Press Release

Health Savings Focus on Reducing Costs while Maintaining Services

Announcing today’s Estimates for Health for 2011, the Minister for Health & Children, Mary Harney, T.D. said:

“The health service must, of necessity, contribute to the expenditure reductions required next year. My objective in today’s Health Estimates has been to ensure that these reductions are achieved in a way that minimise the impact on services to patients and continue to protect as far as possible, the most vulnerable. To do this we need to reduce costs and improve productivity.”

“The gross current expenditure provision for the Health Group of Votes in 2011 is €14.1 billion, a reduction of €727m or 5% on the 2010 provision.”

“The health service consumes over €5 billion in goods and services. There has to be a particular focus on achieving savings on procurement. The State’s drugs bill, in particular, has increased at an unsustainable rate in the past decade and we must make savings over and above what has already been achieved in recent years.”

“Specifically, in the past week agreement has been reached with the Irish Pharmaceutical Healthcare Association on further price reductions and other measures to achieve full year savings of €200 million in the cost of drugs.“

Current Expenditure Savings 2011

The main areas of savings are as follows:

Demand Led Schemes (drug costs & professional fees) €380m
Other procurement and non-core pay cost savings €200m
Administrative & other savings in Vote 39 & Vote 41 €43m
Estimated saving from voluntary exit package in HSE €123m

* While the year-on-year reduction is €727m, as referred to above, there are further technical adjustments which in aggregate increase the 2011 requirement by €19m. This makes it necessary to achieve savings of €746m to meet the Budgetary target. Further explanation is given in the Notes for Editors below.

Demand Led Schemes (€380m)

Savings on Demand Led Schemes (e.g. General Medical Scheme, Drug Payment Scheme, Dental Treatment Services Scheme, etc) are expected to yield €380m next year. These include:

  • price reductions and other measures agreed with industry (the Irish Pharmaceutical Healthcare Association) which are expected to contribute up to €200m in savings;
  • additional savings of €100m in 2011 from measures introduced in 2010 to reduce drug costs, professional fees and implement prescription charges: this includes reductions in GP fees decided upon this week following a formal consultation process under the Financial Emergency Measures in the Public Interest Act;
  • measures to achieve enhanced probity in payments to contractors under the above schemes and to ensure ongoing verification of the validity of all medical cards; and
  • expected savings from a further examination of fees paid to community pharmacists under the Financial Emergency Measures in the Public Interest Act: formal consultations in relation to this matter will be initiated in the coming days.

While no additional saving arises in 2011, the budgetary limit on the Dental Treatment Services Scheme introduced in 2010 will be maintained next year.

Other Procurement & Non-Core Pay Savings (€200m)

The HSE and other health providers spend in excess of €3 billion on other goods and services, i.e. outside of demand-led schemes. Over €1.1 billion is spent on non-core pay in areas such as overtime, agency and allowances. A 5% reduction in the total combined non-pay/procurement and non-core pay expenditure will generate savings of €200m. The Minister said:

“The HSE is in the process of negotiating significantly improved procurement terms with a wide range of its suppliers. Further expenditure reductions can be achieved through better supply chain management and reduced usage.”

“Further savings can also be achieved in payroll costs through reductions in the volume of overtime and agency staff. The challenge to management and staff alike will be to make maximum use of the Croke Park Agreement to ensure services can continue to be provided with lower payroll costs.”

Administrative & other savings in Vote 39 (DoHC) & Vote 41 (OMCYA) – (€43.5m)

Savings will be achieved by the Department of Health & Children and its agencies in administrative costs, legal and other payments and by the Office of the Minister for Children & Youth Affairs through planned reduction in National Childcare Investment Programme expenditure and a reduced allocation for youth programmes.

Estimated saving from voluntary exit package in HSE (€123m)

Applications under the HSE voluntary severance and early retirement scheme are still being processed. The actual numbers who avail of the terms and the associated payroll savings will not be finalised until early in January. At this stage, it has been estimated the schemes could generate savings of up to €123m next year.

Additional savings will arise on foot of the employment control framework for the health service which provides for a further reduction of about 1,500 staff through the non-filling of vacancies which arise in the normal course.

Areas of Additional Provision

The 2011 Estimate includes increased funding of €115m for an additional 120,000 medical cards next year. It also provides some additional funding for the following key priority services:

Older People €14m
– Fair Deal (€6m)
– Home care packages (€8m)
Disability €10m
Cancer €10m
Child Protection/Ryan Report €9m
Suicide €1m
Total €44m

The Minister said:
“The scope for additional investment is obviously limited but there are a small number of areas where I have sought to target additional funding to address demographic pressures or key policy priorities. This will support some improvement in the availability and quality of services. However, service improvement in these and other areas must be delivered primarily from reform and innovation within existing allocations.”


Charges for Private/Semi Private Treatment in Public Hospitals

It is estimated that moving to full cost recovery for private treatment in public hospitals would involve an increase of about €93 million. The 2011 increase will recover an additional €75 million and the balance, approximately €18 million, will be recovered in 2012. This represents an overall 21% increase in 2011. In the current fiscal situation, increased income from private patient charges provides an important revenue source which can serve to avoid budget reductions in other priority areas.

On the increase in private hospital charges, the Minister said:

“The increase in charges to apply in 2011 represents a significant step towards achieving the Government’s policy of charging the full average cost of private patient treatment. Last year, on an exceptional basis, I decided not to increase private and semi-private treatment services. However, given the current pressures on the public health system, it is no longer sustainable for the Exchequer to subsidise private patient treatment”.

Other Charges

There are no increases in the A&E charge, the statutory day and inpatient charges, or the monthly threshold for the Drug Payment Scheme.

HSE Service Plan

In line with previous years the HSE will now finalise its Service Plan for 2011 and submit it for the Minister’s approval. The Minister has asked the HSE not to apply an across the board expenditure reduction. Instead, there should be somewhat lesser reductions in the budgets for disability and mental health services, and correspondingly greater reductions in the allocations for acute hospital services, with the latter allocations also reflecting differences in the relative efficiency of individual hospitals. The Minister said that:

“The scope for achieving economy and efficiency in all service areas must be the subject of scrutiny and every opportunity to deliver the same or an increased volume of services must be availed of. In the case of disability and mental health I am particularly anxious that the momentum underway to reform and modernise service delivery is supported. This is the basis on which the HSE has been asked to prioritise these areas. Overall, the challenge for all service areas will be to continue to take costs out of the system while maintaining and developing much needed services for the public.”

2011 Health Allocations

The gross current expenditure provision for the Health Group of Votes in 2011 is €14.1 billion, a reduction of €727m or 5% on the 2010 provision. The breakdown of the €727m savings on the 2010 original provision across the three Votes is:

Vote 39 DoHC €37m or 10%;
Vote 40 HSE €683m or 5%
Vote 40 HSE €683m or 5%
Vote 41 OMCYA €7m or 2%

The figure of €746m shown in the Budget Book is slightly higher for technical reasons. The underlying saving is greater because of the need to provide for a number of key policy priorities (as set out above), a projected increase in the number of medical cards and other unavoidable costs next year in areas such as superannuation. On the other hand some of this increased expenditure is offset through technical adjustments (e.g. savings on the H1N1 pandemic) and further savings already built into next year’s figures in areas such as the moratorium on recruitment. In aggregate all of these items require additional savings totalling €746m, as set out above, to achieve the Government’s Budgetary target for Health.

In the case of Vote 40 (HSE) a Supplementary Estimate is before the Dáil which increases the original gross provision to meet the costs of the once-off, upfront costs of the voluntary severance and early retirement scheme. The reduction in the gross current provision for the HSE next year compared with the 2010 outturn provision (including the Supplementary) is €891m or 6.2%. The detailed Vote 40 figures included in the Abridged Estimates Volume published today are complied on this basis.

The gross capital provision is €399m, a reduction of €92m on the 2010 provision. The capital allocation of €399m is in line with the figures published in July in the Government’s Infrastructure Investment Priorities 2010-2016. It has been agreed with the Department of Finance that there will be a subsequent increase in the 2011 gross capital provision to be financed through receipts next year from the disposal of surplus mental health properties. The additional provision to be made available will be based upon further analysis and finalisation of the amounts likely to be raised through property sales.

Charges for Private/Semi Private Treatment in Public Hospitals

The increase in these charges is as follows:

Category 2010 Rate 2011 Rate % Increase
Cat 1 Private Charge €910 €1,017 11.78%
Cat 1 Semi-Private Charge €713 €889 24.67%
Cat 1 Day €655 €732 11.78%
Cat 2 Private Charge €607 €789 29.98%
Cat 2 Semi-Private Charge €488 €693 41.95%
Cat 2 Day €434 €564 29.98%

The detailed calculation of the revised charges reflects work undertaken by the Department of Health & Children in a ‘Value for Money and Policy Review of the Economic Cost and Charges Associated with Private and Semi-Private Treatment Services in Public Hospitals’. This review will be published shortly.

You can listen to the Department of Health Budget 2011 press conference