Croke Park deal a likely casualty of HSE overspend

THERE IS growing concern in Government at the scale of the financial problems that have emerged in the health services over recent months and on how these should be addressed.

An official HSE report approved by its board last week revealed it recorded a €200 million overrun in the first four months of the year. The report also said the HSE’s revenue account to May showed a deficit of €160 million.

The Department of Health is drawing up a paper for Cabinet on how the deficit should be tackled. However, it appears the issue may reawaken the debate over whether the Croke Park agreement – which guarantees no further pay cuts for public service staff in return for co-operation with reform – is sustainable politically if this causes further reductions in public services.

This issue was always likely to re-emerge as part of the preparations for next year’s budget, when over €3 billion in cuts or revenue-raising measures will be required. However the growing HSE deficit for this year may bring forward this debate.

In correspondence with the Minister for Health James Reilly last month, Minister for Public Expenditure and Reform Brendan Howlin expressed concern at the HSE’s financial position. He said the HSE had recorded a net revenue overspend of €124 million to the end of April, up €30 million from the previous month.

“Worryingly, its overall cash spend for the three months to March 2012 is running ahead of last year,” he said. “And, at recent joint financial performance monitoring meetings, the HSE has been unable to provide monthly profiles of expenditure by programme, adequate explanations in regard to the drivers of expenditure or adequate projections of when and to what extent the savings measures in the 2012 service plan will bring about an abatement of these spending pressures.”

He warned, if current trends were to continue, the HSE was facing a potential €500 million deficit for the year.

“Any significant overrun in the health sector this year would not be sustainable and would undermine our national recovery efforts. It would also render the task of producing the 2013 estimates for the health sector and continuing implementation of the programme for government commitments on health reform extremely difficult, if not impossible.

“I would ask you, therefore, to ensure that immediate action, including additional measures over and above those envisaged at budget/estimate time [last year] if necessary are taken to bring HSE expenditure back on track.”

Dr Reilly has also expressed concern at the growing deficit and has taken steps to deal with it. A UK-based financial management consultant has been commissioned to review the HSE’s capacity to handle its budget and a quartet of senior health service figures have been given the task of working with hospitals experiencing spending difficulties. However, he has also maintained that the €800 million spent on overtime, allowances and premium rates was “the elephant in the room”.

And, as the HSE deficit grows, the Minister appears to be sticking to his belief that overtime and premium pay reductions have to be considered as an alternative to further service cuts.