Address by the Minister for Health and Children, Mary Harney, T.D. to the Adelaide Hospital Society Conference on Financing Universal Healthcare

I welcome the debate and the scrutiny that has taken place today at this conference. Considered, honest debate based on facts and detailed analysis is always welcome, for health policy, as for other areas.

In particular, the documentation produced by the academic team at Trinity College, Stephen Thomas, Padhraig Ryan and Charles Normand contains some further useful insights and facts from other countries’ health systems.

The issue of financing any healthcare system is very complex, whether for a large or a small country, a developed country like Ireland or developing countries in Asia or Africa.

In every respect there are common issues, like

  • setting and implementing standards;
  • separating good and bad incentives;
  • the application of resources to achieve best health outcomes;
  • the management of chronic disease;
  • encouraging healthy living;
  • the balance between primary and acute care;
  • the provision and financing of long term care;
  • the avoidance of cost-escalation and over-use of procedures.

And, just as in many other countries, the great bulk of health spending is not on hospitals but takes place outside the hospital setting. Just 34% of the HSE’s current budget is for acute hospital care. Nearly twice that is for a wide range of services like primary care, mental health services, services for people with disabilities, long term care and so on.

Bearing all this in mind, there are no simple ‘solutions’; no total, all-encompassing strategies that can be captured in one simple phrase or policy, no matter how enticing.

However, I believe there can be a set of clear guiding principles for policy. We can also implement policy based on the international experience that each country can do best to build new initiatives on the good that exists already in their country.

So today, I will first set out the core objectives and values of Government policy.

Second, I will briefly mention some major building blocks of health policy on our agenda now. These are issues that arise in any system, irrespective of funding base.

And third, I will make just some comments and pose some questions about the issues raised by concepts of Social Health Insurance and Compulsory Private Health Insurance for Ireland.

Objectives and values

So let me start with objectives and values.

The objective of the Government’s health policy is to achieve the best possible state of health for the whole population, and the best possible outcomes from health interventions for us all when we are patients.

Our goal is to do this with the resources our economy can generate sustainably for health, being upfront and honest about both the overall limits of resources, and the prioritisation in the allocation of those resources.

We believe everyone should have the opportunity to enjoy the best possible health they can personally – including people with chronic diseases, people with occasional or persistent mental health problems, and people with intellectual or physical disabilities.

We believe that every person should have the assurance of standards being set and enforced both for health services and for professionally-qualified individual clinicians.

We believe that public health services should be provided on the basis of medical need. We believe that where people choose to pay privately for certain health services, as they will in any system, this should not be at the expense of people who use public services in terms of their access to, or quality of, care.

We also believe that we can use all health care providers to contribute to public services. I note that the documentation produced by the Trinity team agrees: it says that all providers – public, voluntary, not-for-profit, and for-profit – can be used. I believe that, so long as they meet quality and value for money standards, they should be available to be purchased as part of public services.

I would like to offer just four examples of what implementing these values and objectives means in practice.

In cancer care, for example, it means that every person, no matter what region or county they come from, no matter their income, no matter their medical status, will be offered the highest, quality-assured cancer care available in our country in designated cancer centres. It means that everyone is offered quality assured screening services first on a population basis.

In long term residential care, it means that every person who has high dependency needs is assessed on the same basis, both financially and medically, and everyone has access to both public and private nursing home places, where standards set and enforced. The new Fair Deal has brought one system for all, with people contributing to the cost on a totally equitable way, with those who have more contributing more.

In changing the consultants’ contract, we have stipulated that access to outpatient diagnostic appointments in our public hospitals must be on the basis of medical need alone. The outpatient diagnostic appointment is the key entry point to in-patient treatment.

The ratio of public to private work is now to be reported and enforced much more strictly, including by the new clinical director in charge. Consultants can lose private fees if they exceed the ratio.

I will insist on compliance with the terms of the contract and strict management of the public-private ratio so as not to disadvantage public patients.

In complex paediatric care, we are developing a state-of-the-art National Paediatric Hospital now, long overdue, so that we provide the very best care for all the sickest children of our country, on the basis of their medical need.

This new hospital, and the services it will offer, is one demonstration that we are putting in place the highest quality public services and quality of care based on medical evidence and meeting all patients’ needs.

These are some of the services which we are continuing to build and develop, while we keep the existing system working.

Strategic issues on the agenda

We have quite a range of strategic issues on the health agenda, and I would like to focus on a few that are particularly relevant for this conference.

Since discussion has focused on issues of financing, resources and benefits packages for patients, I will address those first.

Resource Allocation Group

First, there is the outcome of the work of the Resource Allocation Group I set up under Professor Frances Ruane.

As you will know, this was set up to recommend practical ways that we can better allocate resources to achieve the outcomes and objectives of health policy I mentioned above.

Too often, we have focused on inputs: the amount of taxpayers’ money we allocated – or outputs: the amount of procedures or GP consultations that occurred. But what about outcomes – that is, the health status of people without interventions or after necessary interventions?

Throughout the world, across all healthcare systems, people are seeking better ways to allocate resources to achieve best health outcomes.

We commonly use the term ‘money follows the patient’ to describe a new type of resource allocation.

I think more precisely, it should be ‘money follows the patient’s best health’.

We don’t want to allocate resources for unlimited or unnecessary interventions, tests, consultations and so on. We all have heard the results of that from other countries – high costs, high earnings for some, little health gain for most.

Your own documentation has highlighted that the way resources are allocated to hospitals in particular can be better tuned both to achieve the outcomes we want, and with the efficiency we need. It also noted this can be achieved in a tax-funded system too.

I set up the Resource Allocation Group on that basis.

What matters most is how resources are used, not how they are raised. This, I believe, has to be the conclusion from cross-country comparisons of health systems and is the most important practical lesson for policy-making in the here and now.

We’ve had the second highest increase in public health spending in the last dozen years or so in the OECD. This too surely supports the idea that how we use resources is the critical issue.

I also set up the Group on the basis that its recommendations should be revenue-neutral. This was because the challenge of producing recommendations which will actually be implemented is much better focused when a limit on resources is recognised from the outset.

In fact, I would hope that the work of the Group will point to further efficiency gains that we can make. The HSE has made hundred of millions of euros in savings in recent years. In addition, we are now saving nearly a quarter of a billion this year from actions we took last year in the whole pharmacy sector.

In the report from Trinity College, efficiency gains of 10% are posited. Some of these are precisely from the area of allocating resources in new ways, perhaps on a mix of capitation and limited procedure-based funding for hospitals. Any new method of payment would have to have a budget cap each year.

There are certainly efficiency gains we can get on with now, without requiring, or waiting for, a fundamental change in the financing base for health as a whole.

I see the Resource Allocation Group addressing some of the detailed engine-room issues of how to use resources better.

It is certainly a challenging task, and the Group under Prof. Ruane is well up to it. I look forward very much to its recommendations, and I have a very open mind about them.

Review of Eligibility

Another central issue for health policy that is on our agenda now is updating the legislation on eligibility to health and personal social services, currently based fundamentally on 1970 Health Act legislation and developments since then.

The 1970 Health Act has the rather negative concept of ‘undue hardship’ as basis of providing full eligibility (or medical cards) for people who cannot arrange healthcare for themselves.

It is time to move to more modern concepts for the basis of public health care such as ‘financial, medical or social need’.

Effectively, this is the same issue as the design of what is called a ‘benefits package’ in the discussion on social or private health insurance.

For the public, it comes down to this: just what exactly can the public expect from their health services, in return for the State raising money from them by force of law to fund those services?

Every system needs clarity about the benefits package, whether it is taxation-based or social or private insurance based.

Increasingly, citizens demand more clarity and transparency about public service commitments to them. And they also seek to have those commitments measured and reported on.

At the policy level, we are placing much greater emphasis on the central role of primary care in delivering best outcomes and best health status for people. This is not just about episodic visits to the GP. It is also about assisting people with staying healthy and improving their health.

Very importantly, we have organise much improved chronic disease management in primary care, as all other developed countries are challenged to do, no matter how they are funded.

To help achieve this, we in Ireland are going to develop both the eligibility rules for public benefits and the minimum benefits regulations for health insurance. Both of these, together, should be aligned towards the objective of better primary care and much better and more cost effective chronic disease management.

Clearly therefore, this updating of eligibility goes beyond GP services for holders of the medical card and the GP Visit Card. It is driven, again, by health outcomes and the best, most cost-effective allocation of both public and private resources that are available.


One aspect of any benefits package relating to primary care in any system is the question of co-payments by patients. At one end of a spectrum, one could claim to offer an unlimited amount of GP or primary care services, with no co-payment, that is, free at the point of use.

I am not convinced that goal of best health outcomes and the task of developing health services that are of high quality, available to all, affordable, effective, sustainable and efficient, actually require all services to be free at the point of use to all persons, irrespective of income.

It is not just a financial or revenue raising issue. There is the question of people understanding the value and use of a resource – be it a busy GP, the A&E, a prescription drug or a diagnostic test.

With ‘free at the point of use’, if we want to guard against over-use of resources, someone other than the patient has to carry out a so-called ‘gatekeeper’ role, as suggested in your analysis.

While this can appropriately be a GP in relation to access to hospital consultant services, is there really no role for a patient herself, no area where any decision-making or responsibility by the patient is appropriate or relevant? Is some small element of personal responsibility not appropriate in any circumstance? Are some signals of the value of the resource being used not possible, without offending against equity of access?

The small prescription charge we plan to introduce is one such. A&E charges are another. The Fair Deal has achieved considerable public support from users, notwithstanding that co-payments vary according to an individual’s means. I think it is a very interesting development for that, among many other reasons.

I note in the documentation produced for this conference that one version suggests a charge of €20 per GP visit, even if all GPs are salaried. So clearly there are a range of views on the concept of ‘free at the point of use’. It is certainly worth debating from many perspectives.

In any funding system, benefits design is very complex, and has to be set out in law in the modern age. It is a matter that goes to the heart of the relationship between citizen and State and is therefore intensely political.

I believe the financing method is largely irrelevant to the complexity of the task of designing benefits clearly in law for the public. It would certainly not be a good service to citizens, if it is suggested that the financing of health care through social or private health insurance makes this task any easier, any less political or any less subject to resource limits.

Licensing and standards

I mentioned standards there this is an area where the role of the Minister for Health covers both public and private providers.

A critical further block of health reform will be the introduction of licensing and standards for acute hospitals, be they public, voluntary or private.

This was a recommendation of the Commission on Patient Safety that I set up and we are now preparing legislation for it.

We have implemented this approach in relation to nursing homes. To move on to acute hospitals is a big step, but I am determined to make it. It is a critical part of quality assurance. It will be sophisticated and based on evidence.

It will start with the areas of greatest risk, particularly in the acute hospital sector. But it will develop into a licensing system for all healthcare providers, not solely for acute service providers. It will require a sophisticated approach to setting of standards for particular services – for example, intensive care units – and the determination to ensure their implementation, just as we have done in the area of symptomatic breast disease.

However, these standards will have the force of law and that will be a very significant development.

Again, I would point out that this building block of our developing health service is being put in place now and does not require a change in the financing base for health care. It is being done because it is necessary, and it will be implemented just as well in a tax-financed system as in an insurance-based system.

Reflections on ideas for Social Insurance Funding of Health

I know that the Adelaide Society has promoted the idea of social health insurance for some years. I recognise at the outset that the work done by the team at Trinity has identified many issues and challenges involved, in a way that has not been done before. So it has brought the debate to a new level.

I think you will have seen from what I have said so far that there are, as the Trinity authors point out, many areas of convergence in health policy now between social insurance systems and taxation-based systems. We can each learn from each, taking the best of what we find elsewhere and what we can reasonably hope to implement nationally.

That said, I do have to raise some questions.

They fall into two categories: first, questions of public finances and resources in general, and second, some issues for health policy in particular.

Limits on resources

Proposals for universal health insurance can be divided into two very distinct groups: those, such as set out today, for Social Health Insurance and others requiring Compulsory Private Health Insurance.

They both require compulsory – and additional – payments by individuals: one to a state or semi-State fund, the other to private health insurance companies.

In simple terms, both are often presented as based on the concept of ‘money follows the patient’. There is an impression created – not by all, it has to be said – that whatever the patient needs or is prescribed, the money will always be there, ‘following’ that patient, so as to speak.

This is a world of no limits – either on the funds available, or the quantity of healthcare the patient might use (for example, GP consultations).

I don’t believe that’s realistic in any healthcare system. I don’t think it is honest to give an impression that we can provide limitless healthcare with limited funds.

Because in every system, there are limited funds.

Worldwide, healthcare systems of all types are trying to reduce hospitalisation, limit costs, stay within budget, and eliminate cost-escalation practices, such as fee per item payments.

It is wrong and misleading to suggest that one can construct a healthcare system where every hospital will treat as many patients as turn up, as often as they turn up, because every time, the hospital earns money from treating that patient.

That may be the case in businesses, which earn a profit per sale or per customer, but in health, it completely ignores that the pool of money to pay for unlimited treatments is limited itself.

We can tax or levy or set insurance premiums up or down each year, but I have not yet heard of unlimited taxes, levies or insurance policy premia to pay for unlimited services.

No insurance company can stay solvent if it has to meet unlimited claims with a fixed premium income from its customers. No state insurance fund will stay solvent either.

In many State insurance systems, as the authors from Trinity point out, the general taxation base has to supplement insurance payments.

The impression may be that the insurance payments are adequate, but only because of subsidies from general taxation. In fact, it is a necessary feature of many insurance-based systems that the Exchequer supplements insurance funds, be they public or private.

And so, we are back to annual Exchequer budget limits. It is simply inescapable.

So, while I very much like the concept of making money follow the patient’s best health, the public deserves to know, in all honesty, that even this has to be done within budgets, within limited resources.

Public finances

On the wider issue of public finances, a core argument for Social Health Insurance seems to be that it will provide both a more stable funding base for health principally from earmarked payroll-deduction taxes.

The top proposal here is represented in different ways: for example, it would add €2.8 billion in funding; it could be an effective rate of 35.4% of payroll (offset by income tax reductions); the equivalent of an extra 3% in total payroll deductions; or a 6.6% increase in household spending; for a 19% increase in public health spending.

Interestingly, the €2.8 billion is more than the €2.4bn Health Contribution levy currently deducted on payroll – so it could be a doubling of that levy.

I do intend to study the proposal and the costings in detail with my officials, but these are substantial additional sums to ask the public to bear.

However, the quest for a stable source of funding has led this analysis to income taxes.

In the pure Social Health Insurance model, health would be completely funded from a dedicated or earmarked income levy, at higher levels than at present.

Gross current health spending across the three Health Votes is just under €15 billion. This is 27% of gross current public spending. It represents 133% of expected income tax receipts this year, which are expected to be about €12bn.

The total of income taxes, plus the health levy, all A&E, hospital bed and other charges, and revenue available from tobacco excise, covers the total current and capital health budgets this year.

There are two fundamental problems with the concept of an earmarked income tax covering 27% of Government spending, and more.

First, every other area of Government expenditure also needs a stable source of funding. We certainly need to have a stable source service the national debt (Budget 2010 estimated payments are €4.6bn). Non-contributory old age pensions also deserve a stable source of funding. As does Education. As does the justice system – An Garda Siochana, the Courts and prisons.

This Government believes that all State expenditure needs to be affordable, and all needs stability and adequacy in its funding base. And I believe future Governments will share that view.

In my opinion, that stability is provided by a reasonably diversified, export-led, enterprising economy, where economic activity is encouraged and taxes are set so as not to be a drag on activity.

Second, the entire range of incomes from employment, from the highest to the lowest earnings, and the level of employment in the economy, are not immune to the economic cycle, let along to a big economic shock such as we have suffered.

I also have very serious doubts about loading the entirety of government health expenditure on payroll taxes because of the negative effect on job creation.

The authors of the report provided today acknowledge that European policy has been to try to lower payroll taxes.

The Minister for Finance said in his Budget speech last December that that the tax increases in the last two Budgets have placed the heaviest burden on those best able to pay. He pointed out however that we have reached the limit and that, ‘we will not create jobs by increasing the penalty on work and investment’.

I don’t believe that the Minister has been contradicted on this point by any of the main political parties or by any reasonable commentators.

The Minister also said that ‘a new universal social contribution will replace employee PRSI, the Health Levy and the Income Levy. It will be paid by everyone at a low rate on a wide base as a collective contribution to public services. Income tax will apply on a progressive basis to those with higher incomes reflecting their capacity to make a greater contribution’.

So we will re-organise our tax funding base in support of solidarity in society, but for all services, and recognising limits to tax increases.

Acceptability of further tax or levy increases

I am interested by claims that a Social Health Insurance system would be more popular. I wonder if this will be the case even it is made clear that it means higher, ear-marked income taxes at the level set out in the document (e.g. an additional €2,800 a year for a married couple earning €70,000 jointly, on the basis that they would save GP fees and, perhaps, private health insurance, if they have it.)

Perhaps so.

We saw evidence from the ESRI some years ago of how much people would have been prepared to accept an increase in PRSI or income tax to pay for long term care.

40% were in favour of an increase; 46.5% were against.

Of the minority who were in favour, nearly two thirds opposed a PRSI increase of just €8 per week or €400 a year.

26% were in favour and 62% were against an increase in VAT to pay for long term care. Of the 26% in favour, two thirds would have opposed in increase in the order of €8 per week.

That survey was in 2004, at the height of the economic boom. We can each speculate as to the popularity of further tax increases for health now at current taxation levels, and for the foreseeable future.

In addition to money, many people are also very wedded to some degree of control and choice in accessing their own doctor or hospital.

At the very least, people will assess any such proposal very carefully. They deserve to be told exactly how much it will cost them, so that they can assess that against any benefits. Similarly, any system of means tested subsidy for private insurance would have to be upfront about where the means test subsidy begins and end.

Might I add, it has been suggested that we should essentially import another country’s health system – the Dutch private insurance system.

Leaving aside the enormous complexity of that, it is misleading to tell the public that one advantage is that it costs less per capita than we currently pay in Ireland. This is simply wrong.

The facts are otherwise: for nearly forty years, the OECD has shown that Dutch health spending per capita is consistently higher than Ireland’s. People deserve to know that as they assess options.

Other health policy issues

I won’t go into detail, but I would pose some specific health questions on the proposal today.

First, another agency.

Are we really sure that what we need is to create another State or quasi-State agency – the holder of the Social Health Insurance Fund – in addition to the Minister, the Department and the HSE (as a healthcare provider) plus voluntary hospitals and service providers?

What would happen to the HSE and its 65,000 direct employees? Surely it would continue as a large provider organisation, since most of the employees are work in the provider side of health, not the corporate or funding side?

Second, where would additional State expenditure go? If it is a pure replacement for current private spending, would any go to increased services? Would there be increased, or decreased, earnings for particular groups in the health sector?

For example, currently, we pay about €500m in pay and pensions for public contract-holding medical consultants; they may receive another €400m or more in private fees. Would €2.8bn State spending add to that total, replace the €400m fees, or reduce it? Would insurance payments systems drive up fees?

Similarly, how much would GPs have to be paid in salaries? There is the suggestion, at least, that the replacement of out-of-pocket fees paid by non-medical card holders, by salaries paid by the Social Health Insurance Fund would save money – are the GPs ready to agree to this loss of income?

In general, both Social Health Insurance and Compulsory Private Health Insurance would require major change in employment and contractual arrangements that exist between the State and clinicians and all staff involved in public health care.

One can easily underestimate the difficulty and time required to change all these, especially when agreement on both sides is required.

Third, I do wonder if health insurance proposals are driven a bit too much by elective hospital procedures. I recognise that there has been a focus on primary care in the idea of replacing private GP fees by a State insurance system for salaried doctors.

As I said, the acute hospital sector represents on 34% of the HSE’s current spending. The non-acute side of health is far, far bigger.

For all the change involved, and the huge complexity of trying to introduce it, I think we could well be in danger of using our time, efforts and administrative and legislative resources, at the expense of other health policy areas, such as promoting better health and managing chronic disease, actually delivering more efficient services, setting and implementing standards, moving services from hospitals to community settings, improving cardiovascular care, improving home care services for older people, developing services for people with disabilities and mental health services.

Fourth, and finally, both Social Health Insurance and Compulsory Private Health Insurance recognise that people will still be free to purchase additional private health insurance, and go to doctors and hospitals privately, above and beyond the State benefits package.

Presumably, the better off, or those who choose to, will do this.

A pure one-tier system is not on offer, from anyone that I can see.

Let us be clear and honest about that.

It would mean banning any private interaction with doctors, which I have to doubt, is neither legally possible nor desirable.

Dealing with the interaction of public and private is a matter of both principle and practice.

The principle, in my view, is that the existence of private insurance should not diminish public services or equity of access to high quality healthcare for those without insurance.

The practice is that the interaction has to be managed in great detail at policy, contractual and hospital levels. And I am determined to ensure this happens under the new arrangements.


Health financing is a big and complex issue. It is clearly not possible to discuss all of it adequately in a few moments.

Indeed, it is not possible to do justice fully in a short address to the work put in by the Adelaide Society and by the team in Trinity College.

I hope I have done some justice to your work by taking it seriously, as I do and as I will. I will be interested to see further analysis of the proposals by officials.

However, most importantly from my perspective, the agenda we are leading in Government now for health policy contains many key elements that are in fact common to all systems of healthcare, no matter how they are financed.

Much of that agenda will follow from the work of the Resource Allocation Group and other policy initiatives I mentioned.

And I believe we will serve the public best by being upfront about resource limits and costs.

I hope we can look to areas where we share objectives and values and where we can implement practical actions to improve the health and well-being of our whole population.