VHI to be worst affected by transfer of costs to insurers

Mon, Oct 29, 2012, 00:00

ANALYSIS:VHI documents show difficult decisions lie ahead in the context of the troika’s demands, writes PAUL CULLEN

THE HEALTH insurance industry is in a state of barely concealed crisis. Prices have doubled in three years and customers are leaving in droves: 6,000 of them every month.

Most are younger customers, those less likely to get sick and make claims. Many of those remaining have downgraded their cover, thereby further reducing the insurance companies’ income stream.

Yet the finances of the health service are also in crisis. The Health Service Executive is more than €430 million in deficit. Virtually every major hospital is substantially over budget. Another €1 billion has to be taken out of health costs next year if the targets set by the EU-IMF-ECB troika are to be met.

One solution to the second problem is to charge private patients using public facilities the full economic cost of the beds and services involved, according to critics of current policy. In one fell swoop, it is argued, this would not only strike a blow at the iniquities of our two-tier health system but would also make a significant contribution to the cost overruns we are facing.

If only things were that simple. If only at the stroke of a pen we could wipe hundreds of millions off the HSE’s deficit, without causing adverse effects elsewhere.

The problem is that transferring the burden these charges to the health insurance sector, however just the principle may be, will have a massive impact on a business that is already struggling. And the impact will be most deeply felt by the VHI, which as a State company is owned by you and me.

The VHI has 57 per cent of the market but accounts for 80 per cent of claims, because its customer base is older than its three privately owned rivals.

The imposition of these charges on the four health insurers will inevitably drive prices upwards, as the VHI documents obtained by The Irish Times show.

This in turn will hasten the flight of consumers from health insurance, or at the least encourage more people to downgrade their policies.

It means that when those people become sick, it will fall to the public health system rather than any private facilities to provide treatment, thereby further clogging up a system that is already choc-a-bloc.

This approach will also further weaken the VHI at a critical time, perhaps, as the documents suggest, beyond the point of sustainability. The result might be a need for more, not less, exchequer funding to bail out the company.

Aside from price increases, the imposition of the charges will inevitably entail reductions in cover with subscribers being asked to share the cost of procedures.

The VHI argues that a more balanced approach would see the charge introduced over five years rather than one or two. This would soften the blow for consumers – though prices would still rise – and would allow the company time to introduce much-needed improvements in efficiency. Among the measures contemplated are specified payments for the top 20 procedures and conditions and a requirement that hospitals admit patients on the day of surgery in at least 75 per cent of cases.

Consultants would not be paid fees for private patients admitted to a public bed via the emergency department, it is also proposed. In future, the minimum standard for private patients in public hospitals would be based on a ward with at most six beds and an en-suite toilet. Minister for Health James Reilly has ambitious plans to introduce universal health insurance in future years. Levying costs at the rate at which they accrue, rather than subsidising private beds in the public system, makes political and moral sense.

It is also in accord with the widely held view that “costs should follow the patient”.

However, the VHI documents show the wider implications involved and help to explain to some extent why Dr Reilly has not moved as fast as the troika and his critics would like.

The Minister has already postponed the introduction of these costs for a year and he has been criticised for doing so. Difficult decisions lie ahead.