Introduction

On 10 March 2009, the Minister for Health and Children, Mary Harney TD, said in the Dáil that emerging pressures on the finances of the Health Service Executive (HSE) would mean that savings of €480 million would have to be made elsewhere in its budget over the course of the year. The HSE, however, said on 12 March 2009 that in order to meet the new pressures and stay within budget it would have to make savings in other areas amounting to over €1 billion.

The divergence in the projections as to the scale of the shortfall went largely unnoticed by politicians, the media and the public. A month later, in a statement issued following the Supplementary Budget of 7 April 2009, the Minister for Health and Children referred to the shortfall as amounting to €540 million.¹

This was reiterated in a further statement by the Minister on 24 April 2009, which said the figure was ‘based on the best available information’ and had been arrived at following ‘a detailed examination undertaken by the HSE and the Department of Health and Children’.²

Dealing with the Shortfall

The statement of 24 April 2009 detailed how the shortfall was to be dealt with. Over €400 million would be accounted for by actions to be taken by the Department of Health and Children. The greater share of this would consist of measures that would channel additional revenue to the HSE and the rest of measures that would reduce the spending requirements placed on the HSE. The remaining €133 million of the shortfall would be accounted for by savings achieved by the HSE itself through ‘measures … not affecting the Service Plan’ of the HSE for 2009.

Despite an assurance in the Minister’s statement that the priority would be ‘to maintain, in every possible way, services to patients’, it is inevitable that there will be cuts in services provided. The gap that has emerged in the HSE budget for 2009 may mean the difference between open and closed hospital wards; between older people and people with disabilities being able to live at home or being forced into residential care because of the lack of adequate home care services. It may mean the difference between promised and much-needed improvements being made or not made in health care for Travellers, in mental health services, in care for cystic fibrosis patients. The list could go on and on.

The scale of the difficulties facing the HSE budget, the fact that the Minister for Health and Children and the HSE initially gave different estimates of the size of the projected shortfall, and type of measures that have had to be taken in response, are not just significant in themselves. They are also a reflection of the confusion regarding aspects of the financing and obligations of the HSE that remained unresolved by the legislation under which it was statutorily established – the Health Act 2004.

Health Act 2004

With the 2004 Act, Mary Harney, at that point in position as Minister for Health and Children for just a few weeks, executed the reform which had been long planned by her predecessor, Micheál Martin TD.

Despite the two year lead-in to the establishment of the HSE, much of the detail of how it would operate remained unknown in late 2004. Contrary to the advice of both the Department of Finance and the Department of Health and Children, the Minister through the legislation handed over responsibility for the financial management of the HSE from the Secretary General of the Department of Health and Children to the CEO of the HSE.

The concern of the government departments in 2004 was that the HSE simply did not have the experience or expertise to manage the second largest public sector budget allocation in the State. And indeed for the first few years of its operation, the HSE, like the health boards before it, had to be bailed out by additional finance from the Central Exchequer.

However, in 2008, the HSE managed to live within its budget for the first time. Of course, this involved some juggling of internal budgets but this has always been the practice in Irish health finances and will take more time to curtail. Funds are moved from capital (buildings and equipment) to current (day-to-day) budgets, and from what are perceived as lower profile services (such as mental health and primary care) to higher profile areas (such as cancer services and acute hospitals).

HSE Service Plan 2009

A key reason, however, why the HSE succeeded in living within its budget in 2008 was that it introduced very strict ‘cost cutting’ initiatives in September 2007 and a range of measures which are referred to as the ‘Value for Money’ programme.

The HSE Service Plan for 2009, published just before Christmas 2008, provided for the delivery of the same level of services in 2009 as in 2008, despite the minimal increase allocated to the HSE in the October 2008 Budget.³

The Plan envisaged the continuance of the Value for Money measures adopted in 2008 and the achievement of yet more savings by reducing the overtime of junior hospital doctors; moving from the use of agency staff to salaried staff; making savings in travel, administration, and PR; continuing the shift from inpatient to day care in hospitals, and reducing hospital lengths of stay.

However, the Service Plan also acknowledged that there were factors which could affect the costs and the level of income of the HSE but which were outside its control. Listed among these were the increase in numbers entitled to medical cards, which is escalating as more and more people become unemployed; increased numbers on the Long Term Illness Scheme,⁴ and an anticipated decline in income from the health levy.

Listed also were what the Plan described as other ‘risks’. These included the €100 million the Government had said would be saved by the withdrawal of medical cards from people over seventy (the fact that the HSE described this as a ‘risk’ indicates that it believed there was little or no chance of this level of saving being achieved) and unknown actual costs of the revised consultants’ contract.

In the event, as already noted, several of these anticipated pressures became a reality even within the first few months of 2009, giving rise to the projections of substantial shortfalls referred to earlier, and the corrective measures that have had to be taken.

Lack of Clarity

The whole episode reflects the contradictions inherent in the provisions of the legislation under which the HSE is established and the lack of clarity regarding the respective roles of the Department of Health and Children and the HSE. The Health Act 2004, in other words, laid the ground for the confusion that continues today. While the HSE must, by law, live within its budget, and the CEO of the HSE is responsible for managing that budget, many of the decisions and demands affecting the budget lie outside the authority of the HSE.

Thus, on the one hand, the HSE does not have control over the key elements of its income – specifically, the actual amount it is allocated in the Government’s Budget each year, including the amount it receives from the health levy – as these are politically motivated and decided.

On the other hand, some of outgoings of the HSE are beyond its influence – for example, the changes in the cost of salaries under the new consultants’ contract, and the costs associated with rising numbers becoming entitled to a medical card.

So what happens to the health budget now, given the international and national economic crises?

Still Making up for Decades of Neglect

For decades, the Irish health system was under-funded. From the early 1980s to the late 1990s, the services were starved of staff and resources. During this time, thousands of public hospital beds were taken out of the system; buildings were allowed to slip into disrepair, and staffing levels did not keep in line with growing demand.

Since 1997, the budget for health has increased four-fold, from €4 billion then to a total budget allocation to health in 2009 of €16 billion. By any standards, this is an extraordinary increase. However, the enlarged budget for health is still just making up for the long years of neglect.

Furthermore, the additional funding was poured into a system which was providing more and more services for a growing and ageing population (and currently a baby boom)⁵ without major funding or structural reform.

While one could argue that the Irish health services have been over-reformed in the last five years, the reality is that this so-called ‘reform’ happened without changing the funding mechanism and, fundamentally, without introducing a universal health system, where access is based on need, not ability to pay.

Unique Public–Private Mix of Hospital Care

Ireland is unique in Europe in that we continue to privilege private patients over public patients within the public hospital system. It is remarkable that despite reform in the guise of the establishment of the HSE, the reconfiguration of hospitals, the recently-agreed consultants’ contract, no attempt has been made to deconstruct the two-tier system of hospital care.

Most European countries have some type of public and private mix in health care, but Ireland is highly unusual in that a substantial part of private care takes place in public hospitals. This care is heavily subsidised by public money (up to 70 per cent) and private patients are allowed to skip the queue ahead of public patients.

One of the flagship projects of the current Minister for Health and Children has been the agreeing of a new contract for hospital consultants. When challenged about the two-tier nature of Irish hospital care, Ms Harney refers to the new contract as the solution.

The New Consultants’ Contract

The new consultants’ contract took almost five years to negotiate. It was delayed tactically by both sides – the doctors and the State. Report after report on the Irish health system had recommended that the issue of the public–private mix in consultants’ contracts should be addressed. One of the three reports on reform of the health system published in 2003, the report of the Commission on Financial Management and Control Systems in the Health Service (the Brennan Report), stated:

Existing arrangements, which enable medical Consultants to combine their public hospital commitment with private practice, are inherently unsatisfactory from a management and control perspective. To address this, we recommend that all new public consultant appointments be on the basis of a commitment to work exclusively in the public sector.⁶

The new contract does not achieve this aim. Consultants are still allowed to opt for a public–private mix of work. By March 2009, about 85 per cent of consultants had signed up to the new contract. Of these, just 30 per cent had opted for Type A, which is the public-only contract. The remaining 70 per cent have a Type B or Type B* contract, both of which allow them to work publicly and privately.

A Type B contract enables consultants to practice in a public hospital and privately ‘on site’, i.e., in the private wards of the same public hospital or in a co-located private hospital.

It was planned originally that eight private for-profit hospitals would be built on the grounds of public hospitals. However, no co-located hospital is yet in place. There is now considerable uncertainty as to how many of these hospitals will ultimately be built – and when. This uncertainty is reflected in the statement of the HSE Service Plan for 2009 that the projected progress during the year in the development of even the five co-located hospitals which are at a more advanced stage in planning would be ‘subject to satisfactory banking arrangements’.⁷

Type B* contracts allow consultants to practice in a public hospital and off-site in a private hospital. Only consultants already working in the system can opt for this contract; in other words, anyone taking up a new contract from now on will not have this option. Over time, then, fewer and fewer consultants will hold this type of contract, so that eventually it will no longer be possible for a consultant employed in a public hospital to have a private practice other than in that hospital or in a co-located private hospital.

Terms and Conditions of the New Contract

Under the new contract, then, over two-thirds of consultants will continue to practice privately and publicly. They will be paid a salary for their work in providing services to public patients; for their private work, they will receive a fee per item of service (either in the form of payments from insurers or in direct out-of-pocket payments from patients). Every examination of the Irish health system has found that this mixed method of payment provides an incentive to engage in private work.

Under the old contract, the salaries paid to consultants for their public work ranged between €140,000 and €180,000. Under the new contract, the salary range is significantly higher – from €156,000 to €252,000. For the 70 per cent of consultants who have opted for one of the Type B contracts there will be, of course, additional earnings from private practice.

The salaries for the three main types of contract under the new scheme are:

• Type A – public only: €211,000–€252,000;
• Type B – public and private practice on the same site: €197,296–€205,000;
• Type B* – public and private off-site: €156,000.

Minister Mary Harney has rejected the suggestion that the new salary scales represent a pay rise, saying that the new contract is about a new way of working – that it means a change in the work practices of consultants within the public system. And this is in fact the case: under the new contract, consultants are expected to work a 37-hour week (under the old contract it was 33 hours); they will be rostered early in the morning, in the evenings and at weekends. Moreover, they will be accountable to newly-appointed ‘Clinical Directors’.

Clinical Directors

Academic and government-commissioned reports have consistently highlighted the absence of accountability of consultants under the previous contract.

A. Dale Tussing and Maev-Ann Wren, for example, in their book, How Ireland Cares, commented: ‘… the consultants’ common contract is widely criticised … Consultants are not accountable to anyone, either administratively or clinically…’. Tussing and Wren pointed to the serious management problems created by the ‘extraordinary degree of autonomy’ and the excessive delegation of responsibility to non-consultant hospital doctors which the common contract allowed.⁸

The appointment of Clinical Directors and the fact that consultants will be directly accountable to them is therefore progress. However, no matter how it is viewed, it is clear that consultants will be paid significantly more for their new ways of working within the public system.

The Clinical Directors will also be responsible for ensuring that a common waiting list operates for all diagnostics and that the target of an 80:20 public–private ratio for public hospital beds is realised in practice. Clinical Directors are in the process of being recruited and appointed in Spring 2009. To qualify for appointment, candidates must already be a consultant; an additional sum of €50,000 will be paid on top of the consultant salary to those who fill the Clinical Director posts.

According to the Minister for Health and Children and the HSE, the new contract and the creation of the position of Clinical Director will end the privileging of private patients over public patients in public hospitals. Fundamentally, however, the public–private mix remains. All the international evidence shows that where there are incentives in place, private patients will continue to be privileged over public patients. Moreover, while the consultants’ contract stipulates that there will be a common waiting list for diagnostics, there is nothing in the contract about a common waiting list for treatment.

And there is a way around the common waiting list for diagnosis – a patient could obtain a diagnosis in a private clinic or rooms not associated with a public hospital and then, since under the Health Ammendment Act, 1991 all citizens are entitled to care in a public hospital, could be referred as ‘urgent’ into the public hospital system (and skip the queue) or referred on to the consultant’s list for private treatment in a public hospital (and skip the queue).

Furthermore, the inequity arising from the public subsidisation of private care in public hospitals still remains unresolved. The subsidisation consists of tax relief on insurance premia, and the fact that the full costs are not charged for the use of theatres, nursing staff, and hospital laboratories in the public hospitals where private care takes place. Over two decades, successive reports have recommended that public hospitals should be able to charge for the full cost of the private care taking place within them, but this has never been achieved.

Where the Political Parties Stand

Only when we have a universal health system where access to care is based on need, not ability to pay, will we see the ending of the two-tier structure of Irish hospital care.

While Fianna Fáil has not advocated such a system for about half a century, there is a growing consensus among opposition political parties about the need for one-tier, universal health care.

The Labour Party has long argued for a universal health system based on a social health insurance scheme.⁹ Sinn Fein advocates a one-tier, tax-funded system akin to the National Health Service in place in Northern Ireland.

On 27 April 2009, Fine Gael, which had long been a proponent of the two-tier health system, published a policy document outlining proposals for a series of health service reforms, including the introduction of a system of universal health insurance based on the model operating in the Netherlands.¹⁰ Fine Gael has therefore opted for a system of compulsory insurance using private insurance companies, under which the premia of people on lower incomes would be paid for or subsidised by the State, rather than a system of social health insurance where premia would be paid into a fund or funds run by the State.

The Green Party went to the electorate in 2007 advocating a universal health care system for all children, starting with under-sixes. The Party also said it would end the plan to co-locate private hospitals on the grounds of public hospitals. However, since going into coalition with Fianna Fáil and the now defunct Progressive Democrats, the Greens have done a u-turn on these commitments.

Both the Greens and Fianna Fáil backed the withdrawal (announced in the October 2008 Budget) of the element of universal health care represented by automatic medical card entitlement for all people over seventy. And while the Government capitulated to the anger of the grey lobby by drastically revising the original proposal, so that only 5 to 10 per cent of older people would lose their medical cards, it maintained the hard-line position that universal health care for this segment of the population would be abolished. Despite the demise of the Progressive Democrats as a political entity, their legacy in health is alive and well.

Only through the introduction of a universal, one-tier health system can access to health care be based on need, not ability to pay. In the decade when we had most, the divide between public and private care in the Irish health system widened considerably and as the decade ended one of the few examples of universality in the system was abandoned. It remains to be seen whether, in times of less, there will be greater solidarity and the bold decision made to deliver a really good quality, universal public health system.

Notes

1.    Department of Health and Children, ‘Statement by the Minister for Health and Children following Supplementary Budget, 7th April 2009’. (http://www.dohc.ie/press/releases/2009/20090407.html)

2.    Department of Health and Children, ‘Statement by the Minister for Health and Children, Mary Harney T.D. on the HSE National Service Plan 2009’, 24 April 2009. (http://www.dohc.ie/press/releases/2009/20090424.html)

3.    Health Service Executive, National Service Plan 2009, Cork: Corporate Planning and Control Processes Directorate, HSE, 2008.

4.    Under the Long Term Illness Scheme, people who have certain long-term conditions (including, for example, epilepsy, Parkinsonism, cerebral palsy, cystic fibrosis, mental handicap) but who do not qualify for a medical card can receive drugs, medicines and medical and surgical appliances for the treatment of that condition free of charge.

5.    Between 1996 and 2008, the total population grew from 3,626,100 to 4,422,100 (estimated) – an increase of almost 800,000 or 20 per cent. In the same period, the population over 65 grew from 413,882 to 481,600 (estimated) – an increase of 16 per cent. There were around 72,000 births in 2008 as compared to 53,000 in 1999; the birth rate in 2008 was approximately 17.2 per 1,000 of population as compared to 14.3 per 1,000 in 1999.

6.    Commission on Financial Management and Control Systems, Dublin: Stationery Office, 2003. (The Report is generally referred to as the Brennan Report, as the Commission was chaired by Niamh Brennan, Professor of Management, UCD.)

7.    Health Service Executive, op. cit., p. 60.

8.    A.Dale Tussing and Maev-Ann Wren, How Ireland Cares: The Case for Health Care Reform, Dublin: New Island, 2006, pp. 246–47.

9.    For example, Labour Party, Curing our Ills: Irish Healthcare 2000: Delivering Excellence for All, Dublin: The Labour Party, 2000.

10.    Fine Gael, FairCare: Fine Gael Proposals to Reform the Health Service and Introduce Universal Health Insurance, 27 April 2009. (www.faircare.ie)

Sara Burke is a journalist and social policy analyst. She is author of ‘Irish Apartheid: Healthcare Inequality in Ireland’, which will be published by New Island in June 2009.