This note is in response to the invitation to participate in the consultation process in relation
to the white paper on " The Path to Universal Healthcare ". By way of background I have
been involved in the Insurance Industry for over 40 years, 8 of which as CEO of VHI
Healthcare. Currently I serve as a non-executive Director on a number of Boards.
At outset let me say that I am in broad agreement with two of the main planks of current
goverment policy on healthcare ie
(1) The introduction of Universal Healthcare through mandatory health insurance for all (
chiefly to remedy the long standing inefficiency of the same dominant provider and dominant
purchaser ) and
(2) The maximisaton of the use of GP facilities.
Let me quickly add that I was dismayed after reading the White Paper. It does not address
many of the issues associated with the introduction of Universal Health Insurance and in
relation to those that it does address it reads more like a political manifesto than a practical
policy document that is capable of being implemented. I fear that 15 years from now
Universal Healthcare will remain a vision - being used to introduce changes which have little
relevance to the end result ( as has arguably been the case over the past 2/3 years ). In this
event it will be similar to the White Paper on Community Rating which was published in
1999 and received a large measure of political consensus but remains to be implemented.
This is despite claims by politicians that we have a Community Rated health insurance
system.
I will attempt to outline my thoughts in a number of points :
1. Free GP care.
As stated above, I agree that the use of GP facilities must be maximised in the delivery of
healthcare. However it makes absolutely no sense to me to propose a free GP service for all. (
Human nature in this regard is best illustrated by the comment attributed to Mae West " if it
is free, I will have two " ). Such a free service would undoubtedly be abused and would
consume an increasing proportion of the overall health budget. It is certainly true that the
current level of fees for GP visits are far too high and drive middle and higher income earners
to forego necessary visits to GPs and to the greater utilisation of high cost hospital facilities. I
suggest that a visit to a GP should cost, say, 5 euro for a medical card holder and 20/25 euro
for all others. Such fees should not deter appropriate use of GP services but would act as a
disincentive to abuse. It is also essential that all GP facilities have on-site availability of
prescribed diagnostic equipment together with full back-up and nursing assistance.
2. Insurance is a Financial Contract.
Universal Health Insurance will involve a financial contract between an individual and a
Financial Institution ( ie the Health Insurer ). The latter will be subject to prudential and
consumer protection regulation by the Central Bank of Ireland. The implications of this
fundamental but simple reality are not teased out in the White Paper. Perhaps this is not
surprising since the requirements of a social service such as healthcare and the requirements
of a regulated financial services market are likely to pose major challenges, if not outright
conflict. Indeed if I were the Financial Regulator within the CBI, and based on my reading of
the White Paper, I would find it difficult to grant or renew a licence to any Health Insurer. As
I see it two major issues arise :
(1) Where is the Capital likely to come from to finance the huge increase in Premium
Income that must result from the mandatory introduction of Health Insurance for all.
(2) If the Capital does become available either through direct equity investment or through
some arrangements with overseas re-insurers, ( although this latter form of capitalisation if
utilised up to, say, 50% would leave our Universal Health Insurance system vulnerable to a
potentially volatile international market both as to availability and price ), such capital must
achieve a return. The White Paper envisages the exercise of extensive political control whether through quangos or otherwise - over both the content of health insurance policies and
the premiums that can be charged. Further, the functioning of our Community Rated Health
Insurance market without an efficient Risk Equalisation system continues to remain an issue
and a major doubt. In these circumstances I cannot envisage how any Health Insurer could
satisfy the CBI that it would remain sustainable and solvent over the short, medium and long
term.
3. Basic Basket of Health Benefits.
The White Paper accepts that a central and critical issue will be the package of services to be
included in the basic mandatory health insurance contract. Some of the speculation in the
document as to what might be included is mind boggling eg it is speculated that the cost of
drugs might be included as part of the basic coverage. Many years ago the VHI was facing
insolvency had drugs not been excluded from cover. We must learn from past health
insurance experience. The HSE experience is also, I believe, relevant. The HSE might have
proved a success if it had been entrusted initially only with the management of public and
voluntary hospitals. Other aspects of the Health Service could have been added on over time
to a successful HSE. The result was that it struggled from outset under the burden of
bureaucracy and unforeseen complications and has achieved little in it's primary aim of
making public hospitals more efficient. I suggest that - at outset at least - the package of
benefits to be prescribed for the basic health insurance contract should stay close to the
current mandatory cover ( or close to the old basic VHI Plan B ). In particular the following
should be funded initially out of public funds :
* Drugs
* Accident and emergency services ( including a national ambulance service )
* Hospital facilities for children
* Basic maternity facilities in maternity hospitals
* Long term medical / nursing care
* Training facilities provided within university hospitals
4. Access.
Equal access for all is a laudable and core objective of the Universal Health Insurance
system. It is also revolutionary in that access is undoubtedly the primary reason why 50% of
the population currently purchase health insurance on a voluntary basis. The belief apparently
is that making health insurance mandatory will overcome this contradiction and that the
efficiences which Universal Healthcare will bring will lead to public acceptance. Yet access
must be one of the key metrics of the success of any health insurance contract. If it is not then
the new system will simply move the delays long associated with the public system into the
insurance sector. This may represent a good outcome for politicians but it would reduce the
standing of an insurance contract to that of a political promise at election time. Both the
concept of insurance and healthcare itself would be the loser. Thus, while privileged access
cannot be a feature of any health insurance policy, access must be one of the key yardsticks
that will be used to judge the effectiveness and performance of competing insurers.
5. Community Rating / Risk Equalisation.
It is acknowledged in the White Paper and is self evidently the case that universal health
insurance can only operate on a community rated basis. It is equally clear that Community
Rating, within a competitive market, must be supported by an efficient risk equalisation
system. Since the arrival of competition into the health insurance market in Ireland we have
not had effective community rating because we have not had anything approaching efficient
risk equalisation. Our politicians must be held responsible for this and for the resulting high
cost and confusing state of the health insurance market. The previous Minister for Health did
eventually introduce a Risk Equalisation system but the Supreme Court held that the
legislation on which it was based failed to achieve the objective envisaged by that legislation
( the Court held that the legislation only required community rating / risk equalisation within
each individual product rather than across product lines ). After the Supreme Court decision
in 2008 the Minister announced that it would take 3 years to draft new legislation ! It is now
2014 and we have a health insurance shambles with hundreds of policies which nobody
understands as health insurers target potentially low claiming policyholders. Subsequent to
the publication of the White Paper we have been promised - yet again - effective risk
equalisation but the details remain to be announced. The new risk equalisation system must
take account of both age and health status variations between competing insurers. The issue
of variations in health status assumes even greater importance in a universal healthcare
environment since the White Paper points out that lower income groups enjoy lower health
status than higher income groups. The objective must be to equalise at least 90% of the risk,
as has been achieved in other universal community rated markets. We do not have an
effective community rated market at present and unless we do achieve effective community
rating, based on an efficient risk equalisation system, the Universal Health Insurance system
will fail.
6. Other Reforms in Delivery of Healthcare.
I remain convinced that Universal Healthcare can be made to succeed. The seperation of
payer and provider will end the distinction between public and private hospitals and bring
increased efficiency to both, particularly the former. Other reforms must continue to take
place in the way in which healthcare is delivered within our society. This will require
leadership from goverment and active participation by the new enlarged private sector. I am
not a healthcare expert but one reform which, I believe, would make a considerable
contribution to the more efficient and effective delivery of healthcare would be to change the
current practice of GPs referring patients to individual consultants ( who then decide on the
hospital ) to a practice of GPs referring patients to hospitals which have a specialty in the
problem area requiring diagnosis and treatment. The hospitals would employ the consultants.
Among many other advantages this would do away with the gross inefficiency that results
from some consultants holding down posts with a number of hospitals. The public ultimately
pay for all inefficiences in the delivery of healthcare.
7. VHI Healthcare.
It is likely that VHI Healthcare will continue to be the largest health insurer in the country for
some considerable time. The Goverment has also indicated that VHI will not be privatised. If
the primary benefit of Universal Healthcare is to be fully realised, ie the seperation of the
dominant provider from the dominant purchaser, then there must be clear definition and
distance between the role of goverment and the role of VHI in the new Universal Healthcare
environment. VHI must be allowed be a strong advocate for the interests of it's customers and
the health insurance market in general. Some Corporate Governance changes would
contribute to this end and bring the business more into line with corporate governance
developments in the private sector. I have no doubt but that the CBI will insist on the
adoption of it's Corporate Governance code, which, inter alia, requires that all non-executive
and senior executive appointments be pre-approved by the CBI. One positive change would
be to reduce the size of the Board from 12 to 7 ( the size of the Board was doubled in the
1990s to address an issue which is no longer relevant ) comprising of 4 non-executive
directors ( including the Chairman ) and 3 executive directors.
Vincent Sheridan