Universal Health Insurance plan should be abandoned
Opinion: Proposal would have led to charges for those who now have free access to services
Health insurance policies will no longer be allowed to offer their principal current benefit, which is reduced waiting times for non-emergency treatment. Photograph: Getty Images
The need for the Coalition to re-examine priorities and past commitments in the wake of the mid-term election offers both parties an opportunity to abandon the promise to introduce universal health insurance (UHI) made in their 2011 manifestos.
Both probably hoped that voters would assume that UHI would provide the majority (55 per cent) who now rely on medical and surgical services funded by general taxation (a so-called “single-payer” system) with the privileges enjoyed by the 45 per cent who are also covered by private insurance (a “multi-payer” system). The recent White Paper, however, makes it clear that its outcome is likely to be the opposite. The majority will be compelled to pay for access to services they now obtain free. Health insurance policies will no longer be allowed to offer their principal current benefit, which is reduced waiting times for non-emergency treatment.
The contrast with the UK, where single-payer and multi-payer schemes are similarly available, is striking. Only about 10 per cent of the population are privately insured. Waiting times in the National Health Service have been considerably reduced in recent years and the number of individually purchased insurance policies has been falling, though partially offset by an increased number of corporately purchased policies. Many employers appreciate the convenience of being able to select time and place for medical and surgical procedures. The proposed abolition of this option might make Ireland a less attractive location for foreign companies.
The White Paper does not attempt to explain why, by international standards, Ireland has relatively long waiting times for consultations and elective surgical procedures. The problem does not appear to be simply a matter of the availability of facilities. In 2011, Ireland was close to the OECD per capita average in its number of MRI units, but carried out far below the average number of MRI exams. Hospital beds per capita are low by EU standards but very similar to the UK and above Canada and Sweden. The number of doctors per head is lower than the OECD average but not to a major degree. The proportion of doctors classed as specialists, however, is strikingly lower than in any other country, so it is possible that shortage of consultants seriously contributes to the problem.
Method of financingThe White Paper implies that at least part of the problem lies in the system of financing. It proposes switching from block grants to public hospitals to payments for the treatments actually provided. This standard argument for introducing market elements into the provision of public services is intended as an incentive to search for cost-efficiency and lead to the provision of more services for the same total expenditure. But in health services the issue is less clear-cut.
Prices will have to be set for each of some 700 identifiable hospital treatments (“diagnostic related groups”), a list that is likely to grow and change as medical technologies improve. In Ireland, both purchasers and providers of hospital services are in the public sector or are not-for-profit trusts, they may not be responsive to price incentives. There is also the opposite danger cost-saving will be pursued to the detriment of the quality and safety of care. So complex processes of pricing, regulation and monitoring are required, and it is not obvious that the gains in efficiency will justify their potential costs. The decision to proceed with the financing reform appears, however, already to have been taken.
This new system will be up and running before UHI is introduced. It is hard to think of any benefits that the greater use of competing insurance companies would bring. Indeed it is not clear how they will compete, except in the volume and quality of their advertising. Every company has to offer the same insurance cover. The Healthcare Pricing Office will set maximum prices for services and, since current waiting times strongly suggest that the system has very little spare capacity, providers will have no incentive to charge less than this maximum amount. Even if a company is occasionally able to negotiate a lower price for a particular procedure from a particular provider, it will have no incentive to pass the saving on to its customers rather than to its shareholders. Since insurance policy-holders have to be given a free choice of provider, the company cannot direct them to providers that offer better deals.
It may look as though the insurance market offers a wide choice of alternative combinations of premiums and deductibles or co-payments. A few years ago it was calculated that Bupa, the UK’s largest medical insurer, offered 3,960 alternative choices for one of its products! But it is unlikely that any differences among companies could long persist in this respect, because clients can switch policies and/or companies every year as their own health situation changes, and it will therefore be in the interests of each company to offer a more or less similar range of insurance packages.
Wrong beneficiariesShareholders of a for-profit health insurance company expect it to scrutinise claims very closely, demand evidence of at least second medical opinions, and to be aggressive in challenging claims wherever there is doubt. It would not be surprising if lawyers joined advertising agencies and shareholders as the sole beneficiaries of the proposed UHI.
Unlike in Ireland, the UK system enjoys considerable public support, as do single-payer systems in Canada and US Medicare. Improving the single-payer component of the Irish health system to reduce the demand for insurance, while still making it available (but without subsidy) would be a much better direction for reform.
Timothy King is a former career economist with the World Bank and was a lecturer in economics and a fellow of Queens’ College, Cambridge