Ireland can no longer afford to ignore long-term planning on health spending

The budgetary mess in the health service has been bubbling away for years. It follows a pattern as predictable as the changing of the seasons. Dark hints typically emerge each spring and summer of spending pressures in the service, followed by an autumn flap around budget time as the full scale of this becomes apparent and a supplementary dig-out of extra funds as the Christmas lights are going up.

Why this keeps happening is hugely contested territory, muddied by long-standing information failures in the health service which have meant anecdotes rather than evidence has driven too much of the debate and unrealistic budgets being set in many areas, notably for hospitals.

In a cycle of what might be called f**k you/no, f**k you budgeting, health overspends and demands for bags of additional money, the Department of Public Expenditure responds by setting unrealistically tight budgets which everyone knows will be exceeded – and then this inevitably happens. Rinse and repeat.

This has all trundled along in recent years without causing any further trouble for the public finances because of the massive surge in corporate tax receipts. The overperformance of these taxes in recent years has greatly exceeded the average annual health overrun of about €600 million, which occurred between 2015 and 2019. And so this Government and its predecessor have been able to pick up the financial slack. This has stopped the rows going nuclear. But with the scale of health spending – and the extent of the overruns – rising fast and corporation tax threatening to stall, this could now all be about to change.

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Talk to any health economist, or read the work of the Irish Fiscal Advisory Council, and it is clear that because of the ageing population and rising costs, really significant extra resources are going to be needed in health over the coming years

The row has now moved to a new level for two reasons. First, because health spending has risen quickly, the numbers involved are now really significant in the overall context of the Government budgets. The likely overrun this year is as large as the budget tax package. Second, a post-Covid surge in demand and rising inflation has inflated the overrun this year, and the estimated cost of maintaining existing services next year.

The obvious advice is to try to agree a realistic longer-term plan for health with costings attached. But longer-term plans tend not to be popular in Irish politics because they force decisions to be made – like how to pay for them. And in health this is complicated by the fact that even standing still is going to cost a bag of cash. Talk to any health economist, or read the work of the Irish Fiscal Advisory Council, and it is clear that because of the ageing population and rising costs, really significant extra resources are going to be needed in health over the coming years. The council estimates that the cost of just standing still in health is about €1.4 billion per year. Modelling by the ESRI also points to big required increases. This compares with an €800 million increase granted to health in the budget, which your local librarian would file in the fiction section.

While this is daunting, it also shows that longer-term budgeting is possible, if everyone can agree on the parameters. We know roughly the shape of the population and pressures in areas such as costs can be modelled, even if this is far from a precise exercise. But the contested bit is that many in Government feel savings and efficiencies need to be found in health, and that money cannot keep pouring into a “black hole”. The lack of proper information systems in health – now thankfully the subject of investment – makes this an unsatisfactory debate. But in the short term two things are clear: savings, while possible, will be hard won, as will higher productivity; while higher bills from an ageing population are inevitable. Like it or not, the cost of providing health is going to continue to rise year on year. Healthcare reform is still vital - but we have been talking about that for years and know that rewards, while important, are hard won,

Uncertainty about where the service is heading is a factor here. Politicians on all sides signed up to the Sláintecare plan of universal healthcare, estimated in 2017 to add €2.8 billion to the annual budget when fully implemented. At the time these costings were seen as tentative, and now they look just plain unrealistic. Not only do we not know what Sláintecare would cost, we are not even sure what exactly it “is” any more.

Health spending has surged over the past decade from €14 billion to €24 billion – this leaves us in the middle of a table of western European countries judged by spending per capita

Minister for Health Stephen Donnelly’s commitment to a new study on the future of healthcare and what it would cost is thus an essential step. Ideally, this would drive some hard political decisions in terms of what can – and cannot – be afforded and form the basis of a longer-term plan, with numbers attached for spending each year.

How do we put this in context? Health spending has surged over the past decade from €14 billion to €24 billion – this leaves us in the middle of a table of western European countries judged by spending per capita. Some other measures rank Ireland a bit higher, with a key issue being trying to adjust for Ireland’s relatively high cost base. Part of the debate comes down to what kind of health service Ireland aspires to – as incomes rise, so do expectations of public services.

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But whatever way you count the numbers, one thing is clear. There has been a massive increase in spending over the last few years and right through Covid. Opposition charges of a “chronically underfunded” sector ring pretty hollow against the backdrop of a 22,000 employee increase in the Health Service Executive since the start of 2020. Bed capacity is rising and the network of primary care centres is being built out. The health service has held on to most of its additional Covid funding, and quick decisions are needed on what the base of spending now is, where it is going next year and what can – and cannot – be delivered as a result.

Everyone knows that with an €8 billion budget surplus and a general election in the offing, vital drugs and services are unlikely to be cut, no matter what dance is now going on between the departments of health and public spending. And whatever happens, it is certain that health spending is going to increase further in the years ahead.

The political challenge is to make sure that this spending increase is planned and that it delivers improvements in services. The annual pantomime needs to end. The significant additional resources which will inevitably go into providing the health service need to be on the basis of planned improvements – not unplanned overruns.