game and we are debating this measure in a vacuum. We need more time and explanation before we can be satisfied with what is being done.
It is necessary to ensure the continuation of community rating but that can be addressed in various ways. At one time the Minister and her Government colleagues claimed the present system of risk equalisation was sacrosanct and, not long ago, it was argued in both Houses that there could be no tampering with it. However, the Minister is today recommending a 20% reduction in the level of risk equalisation, which indicates that the Government's attitude previously was not as perfect as it thought.
I appreciate this is a complicated matter. Our aim must be to ensure competition and the retention of community rating. It is difficult to anticipate how the VHI will respond to this legislation. There were many expressions of concern by VHI personnel about the risk equalisation mechanism. The VHI was demanding the payment of the risk equalisation moneys, but those funds will now be 20% lower. The VHI is almost a monopoly and, therefore, the Minister and the Department should closely examine its operations, competitiveness and efficiency. It would not be unremarkable to find that a company of its size and in such a dominant position is not working as efficiently as it should. Obviously, the next Government will have to reflect carefully on the future of the VHI. In her radio interview this morning the Minister spoke about, although did not advocate, the possibility of mutualisation or some degree of privatisation. These possibilities must be examined but our concern must be to ensure the customer has choice.
We are hugely indebted to the Quinn group for taking on the Bupa mantle. It has brought a degree of certainty to the market and, hopefully, the success of the Quinn group in the broader insurance market will be replicated in the health insurance market and there will continue to be choice. However, there must be further reflection on the issue of community rating.
I am concerned that as the Dáil and Seanad reach their dissolution dates, we are putting through legislation which, although it must be passed within the next month or two, is being dealt with too hastily. We have much experience of hastily drafted and passed legislation coming back to haunt us. That is my concern about the measure before us. It is not just late but also rushed and it could cause difficulties in the future.
It is disappointing that we have not had more time to debate the recommendations of the various reports commissioned by the Minister. Reports were produced by the Health Insurance Authority, the Competition Authority and the Barrington group and all had different recommendations. Many questions still must be addressed and I am concerned that rushing through this measure could end up damaging the health insurance market and the consumer.
The Government's action is necessary. It is important the playing pitch is levelled in private health insurance. Community rating is particularly important because it ensures no health insurer can price a person out of the market. Risk equalisation is a necessary feature of the community rated market. The VHI has approximately 1.5 million members; I am one of them. The reason for the risk equalisation reduction to 80% is the abolition of the three year exemption. It levels the playing pitch and will ensure consumers will not have to pay exorbitant premia.
The VHI has used up a great deal of its reserves and these must now be rebuilt. This can be done in two ways, either through an injection of capital by the State or by part privatisation. The organisation is 50 years old and given that people are generally creatures of habit and do not like change, they would prefer the VHI to continue as it is in the insurance market. I regret the decision of Bupa to withdraw from the market but that was its decision.
It is easy to say this measure could have been deferred but it is never too late to do the right thing. The Minister is doing the right thing in this case and I support the measure.
I have little to add. This legislation is necessary and the Minister should proceed with it, if only to provide some degree of certainty to people as they prepare their accounts for the half year. Nevertheless, I hope the Minister will regard it as a holding operation. It should not deter us from considering a more fundamental review of the sector, particularly the role of the VHI. Obviously, at my age I am supportive of risk equalisation.
It is necessary that operators in the sector reflect the broad range of risks both in the demography and epidemiology of the society. There might be other ways of doing that.
We should welcome the entry of Mr. Sean Quinn to the sector, not only for taking over Bupa at a difficult time for many people but also because his background in insurance indicates he is capable of injecting new life and ideas into the market. While competition is necessary in this sector, a body such as the VHI is essentially anti-competitive. The competition should be extended to the providers and the various insuring organisations can use their muscle and leverage to ensure a better deal.
It is not a great idea to give transfers to people without being assured of their efficiency and effectiveness in using the money. Over the years a comfortable relationship has grown up between the VHI and the hospitals and consultants, whereby the VHI sees itself as a conduit for supplying money to them. The organisation could do an enormous amount for efficiency within the health sector by driving down prices for procedures such as scans, tests, treatments and so forth. That should be borne in mind when the Minister is examining this issue. This proposal, however, is sufficient for the day and I support it.
I also welcome the Minister. She is a doughty fighter. She took on a very difficult job. I am not sure it was not a kamikaze mission but she did it honourably. Although I will support these measures, I do so faute de mieux.
This is a disgusting debate and I am a little shocked that not one contributor so far has mentioned the patients. We have heard about the market, entering the field and the functioning of hospitals but we have not heard a word about the patients. That is what interests me. In a three page, double spaced speech the Minister mentioned the word "market" eight times, "competition" and all that sort of rubbish.
I am glad Senator Ryan raised the question of competition. I have been hammering on about that for the past year and I am getting increasingly sick of competition being made a little tin god and the automatic assumption that it delivers for the consumer. It is clear that it does not always deliver. It is clear from what happened with the groceries order.
I ran the Hirschfeld Community Centre. I was the only person who put my own money into it but then a couple of fly-by-nights opened up. They have now become extremely wealthy people but they did not serve the community very well. They put us to the pin of our collar and then buggered off whenever it suited them, not having paid their tax bills, and we were left in a situation where we did not have the resources to put into the community that we otherwise would have had. I start, therefore, from a patient focused point of view and I am not impressed by the market. It is essential that every citizen of this State have access to health care and it is an obscenity that they do not. That is the result of the Minister's market and the sooner we stop this nonsense, the better.
I realise the Minister has a very busy life but perhaps she saw one or two of the "Prime Time" programmes, one of which concerned a woman in County Kilkenny who did not join the VHI, partly because of principle and partly for penury reasons. She believed in a State system. She got a cancer test but the results were delayed. It took six months to get the results, by which time the cancer was untreatable. That woman was effectively sentenced to death by the market that all Members praise. That is revolting. Why should a citizen be sentenced to death because of poverty? The State already has some responsibility for the poverty in which these people live but to deny them treatment is wrong, and it goes on and on.
Another programme concerned a very decent, hard working doctor who ran a clinic in Naas, County Kildare. He had the same story to tell. A patient of his had died because she was in the public service, not in the VHI. I would like the VHI to come in fully under Government and become a real national institution strongly supported by the State. Health care should be nationalised. I am not in favour of the market. It is disgusting that people talk about markets when we are talking about people's health and the right to life. We should ensure we provide adequate health care for every citizen of this State and we are not doing it. We should fully invest in the VHI. There will be flabbiness, as Senator Hayes mentioned, but that is the case in the private system as well. A fully capitalised, funded and supported health service for all that delivers to the people is what I want.
I support this measure because it provides risk equalisation. The Minister was courageous in fighting this battle, and more power to her, but she is fighting it in the wrong context. The market may be all right for groceries, sweets and so on, although I am not sure that is the case, or for betting and gambling, but people's health is the fundamental concern.
Let us not forget the way BUPA behaved. It scarpered but the Minister dealt with that well. She pointed out that in similar circumstances in Australia — I heard it on the radio — it managed to make a profit but it was not big enough. That is the problem. It is too greedy. I want a proper national health service that delivers for all our citizens.
I support the motion faute de mieux. I hope the Minister and I are both re-elected and that we can go hammer and tongs on this issue because it is ideological. The Minister is a voter and I might alienate her in my constituency but I do not give a damn because I feel strongly on this issue. I hope we will have an opportunity to have it out again and again.
I will be a good deal less colourful. I agree with the core of what Senator Norris said. I am at a loss to understand how a blinkered economic commentariat in this country and other countries can talk about competition as an inherently good thing in the provision of health care. I have written to newspapers and I have said it in the House on many occasions that if market efficiencies make for good health care, why has the United States the most expensive health care system in the world by a factor of nearly70%? Between 15% and 17% of US gross domestic product is spent on health care. We spend 7% or 8% — the Minister can correct me on that. Even on a gross national product basis, the US spends nearly twice as much. The outcome of that is a lower life expectancy than most of western Europe and a spectacularly higher incidence of infant mortality than the rest of the comparatively wealthy world. That is a fact. I am a pragmatist. What works is what matters to me and I have no patience with ideology of left or right on these issues. The US health care system, the most market-based in the world, does not work.
The liberal market model of a competitive market is based on a number of assumptions, one of which is that the withdrawal of one participant from the market will not affect the market. The flurry of activity we had in the past six months makes it clear that the withdrawal of a participant from the market has a profound effect on the market. The two basic platforms are, first, the assumption that there is something like a market and, second, that it is an acceptable model to describe the way to deliver health care. Both of them are at variance with the facts, not with my ideology. The fundamental problem is the belief concerning market discipline, whatever that means.
People talk about efficiency in health care, for instance. It is a fact that 50% of all health care expenditure in the United States is spent on people in the last six months of their lives. If we want to be brutally efficient, let them die six months earlier and half the budget will be saved. Effectively, that is what many of the health maintenance organisations, HMOs, are doing in the United States because a bureaucrat, not a doctor, decides what treatment is appropriate.
Are we moving in that direction? I read in The Irish Times today a commentary from the Barrington report which mentioned dividing up our health care system into three: the public system, community-rated health insurance and luxury health insurance, which is not community-rated. I do not know what efficiency that might create other than to reassure the super rich that they will have a health service all to themselves which they can pay for at whatever exorbitant rates they are charged, and it will not be competitive.
The idea that the market is an appropriate way to allocate resources in health care efficiently, and that must be defined properly, is at variance with the facts. The European health care systems have their limitations but they deliver better quality health care for ordinary citizens than the alternative model, which is the US model of privatised health care based on private or no insurance and an appallingly inadequate public health service. That is the evidence, so what are we doing here?
I am numerate and can handle numbers and figures. However, this is as confusing a statutory instrument as I have ever read. The explanatory memorandum, like many before, says the same thing in a separate language. Assuming the Minister is telling us what is in it, it amounts to an attempt to restore some kind of community rating. Underlying it is the belief that a health service would be better if it were based on a competitive market model. One cannot have such a model in a publicly owned health service or at least where the dominant force is publicly owned. The underlying belief is that we must privatise the health service to make it efficient. That is a very dangerous route to go, which is what worries me about this measure and why I am unhappy about it. It is a bad idea and pushing it through the Houses of the Oireachtas in two sessions, each lasting 40 minutes, is the wrong way to deal with something that is very complicated and quite serious.
I disagree with my two colleagues who have just spoken. I agree with the Minister because I do not believe it is about competition in the provision of health care. Rather, it is about competition in the cost of provided health care, which is the essential difference.
I have dealt and fought with the VHI over the years where I believed it put charges on my cost which should not have arisen. Therefore, it is not about the health service. It is about the cost charged to ordinary people for availing of support in the health service. I know I cannot go any further than that. Can I take my two minutes now?
I agree with much of what has been said. First, I agree that everybody should have access to health care on the basis of medical need. Everybody in Ireland has universal coverage, which was not the case when the VHI was established 50 years ago. Everybody in Ireland is entitled to universal coverage in our hospital system.
The problem is that our public hospitals are a hive of private activity. Approximately 20% of the beds are ring-fenced for private patients. Consultants, with the exception of accident and emergency consultants, get a fee for everybody who goes into hospital, regardless what bed patients occupy. It is an extraordinary system. Even pathologists and radiologists who treat accident and emergency cases get a private fee from the insurers for reading the tests.
To be fair, psychiatrists in the private system are not the high earners. I am talking about acute services, excluding psychiatry, although private psychiatric hospitals exist, such St. Patrick's, which is a completely private institution.
There is a hive of private activity in the public hospital system. Much of my approach recently has been to try to separate that and ensure every patient gets access to those facilities on the basis of medical need. If there is private provision of health care and money to be invested in health care, I want to encourage it, provided everybody can have access to high-quality treatment.
Senator Bradford accused me of tampering. In the court case and other reviews, it has always been suggested that the form, rather than the principle, of risk equalisation should be constantly reviewed. A few months ago, we got rid of the three-year holiday where companies came into the market and paid nothing for three years. We never envisaged that a corporate structure could be used to take over an existing entity and avail of that three-year exemption. That loophole was closed. By virtue of closing it, we must bring in an order to facilitate any risk equalisation from that company. That order was necessary. We are going with the figure of 80% recommended by the Barrington report. There is also an EU dimension that felt that getting rid of the three-year exemption may have been a bit harsh and that we needed to be more proportionate.
This represents a loss of €8 million to €10 million to the VHI per year. To put it into perspective, the VHI earns more than €1 billion in premium income. The loss is less than 1% of what it earns. The Senator's party opposed the emergency legislation. If this had not come in, the VHI would have lost 15 times more than it will lose through this particular measure. It would have lost €150 million. There are other issues.
This is not a wide debate on everything. The Government has decided that by the end of 2008, the VHI must be authorised by the regulator. This means it must meet the solvency requirements of its competitors and that the derogation goes. The landscape will be changed completely. I hate to use words such as "market" after hearing Senator Norris, but the reality is that we want to see a number of companies providing good products. One does not get innovation where there is a single supplier in any market. Competition is not perfect but it is much better than if none exists, as we see in many other markets. One gets more innovation and more price-sensitive products. The VHI has a 75% share of this market. If we were to go back to a situation where the VHI had a 100% share of the market, it would not be satisfactory and nobody would favour it.
For many reasons, we must continue to review the level of the risk equalisation. The VHI argues that we do not risk equalise enough. There are a number of recommendations about lifetime cover, lifetime community rating and encouraging young people by giving them incentives to join early so that one has a pool of young people and, therefore, one makes insurance more affordable. That has been put out for discussion. Owing to the fact that we have open enrolment in Ireland, anyone with an insurance company, no matter how sick he or she is, can switch to another company without any penalty or loss of time. This is not understood and is among the changes that will be introduced on foot of the Barrington report, which is pro-members and pro-subscribers to private health insurance, which is a good thing.